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Commercial property refinancing is a technique where property owners acquire new loans to pay off their existing loans. Usually, the new loan has more favorable terms than existing loans. Refinancing is a common practice because after purchasing the first home, they would want to lower interest rates and grow their equity.
Once you opt to refinance, you need to do your assignment well because you want to avoid a situation where you settle for unfavorable loans. The positive side of property refinance is you don’t have to hurry because you already own the property. Hence, you have enough time to search and settle for competitive property refinancing.
Tips For Getting Good Refinancing
When searching for a refinancing lender to help pay an existing loan, there are a few tips that can help you settle for a competitive option. But with many lenders available in the mortgage market, settling for one could be a challenge.
Here are some tips to help you with it:
#1. Choose The Right Lender
Most property owners may decide to settle on the first lender they get to refinance their mortgages. However, the first lender won’t necessarily translate to the best lender. Thus, you need to conduct proper research and ensure that you get the best lender to refinance your properties.
The best lender will have low interest rates and other favorable terms, such as giving you a higher percentage of your property’s value. You should also choose a lender who charges lesser for the refinancing fees. You should ask for quotations from different lenders because this will help save a lot of money in the long run.
#2. Correct Credit Card Errors
Credit card errors are common because some cards could still be listed even after you’ve closed them. Consequently, it affects your credit score, hindering you from getting good deals when looking for mortgage refinancing. The problem is that most people don’t check on these errors, and when the lender assesses their credit score, the property owners qualify for a lesser amount.
You should ask for your credit card from a trusted agency. If there are any errors on your credit card, make sure you correct them before applying for any refinancing. You should also note that refinancing could affect your credit score temporarily. To help reduce the effect, you need to correct any mistake before applying.
#3. Improve Credit Score
To determine the amount of money you qualify for and how much they can trust you to repay the loans, lenders will look at your credit score. When applying for refinances, you want to get a higher amount to cater to the existing loan and other credits.
Here are some of the tips to help you improve your credit score:
- Keep your credit utilization low by spending a low amount on your available credit balance. Lenders prefer a credit utilization of less than 30% when giving out money, hence you should watch how you spend your money.
- Make all your payments in time, especially loans and insurance premiums, so a lender can trust you more. Using automatic online payments will help you in such cases.
If you have a good credit score, you can qualify for more loans. Also, you get to have more lenders in your books to choose from. This will help you get a better deal when refinancing your commercial properties.
#4. Lower Debt-To-Income Ratio
To determine how suitable you can get a refinancing loan, most lenders will look at your debt-to-income ratio. A higher debt-to-income ratio will mean you won’t meet the terms of many lenders. On the other hand, a lower debt-to-income ratio means that you have a pool of lenders to choose from as you’ll qualify for their terms on debt-to-income.
Here are some ways to help reduce your debt-to-income ratio:
- Find ways to increase your income. This is because lenders will be more interested in your monthly income before determining how much money you qualify for. Apart from your regular job, you can do freelancing jobs or rent your properties. More income reduces the debt-to-income ratio, making you qualify for a higher amount.
- Reduce your monthly debt repayments by asking your lender to lower the repayment amount and extend the repayment period. Moreover, you can offset your debt in full if it’s a small amount remaining before you clear. Lowering debt repayments improves your net income, which, in turn, lowers your debt-to-income ratio.
Just like how improving your credit score works, a lower debt-to-income qualifies you in many lenders’ books, hence more quotations to compare from before settling for the best refinancing option.
#5. Don’t Be In A Rush To Refinance
Even after comparing quotes from different lenders and choosing one, don’t be in a hurry to refinance your property. Waiting will help you make more repayments on the existing loan, which wins you better interest rates as you’ll build more equity on your property.
Secondly, if the market around your area is showing signs of improvement, waiting will increase your property’s value. A higher value of your property relative to the amount you still owe the current lender gives you an advantage when looking for refinancing. Don’t be in a rush to finance your property if you still have time. Instead, take your time to study the market first.
#6. Ask For Better Rates
Some lenders will allow borrowers room to bargain and ask for better rates. Of course, they won’t tell you that you can bargain, so it’s for you to ask them if they can give you better rates. Since not all of them will accept, narrow it down to those who are willing to let you negotiate.
You should also be prepared to convince them that you deserve a better rate. This is why you should get your credit report in order and increase your net income as much as possible.
When you choose to refinance your commercial property, you need to find the most competitive rates. The refinancing loan should cover the existing loans and, even better, other small credits that you may have.
Increasing income and your credit score are only some of the strategies that’ll make you qualify for a higher loan and meet many lenders’ requirements. Therefore, you’ll have more options to choose from rather than settle on the available one.