Commercial property ownership enables an investor to search for growth-oriented opportunities. In some cases, it might be a good idea to obtain a lower mortgage rate or to use a portion of the property’s equity to make several repairs and overdue upgrades. Tips from Direct Apartment Lenders are helpful for an investor who wants to refinance an apartment loan.

Refinancing an Apartment Building Loan 

Unlike refinancing a residential home mortgage loan that typically has a 30-year term, commercial apartment building loans often have shorter terms. 

Apartment lenders also provide 30-year fixed-rate mortgages, however, many investors select shorter loan terms, such a two-year, five-year or a seven-year mortgage term. 

Although, apartment loans are generally amortized for 30 years, the interest rate may become adjustable at the expiration of the fixed-rate period or the balance of the note may become due. 

In either of the above scenarios, refinancing an apartment loan might be a great option for a property owner.

An investor could also inquire about a rate and term refinance when the market conditions provide certain benefits, such as a lower apartment mortgage rate or to change the financing terms.

Get a Cash-Out Refinance for an Apartment Building

A cash-out refinance could enable an investor to upgrade the roof of an apartment building, remodel some of the rental units or to make other improvements toward modernizing the property.

Pulling money from the equity within an apartment building provides a method for an investor to leverage real property versus using other liquid assets or financial reserves.

Additionally, refinancing may be helpful for an investor who is short on cash or who needs to borrow money for any reason via a low-interest rate mortgage loan. 

Cash-out refinances for an apartment building may enable an investor to borrow up to 75 percent of a property’s appraisal value.

For instance, if an apartment building appraises for $2,000,000 and an investor has an existing mortgage balance of $1,400,000, the proceeds before any expenses would be $100,000.

. 

                                                       $2,000,000 (Appraisal value)

                                                                 X .75  

                                                      __________

                                                       $1,500,000 (Max loan amount)

                                                     - $1,400,000 (Loan balance)

                                                      __________

                                                          $100,000 (Max cash-out)

Perform a Credit Check

An apartment lender is going to perform a credit check on an applicant prior to making a loan commitment. Therefore, it makes sense for an applicant to obtain a free credit report via the Annual Credit Report website, before contacting a commercial mortgage lender about refinancing an apartment building loan.

Correcting any inaccurate information that is shown on credit bureau records could positively impact an applicant’s credit standing. 

Certain credit updates may also be instrumental toward improving an applicant’s credit score.

Gather Rental Income Documents

Rent rolls provide some insight that helps lenders determine the monthly income for an apartment building. 

An apartment lender may also request residential leases to see how long the monthly income will continue for each rental unit. Having leases for apartment units, onsite garages, mixed-use units and for parking spaces can provide proof of income for an apartment lender to review versus carbon pages from a rent receipt book.

Create a Property Information Folder

Place information about the property within a folder, such as recent upgrades, before and after photos for major improvements, copy of the most recent appraisal, complete details about any real estate owned.

Including title information for an apartment building refinance loan is recommended for cash-out transactions. Title documents can enable a lender to see the property purchase date, as certain loan programs may have a six-month seasoning requirement.

Length of ownership is referred to as seasoning. This is important information for a lender to know. For instance, if an investor purchased a 20-unit apartment building for $1,400,000, an underwriter would heavily scrutinize the property value if the apartment building was worth $1,950,000 within 60 days.   

Spruce up Exterior Property Areas

A property’s curb appeal could go a long way toward determining the actual value of an apartment building. Maintaining the exterior aesthetics of an income-producing property reflects more desirable living conditions, which may also influence the property’s value.

Tenants who realize the extra attention to detail from a property owner might take more responsibility toward maintaining the fixtures, appliances, walls and interior areas of an apartment building.

Apply Online for a Loan to Refinance an Apartment Building 

Complete an online application to refinance an apartment loan. With the documents and the information mentioned within this article, an investor should be able to fill out a mortgage loan application in less than an hour.

Applying for an apartment loan online enables a borrower to request a desired mortgage amount 24 hours per day.

Direct Apartment Lenders offers excellent mortgage rates for investors who want to receive cash-out from a commercial property.

We fund loans nationwide for income-producing properties. For the fastest response, borrowers can complete our Get A Quote form for an apartment loan.

Contact us today to speak with a loan officer who is kind, courteous and knowledgeable about apartment lending.