Don't be a frog in boiling water, not noticing that you're in trouble until it is too late.

Let's face it, you may not consider refinancing your multifamily and senior housing as a fun time, and Howell Investment Finance understands that. However, with rising interest rates in the future, you also don't want to wait until it's too late to get started only to find out your new interest rate will be quite higher than you thought. Don't be like the frog in a pan of water and relaxing, only to wait too long to find out the water is now boiling, and you're in hot water!

What Should You Consider When Refinancing Commercial Real Estate?

1. Timing

Prepayment penalties are often the reason sponsors wait to refinance, which is very understandable. The first thing to verify is your current loan's maturity date to assist in your refinance timing. Then you need to review your financing strategy with Howell Investment Finance as each loan type has different loan parameters. One of the hardest things is telling a sponsor their property is not ready for refinancing when their loan term is close to coming due. There can be times when paying the prepayment penalty makes sense. You need to factor in what the new interest rate will be, where the interest rate could be if you wait for the prepayment penalty to come down or expire, out-of-pocket costs to refinance to see if it justifies refinancing while you still have a prepayment penalty. Howell Investment Finance has assisted several sponsors in seeing if it is in their best interest to refinance now or to wait.

2. Is your Multifamily or Senior Housing in the best financial position?

To achieve the best loan terms, look to see what your occupancy looks like along with your monthly income and expenses. Howell Investment Finance will review your Rent Rolls, Trailing 12 months financials, and other documents to see how your multifamily or senior housing property is positioned for refinancing. Howell Investment Finance has worked with several sponsors over the years to help them align their properties performance to the current lending guidelines. There has been times when Howell Investment Finance advised the sponsor they need to wait to refinance their multifamily or senior housing project until the numbers improve. This is one of the most important reasons to start early on refinancing vs becoming the frog in the boiling water pot. 

HUD has a 35-year amortization and 35-year term with the LOWEST interest rate, however, HUD can take 8-10 months (possibly more depending on various factors). HUD loans are non-recourse and fully assumable.

Fannie Mae and Freddie Mac have 30-year amortizations with interest rates locked in for 10-12-year terms and can close in 2-3 months, however, they have slightly higher rates than HUD. Fannie Mae and Freddie Mac loans are also non-recourse and fully assumable.

Why use Howell Investment Finance?

• The difference is Howell Investment Finance is an independent commercial mortgage broker and is not locked into any one lender. Therefore, giving you more finance options.
• Lenders have different lending programs and options. Working with a Lender with only their programs will limit your options and possibly reduce the chance of maximizing your loan choices.
• Howell Investment Finance has several lenders across the country from New York City, Washington, D.C., Chicago, Minneapolis, Dallas, and Denver to find the right fit as every sponsor has different goals.
• Howell Investment Finance will be at every appraisal and site visit possible. We feel it is very important to be there and answer any questions from the appraiser on behalf of the sponsor. There have been times when Howell Investment Finance drove 4-6 hours to a site visit for a 30-minute appraisal walk-through, was it worth the time... absolutely. After all, we represent you the sponsor, not the Lender.

When you're ready to finance your multifamily or senior housing project, contact Howell Investment Finance in Ames, IA. Since 1992, they have been serving West Des Moines, Cedar Rapids, the Quad Cities, and Iowa City. They feature comprehensive financing options for investment properties, including construction loans, HUD mortgages, and Fannie Mae and Freddie Mac funding. Call (515) 233-8228 or visit their website to schedule a consultation.