Below I have mentioned some terms to become familiar with to help increase your knowledge and help become prepared and learn what to expect as you approach a Loan Refinance for a commercial property.

Without some familiarity pertaining to a Mortgage Refinance it could be difficult to understand where to start. Without some experience in financing, whether it’s on an initial loan or a Residential Loan, these terms may seem like foreign language or somewhat silly for such a serious matter. A few examples would be: Arm, Balloon, Bridge Loans, Mezzanine Loans, Conduit or CMBS Loans etc.

Long before I became involved in Real Estate, I would hear terms mentioned in regards to Residential and Commercial Loans and Mortgage Refinance options, ARMS, Balloons etc. I was just getting started in this industry and had absolutely no experience in any real estate or financing, so these terms were like a foreign language. I realized very quickly that without thorough knowledge of the terminology it is hard to understand what direction you will go.

Now that you have experience, when learning the thought process behind Mortgage Refinance in the next paragraph, you will see the difference in thought from your original loan. The most prominent reasons people look at Mortgage Refinance are because of taxes, facing a ballooning loan or to help reduce monthly payments and interest. And it may also reduce the life of the loan.

Before we move on to Mortgage Refinance terms let’s recap what terms you had to learn before, such as 1031 Tax Exchange, Environmental Reports, what type of commercial property qualifies for what type of loan, which is a lot for one to learn, the difference between Conduit and Mezzanine Loans, and so on.

Do a simple break even analysis to compare costs of other lenders versus your existing bank. If they know you are looking for a Mortgage Refinance, your current bank may offer to reset the loan.

The terminology is somewhat different when it comes to Loan Refinance. You start looking at possible Prepayment Penalties, Cash out option Proceeds, and maybe you want to inject the money you cash out into new business venture or update your current property, what is the Discounted Cash Flow, Current vs. Proposed Loan to Value Ratio.

It is very important to look at may closing costs will affect the equity you have been building over the years. Two of the biggest reasons people look at Mortgage Refinance, are to get a lower interest rate than they currently have, this means lower monthly mortgage payments (lower payment means extra cash in your pocket) and the second reason people refinance their mortgage is to “cash out” some of the equity they may have built over time and invest it in a new business venture. Remember that knowledge is power, so stay informed by reading and researching your topic.