In one sentence
Replacing an existing loan with a new one, to lower rate, extend term, pull equity, or fund a business plan.
The longer version
Refinancings are their own closings, with fresh diligence, a new appraisal, and a payoff of the existing loan coordinated to the day. Rate and term refinances differ from cash-out refinances in scrutiny and proceeds.
The payoff coordination is the delicate part: the old loan releases as the new one funds, and the closing statement has to tie both sides to the penny.
Common questions
- Why do commercial borrowers refinance?
- To lower the rate, extend maturity, pull out equity, replace bridge or construction debt with permanent debt, or repay a loan at maturity.
- What does a refinance closing require?
- Much the same as a new loan: diligence, title and survey updates, third-party reports, new loan documents and a payoff letter for the existing lender.
- What is cash-out refinancing?
- A refinance where the new loan exceeds the old balance and the excess is paid to the borrower. Lenders size it on current value and income, often with tighter leverage limits.
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