Improve your Debt Structure or Access Equity/Cash

Refinance a Commercial Property

Do you want to replace your current commercial building loan with another one at better interest terms? Are you facing an upcoming balloon payment that needs urgent attention to extend your loan duration? Or perhaps you want to turn equity in the property into a cash-out refinance providing funds for other business ventures. Then exploring a commercial property refinance might be the right idea at this time.

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Commercial Property Purchase or Refinance

Basic Qualifications - Commercial Mortgages

DOING BUSINESS AS ENTITY

Yes

PROPERTY TYPE

5-500 unit MF

OWNER'S CREDIT SCORE

>620 FICO

Funding Parameters - Buy or Refinance

Amounts

$250k to $10m

Term

3-25 years

Rates

from 7.99%

Processing Speed

30-45 days

Typical Application Requirements - Commercial Real Estate

  • Commercial loan application
  • 4 months of bank statements
  • 1 year of tax returns + income docs
  • Entity documents
  • Government issued photo ID
  • Voided check or bank letter
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About Refinancing Commercial Real Estate

A commercial real estate loan is a great method to build wealth. Investors with ownership in the large residential and commercial buildings (large multifamily developments, mixed-use, retail, office, senior living, and light industrial) can benefit greatly from a refinance for a few main reasons:

  • in a time of declining interest rates, refinance into a lower payment structure (replace the current mortgage loan amount with a new loan at the same amount but with a lower rate and likely a longer term, which combine to reduce monthly payments)
  • improve on the original loan terms, meaning shift from an unpredictable and risky adjustable rate mortgage into a less volatile fixed rate one
  • pay off a pending mortgage balloon payment at the end of an earlier 5/10-year term loan and blend that into a new loan under similar terms (i.e. reset the loan term). Commercial mortgages often have shorter loan repayment terms than traditional loans, with a lump sum payment due at the end of this term.
  • access a portion of the portfolio equity for cash-out purposes, which may be in the millions of dollars, usually to buy additional properties or to acquire businesses. A cash-out refinance loan is usually tax-free to the owner who is able to unlock substantial equity in the property.

Potential drawbacks to refinancing commercial real estate include:

  • possible pre-payment penalty from paying off the current mortgage early
  • closing costs associated with the refinance, so the borrower must make sure that the improved cash flow from the new loan will outweigh the extra upfront costs of the refinance transaction

To refinance real estate that is large, stabilized, and income-producing property and needs to close very fast, an attractive option is a CMBS conduit loan. All CMBS conduit loans are non-recourse (no personal guarantees) to the investor. They also allow for unrestricted cash-out on refinance. All CMBS loans are fixed rate for 5, 7, or 10-year loan terms with 25/30 year amortization schedules (i.e. a balloon payment at end of term). CMBS conduit loans can also close in as little as 30 days. CMBS conduit loans can also be attractive in the case of poor personal credit scores because the loan is based mainly on the income from the property.

Short-Term Commercial Mortgages - Real Estate Bridge Loans

A commercial mortgage refinance may be in the form of a bridge loan. A real estate bridge loan is a short-term loan given by lender to borrower until permanent, long-term financing of a "stabilized" commercial asset becomes viable in the marketplace. This normally happens when the real estate is either repositioned or renovated to become stabilized as a viable income-producing property at a higher property value. Kirksley can help lead you through the bridge loan financing process to get your real estate transition project completed with success.


A real estate bridge loan is needed when a property is in distress or in some other kind of transition and therefore unable to qualify for conventional long-term financing due to current levels of risk. A new owner intends to successfully transition the property into a "stabilized" financial situation but needs time to do so. The transition scenario can be highly variable but here are some common examples:

  • non-stabilized assets: commercial property in need of light or heavy renovations currently with insufficient rental income to attract new tenants and reach full occupancy
  • distressed or time-sensitive challenges: stalled construction, bankruptcy, foreclosure, 1031 exchange, bank workouts, etc

Bridge loans for real estate are typically 1 to 3 years in term with interest only payments and lower loan-to value ratios at 50-70% of the disposition value of the property. This requires a sizeable cash injection by the buyer (recipient of the bridge loan) who usually must have some track record of repositioning or managing commercial real estate as well as considerable net worth in order to motivate the lender to go forth with this kind of refinance.


Note on commercial buildings owned by the business owner occupying the property and conducting business operations there: these are in scope for SBA loans and should be considered differently than commercial buildings owned by non-occupant landlords.


If you would like to access our network of commercial refinance lenders, please apply now.

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