Commercial Property Refinance: Replacement of an Existing Obligation with Different Terms.
By refinancing, you may:
- Reduce Interest Costs (if refinancing at a lower rate)
- Extend Repayment Time
- Pay Off Other Debts
- Reduce Periodic Payment Obligations (by taking a longer term loan)
- Raise Cash for Investment, Consumption or Payment of a Dividend
In essence, taking advantage of a commercial property refinance can alter the monthly payments owed on the loan either by changing the loan’s interest rate, or by altering the term to maturity of the loan. More attractive lending conditions may reduce overall borrowing costs. Refinancing is used in most cases to improve overall cash flow. Therefore making your bills/payments lower than before.
Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them. By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time. This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.