Securing an advantageous commercial mortgage refi with poor credit may be a bit more difficult that it is for people with good credit scores. It is important for you to be aware of your options to be able improve your cash flows. There are various steps you may want to take since a refinancing plan with poor credit comes at a higher interest rate than usual.
I. What are your reasons for refinancing? – For most people the reason would be an upcoming balloon payment and they are seeking a new loan to avoid such liabilities. It is important to consider your long-term business objectives as they will guide you into determining whether a commercial mortgage refi with poor credit is possible or even cost effective.
II. Prepare all relevant documents – The lender will need to assess your business. This includes tax returns, a projection of the cash flows you want to refinance and the financial statements for the business. It is important for all these documents to give the impression of a well thought out business plan.
III. What is the current valuation of the property? – Property values fluctuate depending on various factors such as the climate. The value may be different than what it was in the original mortgage funding. The loan to value calculation will be affected by the current value of your property. Since you are applying for a commercial mortgage refi with poor credit, a depreciated property may disqualify you as more equity may be needed.
IV. Make realistic projections – A bad credit often means higher interest rates depending on your lender. It is important to make projections that are realistic. Use a debt calculator to determine whether you monthly income is enough to cover the monthly payments that will be required of you.
V. Research on upfront costs – Application for commercial mortgage refi with poor credit may call for upfront costs which vary with the lenders. It is important to know the costs and the effects it will have on your cash flow. You need to know that that you will have pay from your own pocket and those that can be added to the loan amount.
Applying for a refinancing mortgage loan if you have a bad credit is made easier if you have a co-signer. Regular payments on your previous loan also improve