Balloon-Payment Refinancing Pricing and Costs Key Terms

Price out costs of balloon-payment refinancing by knowing the facts
By Sandy Baker Balloon-payment refinancing pricing and costs are determined on a per-loan basis. Commercial property owners often use this type of financing due to the low payments at the time of purchase. Later, when the balloon payment comes due, the final payment can jump significantly. Keep in mind that balloon payment refinancing may not be an option for every commercial mortgage. It is important to speak with lenders and to understand fully the type of loan available prior to considering loan options online. There are several things to keep in mind with this type of refinancing, so read on and be prepared.

1. Note that some commercial loans may have penalties associated with balloon payment refinancing that should be taken into account.

2. Consider the differences between balloon payment refinancing into an adjustable rate loan or a fixed rate loan by using an amortization calculator.

3. Hire a financial consultant to handle balloon payment refinancing pricing and costs for the business and find the best solution.

Learn interest rates on balloon-payment refinancing

Interest rates are the key cost factor when refinancing. The lower the interest rate is, the less costly it will be. Various industry-wide resources often update their standard refinancing rates, many of which may apply to commercial balloon-payment refinancing. These loans may be refinanced through any type of commercial loan. The rates may range from as low as 4.5 percent up to 8 percent or more, depending on the market.
Try:  Speak with lenders directly or use online services to determine the latest interest rates for refinancing these commercial loans. Steelhead Capital provides daily updates on interest rates for commercial loans. Another website providing up-to-date commercial loan rates is HSH Associates.

Factor in balloon-payment refinancing closing costs

Closing costs can factor into the cost of any mortgage loan. These costs include things such as a title search ($1,000-$3,000), legal fees (up to $2,000), origination fees (1 percent of the loan's value) and appraisal costs (up to $3,500).
Try:  Learn more about the cost of closing on balloon-payment refinancing by obtaining a free quote from a lender. Commercial Finance Advisors provides information and resources for investors looking at all types of commercial loan refinancing. Obtain a quote for a commercial loan through MortgageLoan to compare closing costs, interest rates and terms.

Determine balloon-payment refinancing pre-payment penalties

Some lenders put penalties in place for paying off a loan early or prior to a set time. This may factor into the refinancing costs since the refinancing process pays off the initial loan. Pre-payment penalties can be up to 5 percent of the loan's value, which can be very sizable. Determine if this additional cost makes it worthwhile to refinance.
Try:  Utilize commercial loan amortization calculators to determine how pre-payment would affect the value of refinancing the loan, given the fee involved. PropertyByNet offers an amortization calculator that will show the benefit of refinancing the loan. Bankrate offers an amortization calculator that allows individuals to compare loan options.