Commercial Property Refinance: Lower Costs and Free Up Equity
Commercial loans are often reviewed more regularly than home loans, and some have terms that expire every few years. That makes regular refinancing reviews even more important. Whether your loan is expiring, your rate has crept up, or you want to use your equity, refinancing could improve your position.
Many business owners stay with the same lender for years out of habit. Meanwhile, new customers are often offered sharper pricing. A review costs nothing and can save a lot.
Reasons to refinance
- Your loan term or facility is expiring and needs renewing anyway
- Your rate is uncompetitive compared with what new borrowers get
- Your property has grown in value and you want to release equity for business growth or another purchase
- You want to consolidate several business debts into one facility
- Your circumstances changed, such as a new long lease that makes the property more attractive to lenders
- Your lender’s conditions, like reporting requirements, have become a burden
What to compare
- Interest rate and how often it’s reviewed
- Loan term and expiry date
- Fees, including establishment, valuation and ongoing fees
- Loan covenants, such as minimum rent cover or reporting requirements
- Break costs on your current loan, especially if it’s fixed
- Whether you can make extra repayments or redraw
A lower rate isn’t always a better deal once fees and conditions are counted. We show you the total cost over the time you expect to keep the loan.
Releasing equity
If your commercial property has risen in value, refinancing can free up equity. Common uses include:
- Buying a second property or your next premises
- Funding a fit-out or equipment (though equipment finance may be cheaper for some assets)
- Paying down higher-interest business debt
- Building a cash buffer for the business
Releasing equity increases your debt, so make sure the purpose will earn more than it costs.
How the process works
- We review your current loan, the property, the lease and your financials
- We compare lenders and show you the real cost difference
- The new lender orders a valuation
- Once approved, the new lender pays out the old loan
Start early. Commercial valuations and approvals can take longer than residential ones, so begin a few months before any expiry date.
Example: a medical practice refinances its rooms
Two GPs own their medical rooms, which they bought eight years ago. Their loan is coming up for review, and their bank offers a renewal at a rate well above what new customers are getting. We compare lenders that like medical property, and a new lender offers a lower rate, a longer term and enough equity release to fund new equipment for the practice.
Illustrative example only.
FAQs
Will I need a new valuation?
Usually yes. The new lender orders its own valuation, which affects how much it will lend.
Can I refinance if the property is vacant?
It’s harder, as lenders rely on rental income. Some lenders will consider it with other income or security.
What about my home loan?
If you also have a home loan, it’s worth reviewing at the same time. See our home loan refinancing page and our Credit Ready Check.
Albert Waldron is a Credit Representative (407514) of Australian Finance Group Ltd, Australian Credit Licence 389087. This is general information only and does not take into account your personal circumstances. Please seek advice before acting. Commercial and business loans are subject to lender approval, terms and conditions.