Commercial Mortgage Refinance Loans

A commercial refinance replaces existing debt with new debt. The most common reasons are a maturing balloon, an expiring interest-only period, a prepayment window opening, or a structure that no longer fits the property or the hold plan.

Q Commercial Capital places rate-and-term refinances with lenders whose appetite matches the property and the borrower. We are a brokerage, not a lender. Terms vary by lender, property, borrower, and transaction.

Program overview

A rate-and-term refinance pays off the existing loan and transaction costs without giving the borrower meaningful new cash. The lender underwrites the property's current income against the new payment, which is a different question from whether the property supported the old loan.

Refinance files are generally more straightforward than purchases because the property has an operating history and the payoff is known. The friction points are prepayment penalties on the existing loan, seasoning requirements, title and entity documentation, and whether the property's current NOI supports the requested loan at today's coverage and leverage standards.

Who this program fits

Owners facing a maturing commercial balloon
Borrowers whose interest-only period is ending
Investors moving from an adjustable structure to a fixed rate
Owners whose existing lender no longer fits the property or the plan
Properties with stable income and a documented operating history

Eligible property types

Multifamily — five-plus-unit apartment properties
Mixed-use — residential and commercial space in one building
Retail — strip centers, neighborhood centers, and single-tenant retail
Office — professional, medical, and general office buildings
Industrial — warehouse, distribution, flex, and light-manufacturing space
Automotive and specialty — service properties, car washes, and self-storage

Eligible loan purposes

Rate-and-term refinance. Replacing existing debt without taking meaningful cash out.
Maturity refinance. Paying off a balloon that is coming due.
Recast or restructuring. Moving to a different term, amortization, or rate structure.
Entity or ownership refinance. Refinancing in connection with a partnership or title restructuring, subject to lender review.

Current NOI versus the new payment

The lender rebuilds net operating income from current operations and tests it against the proposed debt service. A property that covered its old payment at a lower rate may not cover a new payment at current rates. Coverage, leverage, and debt yield are recalculated from today's numbers.

Payoff and prepayment

The existing lender provides a payoff statement that includes the principal balance, accrued interest, and any prepayment penalty or exit fee. Yield maintenance and defeasance can be expensive, and the timing of the refinance may be driven by when the penalty steps down.

Seasoning and documentation

Lenders review the ownership history, current leases, rent roll, operating statements, entity documents, and title. If the property was recently acquired or improved, the lender may ask what created the value and whether the ownership period meets its seasoning requirement.

Property income and occupancy

A current rent roll, a trailing twelve-month operating statement (T-12), copies of executed leases or a representative sample, and an aged receivables report. Lenders use these to verify the income they are underwriting rather than the income described in an offering summary. A rent roll that does not reconcile to the operating statement is one of the most common reasons a file stalls.

Borrower, guarantor, and entity documentation

A personal financial statement and schedule of real estate owned for each guarantor, typically two years of personal and business tax returns, two to three months of bank statements, and the borrower entity's formation documents, operating agreement, EIN confirmation, and certificate of good standing. Where ownership is layered, expect an ownership org chart and authority documents for each level.

Third-party reports and closing items

The lender orders the commercial appraisal, and depending on the property and program, a property condition assessment and a Phase I environmental site assessment. These are borrower-paid and largely non-refundable once ordered. Title commitment, survey, insurance evidence or a bindable quote, and lender legal review complete the closing file.

Benefits

Replaces a maturing or poorly structured loan with debt that fits the hold
Can move from adjustable to fixed rate or reset the amortization
Uses the property's documented operating history
Can consolidate or restructure ownership debt
A rate-and-term refinance avoids the tighter leverage of a cash-out

Limitations and risks

The new loan must clear today's coverage and leverage standards
Prepayment penalties on the existing loan can reduce proceeds
Third-party reports and lender legal review add time and cost
A property with declining income may support a smaller loan than the current balance
Cash-out is a separate, more conservative transaction

Example Transaction (Illustrative and Hypothetical)

Hypothetical illustration — not a real transaction

This example is hypothetical and is not a quote or a real transaction. An owner has a $1,500,000 balloon maturing on a 20-unit apartment building. The property's normalized NOI is $135,000 and the appraised value is $2,250,000. The owner refinances into a $1,500,000 loan at 67% LTV. Assuming annual debt service of $108,000 solely to demonstrate the arithmetic, DSCR is 1.25x. The existing loan has no prepayment penalty at maturity. No rate, payment, or term is expressed or implied.

Common reasons a deal may not qualify

Current NOI does not support the existing balance at the lender's coverage minimum
The property has condition, environmental, or title issues
The prepayment penalty makes the refinance uneconomic
Ownership or entity documentation does not match the title
The property is transitional and needs a bridge rather than permanent debt

Alternative structures

A cash-out refinance if the owner needs proceeds and the property supports it
A bridge loan if the property needs stabilization before permanent refinancing
A modification or extension with the existing lender
Additional equity to reduce the new loan amount

Related property types

Related calculators

Frequently asked questions

When should I start a refinance?

Start well before the maturity date. Commercial refinances involve an appraisal, environmental review, title work, entity documentation, and lender processing. Starting six to nine months before maturity gives you room to address problems, negotiate a payoff, or arrange a bridge if the property does not yet support permanent debt.

Can I refinance with a prepayment penalty?

Yes, but the penalty reduces your proceeds or increases the new loan amount needed. Yield maintenance and defeasance can be substantial. Ask the existing lender for a payoff statement early and compare the cost of waiting for the penalty to step down against the risk of higher rates or a tighter market.

What determines the terms I am offered?

The lender sets terms after reviewing the property, the borrower, and the transaction. Property type, occupancy, net operating income, debt service coverage, leverage, loan purpose, loan size, term and amortization, recourse, prepayment structure, sponsor experience, credit, and liquidity all move the quote. Two lenders can reach different conclusions on the same file. Terms vary by lender, property, borrower, and transaction, and nothing here is a rate quote or a commitment to lend.

Have a deal that fits?

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Terms vary by lender, property, borrower, and transaction.

Information provided is for general educational purposes and does not constitute a commitment to lend. Programs, terms, rates, loan amounts, documentation requirements, and eligibility vary by lender, property, borrower, and transaction. All financing is subject to underwriting, appraisal, title review, due diligence, and lender approval.