Refinancing your real estate can be a smart move depending on your objectives and market conditions. When considering the refinance of a home or commercial real estate, you have an opportunity to restructure your financing to more effectively meet your objectives. A lower interest rate will not necessarily serve you if it comes with the wrong loan structure. In determining the right structure there are three primary factors.
1. Hold Time - How long do you plan to hold the building? The length of time you plan to own the building should be a leading factor in determining the right loan strucure. Common mistakes include failing to calculate the impact of prepayment penalties upon sale of the property and failing to leverage the power of full amortization.
2. Payment Sizing - Is your current payment too high, too low, or just right? When considering payment size, consider business objectives and business cycles. If you had more cash, could you generate a higher return on it? If your cash flow is strong, could you comfortably increase your payment to build wealth? Is payment flexibility needed to plan for fluctionations in the business cycle?
3. Interest Rate Expectations - What direction are interest rates headed? How do current levels compare to historical averages? How will these changes impact the prepayment penalty and lifetime interest expense? The future direction of interest rates will have a big impact on certain loan structures. Your expectations must be factored into the ideal loan structure for you.
At Forest Lending our mission is to help you plan strategically and execute tactically to leverage these factors and obtain financing that dramtically increases your success.