Essential Commercial Mortgage Refinance Tools
If you own or aspire to own commercial real estate in Canada, it requires a substantial investment. Whether your property is a multi-family residence, retail space, office space, industrial facility, daycare, restaurant, bar, or self-storage unit, there may come a time when you want to access the equity in your property. There are many strategic ways you can choose to refinance your commercial mortgage. While it’s common to approach the same mortgage lender you have now there are many different options.
It’s important to work with professionals who understand your needs, your business and more important the commercial mortgage market. In this article, we’ll delve into the essential tools and information to help you understand and navigate the commercial mortgage refinance process.
What is a Commercial Mortgage Refinance?
Refinancing a commercial mortgage means changing your existing loan with a new one that offers, different interest rates, terms and conditions. The main goal of a refinance is to access the equity you’ve built up in your commercial property, while potentially adjusting the terms and interest rates to fall more in line with your goals. This process is designed to help you utilize the equity built up to pay off debts, improve cash flow and reinvest in your business.
For instance, you might refinance to pay down high-interest company debts, which could dramatically improve your cash flow and reduce interest expenses. Alternatively, your property might need some renovations or your business requires cash flow, so you might refinance to get the funds you need.
Do the Interest Rates Vary for Commercial Mortgage Refinancing?
The simple answer is yes, interest rates for commercial mortgage refinancing can vary depending on what the business qualifies for. Several factors determine the interest rates, including the financial stability of your business, the property type, current economic market conditions and the lender’s requirements. Traditional banks are one option for refinancing, but they are not the only ones.
Alternative institutions and private mortgage lenders also offer refinancing options that come with a great deal of flexibility and a more relaxed approach to their lending requirements. While these lenders look for some of the same things as a bank or credit union, they are often willing to take on more risk than traditional lenders, which can be advantageous if your business doesn’t meet the strict requirements of conventional lenders. It’s important to work with a mortgage broker who can shop around and secure a few offers based on your business needs.
Typical Number of Years for a Commercial Mortgage in Canada
In Canada, commercial mortgage terms typically range from 1 to 5 years. The terms are often shorter than a residential mortgage to allow both lenders and borrowers to periodically adjust the loan conditions based on market conditions, trends and the business’s financial status.
Refinancing your commercial mortgage within this period can provide several benefits, such as:
- Paying past due business taxes
- Catching up on property taxes
- Reducing or consolidating debts
- Investing in property improvements
- Expanding your business cash and operations
Strategic refinancing allows you to better manage your finances and capitalize on favourable market conditions. For example, during a low interest rate environment if you refinance, you could significantly reduce your cost of borrowing. Additionally, by refinancing you can secure enough money to invest in new equipment or hire additional staff to grow your business.
Documents to Process a Commercial Mortgage Refinance Application
To get started with a commercial mortgage finance application, you’ll need to gather some important documents.
These include:
- Business License or Articles of Incorporation: Proof of your business’s legitimacy and legal standing.
- Business Income Taxes: The previous year’s business tax return highlighting the business’s performance. These documents show the cash flow you possess to repay the loan.
- Recent Accountant Financial Statements: Detailed financial records prepared by an accountant, including balance sheets and income statements, which provide a comprehensive overview of your business’s financial health.
- Property Tax Bill: Evidence of the annual property taxes. Any past due amount can be included and paid from the loan.
- HST History: Records of your business’s HST (Harmonized Sales Tax) payments and offers a glimpse into your sales volume and adherence to Canadian tax regulations.
Having these documents ready will streamline the application process and demonstrate your financial stability to potential lenders. While not mandatory it’s also a good idea to have a business plan and a purpose for the funds you are requesting, alongside any other relevant information to support your application.
Borrow from Your Commercial Property Using a Professional
Professional assistance can make a world of difference in navigating the commercial mortgage refinance process. A mortgage broker that specializes in commercial real estate and can act as a guide while you explore your options. They have access to a wide network of lenders, including alternative institutions and private mortgage lenders, ensuring you find the best approval possible.
A professional mortgage broker will:
- Assess Your Financial Situation: Evaluate your business and secure the best possible mortgage approval options.
- Help You Gather Necessary Documents: Ensure you have all the required documents you need to expedite the approval process.
- Compare Different Refinancing Options: Provide you with a range of options from various lenders, helping you find the best terms and interest rates.
- Negotiate Favorable Terms on Your Behalf: Leverage their network of lenders to secure the best possible interest rates and terms available in the market.
By working with a mortgage broker, you can save time, reduce stress, and secure a commercial mortgage refinance deal that aligns with your business goals. They also deliver crucial insights, assisting you in making educated decisions throughout the refinancing journey.
The team at LendToday has several years of experience helping business owners come up with solutions tailored to their needs. Refinancing your commercial mortgage is a powerful tool to access the equity in your property and improve your financial stability. Having an open dialogue with your mortgage professional, gathering the right documents, and asking questions will help alleviate any uncertainty you have to better understand the process. This is the right approach, allowing you to financially protect your business and make informed decisions. Whether you’re looking to reduce your interest rate, access equity, or adjust your mortgage terms, refinancing can provide the financial leverage you need to achieve your business goals.
Apply For A Commercial Mortgage
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