By Anthony Migliore, Senior Advisor
If you're a commercial real estate owner, you're likely keeping an eye on interest rates. As rates rise, it becomes more expensive to borrow money, which can impact your bottom line. But when is the best time to refinance your commercial real estate debt? The answer isn't always clear-cut, but there are some pitfalls to watch out for when rates are on the rise.
First, it's important to understand that refinancing isn't always the best option. While a lower interest rate can mean lower monthly payments and more cash flow, it also comes with costs such as closing fees, appraisals, and legal fees. Additionally, refinancing too often can damage your credit score and make it harder to obtain financing in the future.
If you do decide to refinance, it's important to be aware of the potential pitfalls when interest rates are rising. Here are a few to keep in mind:
Waiting too long: While it may be tempting to wait for interest rates to drop, this can backfire if rates continue to rise. Waiting too long can mean missing out on potential savings.
Not considering the overall economy: Interest rates aren't the only factor to consider when deciding to refinance. You should also take into account the overall health of the economy, as well as any industry-specific trends that may impact your property.
Ignoring loan terms: Don't just focus on the interest rate when considering a refinance. Look at the overall terms of the loan, including the length of the loan and any prepayment penalties.
Failing to shop around: Don't just go with the first lender you come across. Shop around and compare rates and terms to ensure you're getting the best deal.
In general, the best time to refinance your commercial real estate debt is when interest rates are lower than your current rate and when you can secure favorable loan terms. However, it's important to weigh the costs and potential drawbacks before making a decision.
Refinancing your commercial real estate debt can be a smart move, but it's not always the best option. When interest rates are rising, it's especially important to be aware of potential pitfalls and to carefully consider all of your options before making a decision.