The next step is to find out what advantage there might be to refinancing. You might want to contact your current lender or speak with a reputable mortgage broker that specializes in this area to see, based on an evaluation of the property, the rates and terms for which you would currently qualify.

Roughly speaking, at the time of this writing, in January 2004, commercial mortgage rates range between 4.75% and 5.75% depending on a variety of factors. Safe to say, if your current 9.875% mortgage has three years left to run, a 2% prepayment penalty, and could qualify for a 5.6%, 15-year, fixed-rate mortgage, it may well be worth your while to consider refinancing at this time. Otherwise, you might wait three years (during which time you'd be paying a much higher-than-market interest rate) and avoid the prepayment penalty only to find that interest rates have escalated. Better to act when you have a clear advantage than to wait on the sidelines and cross your fingers!

There are also intermediate steps that can be taken. Many buildings have credit lines with rates that are set at a spread over Prime. These days, some lenders offer credit lines or floating rate mortgages set at a spread over LIBOR, the London Interbank Offered Rate. Since the Prime rate is currently 4%, while the 30 day LIBOR rate is approximately 1.12%, (please refer to the interest rate chart on our home page for today's rate) it would make a great deal of sense to either renegotiate a Prime-based credit line with the current lender, or to shop elsewhere for a better deal. The small investment of time that a borrower takes for a quick "financial tuneup" can be very rewarding indeed.

Contact Gregg Winter (ext. 111) or Henry Berliss (ext. 117) at 212-532-1122 if you would like to explore this further.

© 2008. Gregg Winter. All Rights Reserved.
Unauthorized use of this material may violate copyright, trademark, and other laws.

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