Refinancing a commercial property in Florida may be a helpful strategy for entrepreneurs who want to lower their monthly payments, generate cash flow, or add new commercial properties to its portfolio.

In this article, you will find a guide on refinance a commercial property in Florida. 

Back to Basics – What Does Refinancing a Commercial Property Means? 

Essentially, refinancing a commercial real property is similar to refinancing a residential mortgage, which involves using the money from a new loan to pay off the existing loan. In Florida, many borrowers use commercial property refinance to qualify for more favorable terms in a loan, such as decreasing interest or obtaining a different type of loan. 

Refinancing Commercial Property in Florida – Advantages and Disadvantages 

Refinancing a commercial property has its share of benefits and liabilities. But, mainly, most entrepreneurs who choose to refinance a commercial property in Florida want to lower their monthly payments, get better loan terms, or borrow tax-free funds with a cash-out refinance. 

This last advantage is an excellent strategy for entrepreneurs who need to pay any existing debts or acquire cash flow to leverage their businesses. With a cash-out refinance, it is possible to borrow more money than currently owed and then cash out the difference between the two loans.

Plus, refinancing a commercial property is an excellent strategy to avoid “balloon payments,” which are large payments for the remainder of the loan amount. Typically, commercial loans have shorter periods for repayment than residential mortgages. Still, refinancing can help to avoid paying a large amount of money at one time. 

However, nothing is perfect in life. 

Refinancing a commercial property can come with closing costs. Thus,  people interested in a refinance strategy need to ensure that the amount obtained in the new loan will cover the costs of any fees paid upfront.

Also, refinancing does not occur with all types of commercial property loans. In this sense, the recommended approach is to check specifically with the lender to discover any restrictions to your current loan. 

Regarding lenders, some people trying to refinance a commercial property could face a prepayment penalty for paying off a commercial loan too early. This penalty is certainly not a good deal depending on the case. 

Different Types of Loans, Different Refinance Strategies 

Conventional Loans 

In essence, a conventional loan refers to any mortgage that the US federal government does not back. It is the most common type of loan utilized by people refinancing commercial property in Florida, usually taken either from a mortgage lender or a traditional bank.

In this option, loan terms tend to be similar to those of the original loan but with different conditions (e.g., different interest rates, different types of interest, different loan terms, etc.).

Usually, conventional lenders have stricter requirements, such as requiring larger collateral. 

Borrowers need to demonstrate their ability to repay their debts. In addition, they are significantly experienced in business, meaning most people who choose this option are seasoned business owners who can deal with the strict borrowing requirements. 

Government-backed Loans 

As its name suggests, this type of loan is backed by a government agency, such as the Small Business Administration (SBA) or the US Department of Agriculture (USDA). 

In this type of loan, refinancing a commercial property is similar to a conventional loan However, the SBA and USDA participate in the process by guaranteeing a portion of the loan amount in case the borrower fails to repay it, making it easier for lenders to offer more flexible qualifying standards. 

To refinance a loan with SBA, the borrowers must provide a documented on-time payment history detailing the last 36 months. In addition, USDA loans require borrowers to be either US citizens or have permanent residency while residing in a rural area.

Cash-out Loans

In Florida, a cash-out loan permits the borrower to replace his/her existing mortgage with a new loan. This process occurs by borrowing more money than currently owed on the commercial property.

Hence, individuals approved for a cash-out refinance obtain the difference between the new loan amount and the debt on the property involved in the transaction, at closing.

This type of strategy is more suitable for entrepreneurs who have built a significant amount of equity in their property. Especially because most lenders will require a higher percentage of equity before granting a new refinance. 

We Can Help You to Refinance a Commercial Property in Florida 

Refinancing a commercial property in Florida is undoubtedly a complex task requiring an experienced attorney in Florida.  

Waste no time with uncertainty. Get in touch with attorney Romy B. Jurado Esq. today by calling (305) 921-0976 or emailing [email protected] to schedule a consultation.