Taking out a mortgage almost automatically counts as an expense, as it translates to making continuous repayments over an extended period. But did you know that mortgage refinancing provides opportunities to cut down on expenses and outbound cash flows?
That’s right — restructuring your mortgage actually provides opportunities to unlock hidden savings by reducing monthly payments, instituting low, locked-in interest rates and revealing extra cash available in the process. Because of these benefits, refinancing a mortgage has become popular among countless property owners in a bustling business district such as Toronto.
Refinancing your commercial mortgage puts you in charge of the financial health of your business. Learn exactly how you can save your business some much-needed cash through mortgage refinancing:
Analyze the Mortgage Repayment Terms
Before you sign up to refinance your mortgage, it’s important to consider your goals. Does your Toronto business require an influx of cash and savings in the short-term to stay afloat, or would you rather cut down on costs now to be in a better place to afford mortgage repayments in a shorter time frame?
Naturally, the shorter term of the loan, the higher the amount of each repayment; on the upside, this also means paying off the loan much faster and spending less time in the red. But if your business requires the added benefit of increased cash flow in the near term, reducing monthly payments could provide a turnaround in your savings account.
Know Your Options for Mortgage Refinancing
Commercial mortgage loans are designed differently for every business owner. That’s because lenders know that each business has different needs and is in a unique financial situation.
Before ironing out the terms of the mortgage refinancing plan of your business, it’s important to find a lender in Toronto who will offer the best interest rates, as well as friendly appraisal and closing costs. Just like when you first purchased your property through the original mortgage plan, refinancing the terms requires due diligence. This helps to ensure that your business enters into loan terms that best suit its financial situation and future outlook.
Apply for Cost-efficient Mortgage Refinancing
Mortgage refinancing holds the promise of increasing the cash flow of your Toronto business, but unfortunately, it’s not free. The reality is, mortgage refinancing requires certain costs outside of adjusting the interest rate and loan terms that your business will have to shoulder in the long run.
Mortgage refinancing requires an appraisal to determine the current value of your business. While making this investment helps to arrive at the optimal refinancing terms, you will want to make sure that it is cost-effective for your business. Add to that, closing costs such as settlement services and title insurance, as well as private mortgage insurance can also vary among lenders, so make sure to inquire about these fees on top of working out the best refinancing terms. The additional savings you gain can go a long way in maintaining optimal business operations.
Switch to a Fixed-Rate Mortgage
Perhaps the single easiest way to earn savings through mortgage refinancing is switching to a fixed-rate plan. Knowing that you will be paying uniform interest rates helps to secure your business despite market fluctuations. This means fewer mortgage expenses and resulting savings when interest rates elsewhere go up depending on market conditions.
Lower Loan-to-equity Ratio
Mortgage refinancing also offers opportunities to achieve a lower loan-to-equity ratio and even waive private mortgage insurance payments. As you have owned the building over the past few years as a product of the original commercial mortgage terms, the equity accrued changes the loan-to-equity ratio. This means that you may be able to refinance the property without having to shell out the extra cost for private mortgage insurance, allowing your business to unlock savings by the time the mortgage is paid off.
Refinance Your Commercial Mortgage the Smart Way
At the end of the day, the success of refinancing your commercial mortgage boils down to how well you can allocate the savings you earn for actual growth ventures. Once you decide to refinance, mortgage lenders like Northwood Mortgage™ typically offer a “grace period” before restructured payments need to be made, so it’s essential to take advantage of this small window to recoup expenses and build up savings.
For more information about commercial mortgages and getting the best rates in Canada, call 1-888-495-4825, or contact us here.