How do I go about this? 40%equity commercial loan 30 yrs @ 4%. and want to reduce monthly payments

8 Replies

Hi, 

   I have a loan ( commercial) @ 4% with 40% equity built in and remaining payoff about 117K. 

I would like to reduce my interest rate and also reduce monthly payments. Thinking of refi with 5 yr ARM. I know I can pay off the complete loan towards end of 2015.

I can also make additional down payment of that 17K to round off the loan to 100K. 

However, here is the catch.  Just this month onwards, I am no more getting a paycheque and I registered an  S Corp and working through my own company. I will structure to take monthly salaries, but it is not yet in place.

In this situation, how do I get a loan with lower interest than I am paying and reduce my monthly payments on the property.

Property is rented and the rent itself is upto 4 times the possible installment of 100K loan on 5yr term, if I get proper rates.  However not sure if that itself is enough or will the lenders will still look for a regular paycheque.

Additionally, I am closing a 245K loan just this month ( within a year from starting the loan) and not sure if that would bear any impact if I am trying to refi .

Please advise and I would like to go to a lender with best possible strategy. Obviously I dont want to pay origination/closing fees if possible. 

Thanks in advance. 

Naveen. 

Generally with commercial loans, the lender will want to see the cash flow of the property and base how much they will lend you on that amount.

@Naveen Desai  

The 2 most important guidelines for a commercial loan are the Debt Service Coverage Ratio (DSCR) and LTV.

Basically, the DSCR is the ratio of NOI to annual debt service. This calculation ensures that the property has the necessary cash flow to cover the loan payments. The higher this ratio is, the easier it is to obtain a loan.

Regarding credit worthiness:  With your business being less than 3 years old, your personal credit will be evaluated. If in business more than 3 years, they look at the business credit and performance history.

Do some research and familiarize yourself with the different lender guidelines, especially their DSCR policy. And ask that they provide you with a preliminary review of the investment property.

Not sure if I've answered your question, but hopefully this helps :)

You already have a really good interest rate at 4%. You might get something lower for the short term by accepting a balloon or ARM, but that may bite you down the road.

Thank you everyone for the inputs. However I still don't have a way of how and what I can do to reduce my monthly playments.

@Jon Holdman   I exactly want a short term loan. I know by end of next year this time, I would have paid off on this loan.  The interest payments now, are eating me out - which I would like to reduce, since I know the total length of the loan is significantly smaller than intended 30 yrs.  Any pointers please?

Thanks,

Naveen.

I'm confused.  A 4% rate is really, really low.  I doubt you'll be able to get much lower than that, if any thing.  4% interest on a $117K loan is only $390 a month.  

@Jon Holdman  ,   No  my installments are double that.  That is why I am trying to do what I can.  May be something isn't right and we may have to talk. I would appreciate if you have any advice for me. My # is below.

Thanks, Naveen.

What's the amortization period on your current loan?  What was the original loan amount?

Hi, I have this loan for only 2 years and so another 28 yrs. Original loan 156K. I relooked in detail at it & I shouldn't panic just by the monthly numbers, as the mortgage company is actually collecting money to put into escrow (for annual taxes- around 3500 per yr) and yearly home insurance. So all the additional money after principal is not just interest and it also covers annual expense. The reason, I was put into alert to watch the monthly payments on this property is due to higher payments and that happened due to property tax increase by $1000 pa this year,  which sounds ridiculous. But that I will check with county to see why so and if there are any reductions I can claim. 

Thanks. 

Naveen. 

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