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What Are The Commercial Refinancing Options

Who would have thought that at the start of 2008 there would be so many problems with capital markets, and then individual entrepreneurs’ options for refinancing their commercial mortgages? In the past 6 months, margins have almost doubled from 2% to 4% despite the Fed rate cuts and index changes. Fear of the future market, inflation is looming and many commercial realty owners are scrambling to secure long-term fixed-rate financing. You can also get commercial refinancing options via

Your Most Common Mortgage Queries Answered

Many of the borrowers who lived through the Jimmy Carter years talk about 20 percent-plus rates and their strong desire to never go through it again. Some borrowers have refinanced their existing loan to a higher-rate, but longer-term loan.

What's the best way to find out? What should a borrower do if they are considering a commercial mortgage?

Insincere General State of Confusion

There is confusion about what the guidelines are, and what they will look like in the next few weeks. Many lenders have stopped quoting rates until things stabilize and have bowed out. It is not fun to take out a loan and then have it declined because of changes in underwriting guidelines. A general attitude if a deal seems to be borderline is to either quickly say "no" or ignore it.

It can be frustrating for everyone involved, not just the borrower. Here are some details, but the borrower should be open-minded as guidelines and rules change in both directions.

Recourse vs. nonrecourse

Nonrecourse for owner-occupancy is gone. The only exceptions to this rule would be for very liquid, strong borrowers with loans exceeding $2,000,000. Although income-producing properties are still eligible, the criteria are getting tighter. From a minimum of 10,000 just a few months back, the minimum town population has increased to 50,000-100,000. Minimum loan to value and debt coverage ratios must be at least 1.3. To be eligible for nonrecourse, the deal must be flawless.

Lending to Value

Refinance requirements vary depending on the type of building. Flagged hoteliers are finding it difficult to find lenders who will finance 60% of a cash-out refinance. 6 months ago, 75% was hard but possible.