Debt Refinancing Con’t - Commercial Loans

Tonight we continue with our theme of debt refinancing. Last night we talked about SBA Business Loans and debt refinancing now we shift our focus to commercial real estate loans.

Commercial Real Estate Loans or Investment Property Loans offer a greater chance to refinance them providing you meet certain qualifications and time frames. Both the qualifications and the time frames have changed drastically within the last six months as everything else within commercial finance has.

Before we could re-appraise a property and if there was equity we would be able to refinance any existing debt as well as give our client additional capital providing there was sufficient equity in the property. Loan to Value ratios bordered on 75% to 85%. Lenders were not concerned about the use of the cash out an as long as you were current on the loan, had good credit and the property appraised at more than what you originally purchased it for the deal was done rather easily.

NO MORE

Now most lenders will not even consider a debt refinance if you have not owned the property for at least two years or longer. Next even if you owned the property for two years or more they want to know exactly what you paid for the property and then they calculate what increase in value they believe is really there not necessarily what the appraiser says is there.

Next they look at the net operating income of the property and add at least another 15% to 20% to the bottom line expenses. then they examine your tenants and how long they have been a tenant as well as when their lease expires and the length of the tenancy.

Now the most important point! If they believe that you are using the money from the cash out for other than improving the property (increasing the value to the lender) they are not in favor of doing these loans at all. Paying yourself back for expenses directly associated with the property is OK, but using the money for paying outside debt is no longer looked upon favorably.

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