Refinancing is a process by which you get rid of an existing mortgage on your commercial property by taking a new one, often at better rate and terms. In other words, it is retiring an unfavourable mortgage on your commercial property by the help of a new, more suitable one. There are many different benefits that can be derived from a refinance process.
Refinance is not a very simple process for commercial properties and requires planning and patience. Any wrong move can result in lot of hassles and even the objective of refinance can be vitiated. Here is a step-by-step guide on how to go about refinancing mortgage for a commercial property:
1 Getting The Objective Right: It is very important o get the goal right for undertaking such an exercise. Refinance is often done to move from a higher interest loan to a lower interest rate loan. However, there are several different benefits also. A refinance can be done to move from a floating interest rate loan to fixed interest rate loan so as to get a tighter grip on the monthly outgo by way of EMIs and have a more stable financial burden for your company. It can also be done to free up some equity that may be tied to the commercial property in the business. Whatever is the reason for refinancing, it should be clear from the beginning.
2 Finding the Credit Score Of Your Company: The new loan will be given to your company based on its credit score. The higher the credit score, the higher will be the chances of getting the loan.
3 Find Out The Current Property Value: Finding out the current value of the property is very important since the lender of the new loan may erroneously value it for much less and doing your homework will help you in getting a better deal.
4 Look Out For The Best Rates: When moving from an existing loan to a new one, you will obviously want the lowest interest rate possible. You must do a thorough check and see which bank or NBFC is offering lowest rate to you. You will have to do some internet searches and then visit offices of the lenders and do some preliminary paperwork to find out the rate applicable to you.
5 Get The Papers Right: After you have been offered the lowest rate and you have decided as to who will be the refinancer, getting hold of relevant documents will be required. Getting all the documents ready will require some time. Ask your existing as well as new lender as to which documents will be required exactly.
6 Locking OF the Rate: This is an important step in the whole refinance process. Locking the interest rate means that you must get in writing from the lender as which rate will apply to you and once that is done, the rate cannot be changed until the refinance process is completed. You must watch out when to ask the lender to give you in writing. Getting is too early can be as bad as getting it too late.
7 Keeping Some Cash Aside: The refinance process will involve payments towards taxes and insurance, loan processing costs and other expenses. Be ready to meet such expenses or they might hold up the entire process.