Commercial Adjustable Rate Mortgage Paydown??

[Kevin Hittle]

Should I mortgage three single family properties to pay down a commercial mixed use adjustable rate mortgage?

I have a mixed use commercial property with a 20 year amortization and 5 year adjustable rate term mortgage.  The interest rate is adjusted every 5 years at a maximum rate of 2% every five years.  The current (first term) is 4.65%.  Value is around $2.0 Million.  Mortgage is around $1.2 Million.  This mortgage has no federal backing due to it being a mixed use and does not fit into any SBA, etc categories.

I also have three single family properties.  Total value is around $650K with one mortgage at $60K.  I could possibly pull $420K of equity out of the single family properties and pay down the adjustable rate mortgage to around $800K.

In today's environment, it seems like this would be good plan assuming I can get 3%-5% rate on the SFR's for 30 years and the commercial mortgage could go to around 7%, 9% & 11% over the next 15 years. Everything cash flows fine now and should cash flow with refinancing as long as rents are maintained locally. My concern is if / when the SHTF economically, I am putting the paid off properties at risk in order to reduce total average interest rate costs in the long term.

I have been debating this for quite a while and thought you might have have suggestions.  I keep hearing the feds cannot raise interest rates for fear of busting the economy but as an architect I can see the current inflation needs to be curtailed.  Any and all thoughts are appreciated.