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Is refinancing a commercial property beneficial?

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Is refinancing a commercial property beneficial?

Last updated: January 7 2020
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  • Is refinancing a commercial property beneficial?

    In developed markets, refinancing of a commercial property is common practice for various reasons. How does it reflect in Indian real estate and what are the benefits that entail?
  • #2

    #2

    Re : Is refinancing a commercial property beneficial?

    The practice of refinancing a commercial property started in the western and some Asian countries, including India, have started experimenting with it too. For a business, refinancing offers a host of advantages owing to the fact that it involves paying off an existing loan and then taking a new one at a better of rates interest, to begin with.
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    • #3

      #3

      Re : Is refinancing a commercial property beneficial?

      Refinancing lowers the cost of borrowing by letting you opt for a loan lower interest rates from a bank or NBFC, and paying off the existing loan. It further enables you to save more money by the difference between the old and new interest rates. The transition from higher rates to lower rates is very much possible nowadays owing to existing low interest offers from banks and NBFCs.
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      • #4

        #4

        Re : Is refinancing a commercial property beneficial?

        Malvish yes, that is one obvious benefit I suppose. But how much is the difference in rates? Is it good enough?

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        • #5

          #5

          Re : Is refinancing a commercial property beneficial?

          Refinancing an existing commercial loan can help save as much as between 100-200 basis points in interest rates and that can be a whole lot of money saved.
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          • #6

            #6

            Re : Is refinancing a commercial property beneficial?

            How much difference that 100-200 basis points actually make in a commercial loan?

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            • #7

              #7

              Re : Is refinancing a commercial property beneficial?

              The percentage term for 100 basis points is 1%.
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              • #8

                #8

                Re : Is refinancing a commercial property beneficial?

                Refinancing an existing commercial loan also allows the borrower to opt for a shorter repayment period.
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                • #9

                  #9

                  Re : Is refinancing a commercial property beneficial?

                  How does a shorter repayment tenure help in the real sense? I know it does but just for the sake of detailing.

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                  • #10

                    #10

                    Re : Is refinancing a commercial property beneficial?

                    Well, the interest component in EMIs is highest in the first few years of the repayment period of a loan. In a long term loan, the principal amount get's repaid in later years of the repayment tenure. In a short term loan the interest amount paid will be less, also ensuring that the overall outgo remains even lesser than that in a long term loan.
                    Last edited December 26 2019, 08:14 PM.
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