The upside to refinancing a mortgage is not just for residential homeowners. Commercial investors can take advantage of the many benefits that come with refinancing their investment property mortgage to free up cash and improve their business. Here is a quick guide on how to refinance a retail shopping center:

In order to make the best decisions regarding your mortgage loan refinance, you will want to determine your ‘why’. Owners of retail shopping centers can consider the following reasons for refinancing:

• Lower interest rate

The odds are that interest rates are lower than when you originally purchased the property. By refinancing your retail shopping center, you can secure a lower interest rate and lower your monthly payment —more money in your pocket = more money to invest back in your business.

• Change mortgage term

Depending on your business’s financial situation, you may want to extend or shorten the loan term. By extending the life of the loan, you decrease the monthly payment. You will ultimately pay more over the full life of the loan, but it’s a way to free up cash now. Shortening the loan term means you increase your monthly payment but decrease the total amount you pay on the loan in the long run.

“Cashing out” on the equity you own is one of the best ways to profit from your commercial property. With a Cash-out Refinance, you replace your existing mortgage with one higher than what you owe on the property. The difference goes to you in cash. You can use these funds for any needed renovations on the shopping center to help you make more money in the long term. You could also choose to invest that money into new projects or simply have emergency cash on hand.

Once you have established the type of commercial loan you will go with, you need to familiarize yourself with the process. Here are some things lenders will consider when reviewing your loan application:

• Debt service coverage ratio (DSCR): Lenders will consider the business’s cash flow as it compares to its debts to assess its reliability as a borrower.
• Credit score: The higher the business’s credit score, the more favorable loan terms will be available to you.
• Net operating income (NOI): Lenders want to see that the business is profitable. A higher NOI will improve your chances of qualifying for a commercial loan.
• Operating history: When assessing how safe a borrower a business will be, lenders will consider the company’s history. They want to see that the business is sustainable and will be around for the long run.

• Refinancing your retail shopping center can lower your monthly mortgage payment to free up money for other projects and investments.
• Investors can take advantage of ‘cash out’ refinances to get money on hand to invest back into your business and generate more income.
• There are several requirements for refinancing a retail shopping center. The more prepared you are, the better.