Pennsylvania Commercial Mortgage Refinance

One similarity between commercial mortgages and home mortgages is that, if the mortgaged property increases in value over time, each type of mortgage can be refinanced. There are both advantages and disadvantages to refinancing, and there are specific times when a refinance is a good business option. The question is, what is a good time to refinance?

The right time to refinance can be when the property has become significantly more valuable than the amount of its original mortgage. If the owner wants to expand her business, refinancing the property may offer the opportunity to convert some of the value of the property into usable cash. If property values are continuing to rise, the amount of cash "taken out" of the property as part of the refinance may be recovered within a year or two.

The Other Side of the Coin

The downside of refinancing a commercial mortgage loan is that there are costs associated with every mortgage, and the closing costs will also be deducted from the equity in the property. Both the cash amount taken out and the closing costs will reduce the ratio between the value of the property and amount owed. This will reduce the amount of equity in the property at least in the short term.

At the same time, if current interest rates are significantly lower than they were when the original mortgage was obtained, one positive result of a refinance can be a much smaller monthly payment for a larger mortgage including cash out. Pennsylvania commercial mortgage refinance lenders will look at interest rate trends, the borrower's business plan, past performance, and revenue projections, as well as loan-to-value on the property in order to determine whether to offer a refinance option.