Tips to Restructure a Commercial Mortgage Loan
Restructuring of a commercial mortgage loan is a vital instrument. It is often seen that the second loan is started with the first new loan. This is because commercial mortgage has a limit of 1-5 years with interest payments only. In some financing scenarios, the commercial mortgages are critical. Therefore, you should consider the possibility of affording the services of two loans. Besides New City Financial experts being always available to guide you, here are some tips which you can consider to restructure a commercial mortgage loan.
Loan To value
This kind of creative financing has some advantages of its own and most advantageous is the reduction to the “Loan To Value” (LTV) so that you can easily be allowed to qualify for mortgage. For example, the first lender (primary mortgage) will contribute only 70 percent of LTV and you will have only 20 percent (or less than that) to put down.
Compose the Difference
The reason behind taking a commercial real estate loan can be to compose the difference. You should always remember that second mortgage loan’s rate will be higher than the rate on first mortgage loan.
Some other tips to restructure a commercial mortgage loan are as follows:
- The restructuring can help you to develop the business. It can be used for construction, exploitation of working capital, debt consolidation, restorations or for tax arrears.
- The commercial mortgage’s costs can be deferred and immediate payments can be reduced with various options available, such as interest only on annual payments, closing fees, payments, etc.
- The property should be given time for appreciation and firstly, refinancing and consolidation should be allowed. Then mortgages should be allowed later with a low LTV.
- The prime reason for mortgage loan’s security should be to gain line of credit. In credit limit, an equity is made available to you which can be borrowed by you whenever you want.
- When along with mortgage loan a line of credit is obtained, in reality you get a new “mortgage loan” on the real estate equity. For example, instead of taking out cash, you will be allowed a limit and it will act as a stand-by loan.