Refinancing commercial real estate means replacing your current mortgage with a new loan to lower the rate, extend the term, escape a balloon, or pull out equity. Rate-and-term refinances often reach 70-80% LTV; cash-out is usually capped around 65-75%. Most lenders look for DSCR near 1.20x-1.30x+ and credit of 650-720+. Conventional deals close in 30-60 days.
Quick Answer: A commercial real estate refinance pays off your existing mortgage with a new one—ideally at a better rate, a longer term, or with cash drawn from equity. Owners refinance to reduce monthly payments, replace a maturing balloon, consolidate higher-cost debt, or fund growth. Before you commit, weigh the new rate and term against closing costs and any prepayment penalty on your current loan. Compare a cash-out refinance for equity, a rate-and-term refinance for savings, and long-term CRE loan options for permanent financing. To see side-by-side lender scenarios, get matched here.
What Is a Commercial Real Estate Refinance?
A commercial refinance replaces the existing mortgage on an income-producing or owner-occupied property with a new loan. The new lender pays off the old balance, and you start payments on the new loan. Owners typically pursue one of two paths: a rate-and-term refinance, which keeps the loan amount roughly the same and changes the rate or term to improve cash flow, or a cash-out refinance, which increases the loan amount to return built-up equity as cash. Refinancing is common when rates have improved, when a property has appreciated or paid down principal, or when a balloon payment is approaching and needs to be replaced with permanent financing.
Top Reasons Businesses Refinance Commercial Property
- Lower the interest rate — reduce the monthly payment and total interest when market rates or your credit profile have improved.
- Replace a maturing balloon — many commercial loans balloon in 5-10 years; refinancing converts the balance to a new term before it comes due. See refinancing a balloon mortgage early.
- Pull equity (cash-out) — fund expansion, equipment, partner buyouts, or debt consolidation using a cash-out refinance.
- Extend the amortization — stretch payments over a longer schedule to improve DSCR and free up working capital.
- Exit a bridge or hard-money loan — move from short-term, higher-cost debt into permanent financing once the property stabilizes.
- Consolidate debt — roll higher-cost obligations into one lower blended payment secured by real estate.
Rate-and-Term vs Cash-Out Refinance
The two refinance types serve different goals. A rate-and-term refinance is about savings and stability: you keep your loan balance about the same and improve the rate or term. A cash-out refinance is about access to capital: you borrow against equity and take the difference in cash. Cash-out carries higher rates and tighter LTV caps because lenders take on more risk. If your only goal is a lower payment, rate-and-term is cheaper; if you need capital and have equity, cash-out can be cost-effective versus separate unsecured debt. For a full breakdown, see cash-out vs rate-and-term refinance.
How Much Can You Refinance? LTV and DSCR Limits
Two ratios drive how much you can borrow:
- Loan-to-Value (LTV): Rate-and-term refinances often reach 70-80% LTV; cash-out is typically capped around 65-75%. Investment properties face tighter limits than owner-occupied real estate. See commercial loan LTV and down payment benchmarks.
- Debt-Service Coverage Ratio (DSCR): Lenders generally want DSCR near 1.20x-1.30x or higher, meaning net operating income comfortably covers the new payment. Extending amortization can lift DSCR and unlock more leverage.
A current appraisal establishes value, and lenders use the lower of appraised value or recent purchase price. Owner-occupied properties may qualify for stronger leverage under SBA 504 or 7(a) structures.
Commercial Refinance Rates and Terms
Refinance pricing follows standard commercial mortgage rates. Conventional loans commonly carry 5-10 year terms with 20-25 year amortization, often with a balloon. SBA refinance options can offer longer fixed-rate terms with lower down payments. Your rate depends on credit, DSCR, property type, occupancy, and the broader rate environment. Because pricing varies widely between banks, credit unions, CMBS, and SBA lenders, comparing several offers is the single best way to lower your cost. For current ranges, see commercial refinance rates in 2026 and typical CRE loan rates.
Closing Costs, Prepayment Penalties, and Break-Even
Refinancing is not free. Plan for an appraisal, environmental review (if required), title, legal, and lender fees—often 2-5% of the loan amount. Just as important is the prepayment penalty on your existing loan, which can be a step-down, yield maintenance, or defeasance structure. Before committing, run a break-even analysis: add total closing costs plus any prepayment penalty, then divide by your expected monthly savings. If you will hold the property well past the break-even point, refinancing usually makes sense. If you might sell or refinance again soon, the math may not work.
Qualification Requirements
Commercial refinance underwriting mirrors a purchase loan. Lenders typically evaluate:
- Current property value (appraisal required)
- Existing mortgage balance and payoff terms
- Net operating income and DSCR
- Credit score (650-720+ typical)
- Property type, occupancy, and lease quality
- Time in business and global cash flow
Stable or improving property performance strengthens approval. See credit score requirements and what lenders look for in a CRE loan.
Timeline and Documents to Close Faster
Conventional refinances commonly close in 30-60 days; SBA structures can run 45-90+ days. Refinances sometimes move faster than purchases because there is no seller or contract contingency—but prepayment review and appraisal turnaround can add time. To keep things moving, prepare your package early: trailing operating statements, current rent roll or occupancy support, payoff statement, entity documents, and a clear use-of-funds rationale. Inconsistent or late documentation is the most common cause of slippage. See why commercial refinances get delayed and how long it takes to close.
When Refinancing Makes Sense—and When It Doesn't
Refinancing works best when you have meaningful equity, stable property performance, and clear savings or a defined use for cash-out proceeds. It is often the wrong move when the property value has declined, revenue is unstable, your equity position is thin, or your current loan carries a steep prepayment penalty that erases the benefit. For short-term capital needs, a commercial bridge loan, working capital loan, or line of credit may be a better fit than refinancing the entire mortgage. For a deeper checklist, see when to refinance commercial property.
Next Steps
Start with a current appraisal or broker opinion of value to estimate your equity, then gather your operating statements and existing loan payoff terms. Compare conventional, SBA, and bridge-to-perm options based on your DSCR, credit, and timeline—and get quotes from multiple lenders so you are not anchored to a single offer. Get matched with commercial real estate lenders to see programs that fit your property and goals.
Frequently Asked Questions
How does a commercial real estate refinance work?
A commercial refinance replaces your existing mortgage with a new loan, ideally at a better rate, longer term, or with cash pulled from equity. The new lender pays off the old balance, and you begin payments on the new loan. A rate-and-term refinance keeps the loan amount roughly the same; a cash-out refinance increases it to return equity as cash.
What LTV can you get on a commercial refinance?
Rate-and-term commercial refinances often reach 70-80% loan-to-value, while cash-out refinances are typically capped around 65-75% LTV. Limits vary by property type, occupancy, DSCR, and credit profile.
What credit score and DSCR are needed to refinance commercial real estate?
Many lenders look for credit around 650-720+ and a debt-service coverage ratio (DSCR) of roughly 1.20x-1.30x or higher. Stronger DSCR and credit improve leverage and pricing; lower figures may reduce proceeds or require additional support.
How long does a commercial refinance take to close?
Conventional commercial refinances commonly close in 30-60 days, while SBA refinance structures can take 45-90+ days. Appraisal turnaround, documentation quality, and prepayment-penalty review all affect the timeline.
Is it worth refinancing a commercial mortgage?
It is worth refinancing when the savings or cash-out benefit clearly exceeds total costs, including closing costs and any prepayment penalty on the existing loan. Run a break-even analysis: divide total refinance cost by monthly savings to see how many months until you come out ahead.