5 Tips for Refinancing Your Apartment Building Loan

Refinancing your apartment building loan means paying it off with a new loan at a lower interest rate. Then, you will make monthly payments to this new lender instead of your previous lender. Most people who refinance their loans have experienced a change in their personal financial situation. In some cases, it will also make sense to refinance if the national credit market has changed.

#1 Consider Settlement Options

Refinancing a loan is a good opportunity to look into settling that loan for less than what you totally owe. Debt settlement gives you the opportunity to repay only a portion of remaining debt in one, lump sum payment. Since you are already taking out a new loan and giving a lump sum, try to see if you can negotiate the amount you owe to a lower sum.

#2 Think Long-Term

Your credit score will take a dip anytime you modify loan terms. Lenders report this to the credit bureaus because they ultimately make less than they expected on a loan that is refinanced or settled. They will assess fees against you, and your credit score will drop. While refinancing this one loan may make your expenses less in the short-term, it could end up making your future loans much more expensive. If you are not planning on seeking another loan within the next few years, you will have the opportunity to rebuild your credit.

#3 Prepare Your Credit

Before you look to refinance, you should have the best credit score possible. This means no late payments for at least two years. Any bankruptcies or defaults should be beyond the statute of limitations in your state. You want to get the lowest interest rate possible on your new loan; you will only achieve this if your credit score is as high as possible entering negotiations. When your business owns your apartment building, your business's credit needs to be high as well as it will be the primary source of financial stability considered on your loan.

#4 Look for Federally Guaranteed Options

The Federal Housing Authority or the Small Business Administration may be a resource for your loan. If you are seeking a commercial loan, you will need to look to the SBA or other business lenders. If you can fit the requirements for a federally guaranteed loan, your lender will consider you a less risky borrower. This means your interest rate will be much lower. You may also have to place a lower down payment if you are opting for a federally guaranteed loan.

#5 Keep National Trends in Mind

Even if you do everything right personally, the national credit market will affect your loan. If the national prime interest rate has dropped since you took your first loan, you may find your loan quotes will be lower off the bat. However, if the country is in a recession, lenders may be quoting more expensive loans and have less appetite for risk despite the low prime rate. All of these issues will factor into the cost of your new refinancing loan.