By Alex Z.
Similar to residential mortgage rates, commercial mortgage rates have been hitting historic lows since April 2020. All signs point to a low interest rate environment over the next 6 to 18 months, which means one thing.
The same benefit that homeowners who take advantage of these low rates by refinancing their debt are available to commercial real estate owners, too!
Let’s say you own a $1 million commercial property that is mortgaged at 65% LTV over 25 years with a 10% interest rate. Excluding escrows, the principal and interest on that property is $5,906.55. In today’s interest rate environment, a 4.5% interest rate is not out of the question. Refinancing to a 4.5% interest rate will bring your P&I down to $3,612.91 for a total monthly savings of $2,293.64 and an annual savings of almost $27,523.67.
Just by refinancing you have created more cash flow, more income, and less expenses for your business.
The concept to keep top of mind heading into the spring buying season is leverage. How can you leverage historically low interest rates into buying another cash flow producing commercial building? Rates are that low right now.
The time to strategize is running out and the time to action is quickly approaching. Set yourself up for another huge year by taking advantage of historically low commercial interest rates.
Alex Z. is a mortgage industry veteran with experience in sales and capital markets. He invests in real estate along the east coast and runs a blog geared towards the U.S. housing economy and first-time home buyers. Alex is currently available to perform market analysis and market write ups for prospective clients in the real estate industry. You can reach Alex at firstname.lastname@example.org or visit his website for more information at howofhousing.com.
Featured in Harrisburg Commercial Real Estate Report – February 2021