All Forum Posts by: Robert L.

Hi all

Im in the process of refinancing a commercial loan for a rental property.

There are 2 competing lenders, 1 is offering 4.25%, 5/5 30 year amortization.

The second lender is offering several different types, the comparable ones of which are 5/5/5/5/5/5 ARM at 4.125%, 30 yr amort, and also a 7/7 balloon at 4.5%. Prepayment penalty would be reset after every adjustment period.

As a person with good financials and income, and the thought of selling the property in lets say 5-10 years, does any jump out as the better option? Is the 5/5 one better because at year 10 i'll be able to sell or refi without a prepayment penalty? The 5/5/5/5/5/5 sounds so tempting because of the rate but essentially i'm locked in for 30 years and have a prepayment penalty no matter what if i refi or sell later on right? The flipside is the rate difference, which is not that different of a monthly payment.

I guess its unclear to me whether its better to choose the option WITH a balloon or without in my scenario. Essentially, comparing loan A (5/5) vs loan B (5/5/5/5/5/5), at the end of 10 years, I can refinance loan A with a similar market rate that loan B would get readjusted to, but with loan A I also have the flexibility to say I want to pay it all back, sell it, etc. 

Thx

Stephanie thanks for the information!

Just learned of a new “doh” today. Prepayment penalty. We’ve had the loan for 7 years now (it was a 10 year, 5/1 — I think that’s the fancy way to put it). I had thought since we were so far out it’d be a small penalty if any, but now I’m learning years 1 and 6, 2 and 7, 3 and 8, 4 and 9 are considered equal for prepayment % (5,4,3,2,1 percentage respectively), which is nuts to me but I’m sure is nothing shocking to you folks who do this daily.

Anyone ever hear of CURRENT lender waiving this penalty if the new loan is with them also? 

If not can anyone help me brainstorm a way around this? I just need more capital... can I simply ask to take out a new separate loan with them since my property is worth that much more now? I’m waiting to hear back from loan officer but would love your expertise. Thank you all.

Rob 

Great thanks for the info. Yes it’s mixed commercial rental income property so I can document income with corporate tax return!

Thank you very much!

Hi everyone

New to this forum and couldn’t find an answer so here goes. a few levels to this question and appreciate any input.

I am “inheriting” a commercial property of my parents — they are planning to transfer company ownership to me this year. They took out a commercial loan on it many years ago and have about 3 years until loan maturity.

The property is worth considerably more than it was when they first financed (IE like double or triple) and rental income is up about 30-40%.

I am interested in refinancing to get extra cash out for other endeavors.

So my questions are:

1. If there is any benefit in just refinancing with our current bank — what fees, if any, can be avoided? I imagine that during refinancing it’ll be like starting the process all over again IE getting a new appraisal, then reviewing all our taxes, rent rolls, etc, so why not just shop around?

2. Next and more complex question would be if because of my new ownership situation (IE our previous years taxes don’t even reflect me as owner yet) I’d be better off just starting fresh with a new bank. Will either the current bank or new lenders care or be weary that the property just got transferred to me, some newbie owner? FYI my own personal finances are rock solid. But this is a major reason I haven’t personally approached our current lender because they technically don’t even know that ownership is being transferred to me and I worry that it’ll Piss them off somehow.

FYI this is an LLC.

3. This is the most oddball question but maybe someone has experience with ownership transfer. Per our accountant all we have to do to transfer ownership from my parents to me is report the company taxes accordingly this year to reflect my ownership. That and we plan to just scribble something down at a lawyers office. Im surprised that’s all that is involved. Does a bank want anything further than this??

Thank you all very much in advance.