Get All Access for $5/mo

The Going Rate Think long-term when it comes to refinancing.

By Rosalind Resnick

Opinions expressed by Entrepreneur contributors are their own.

Question: Now that interest rates have come down, do you think it makes sense to refinance the mortgage that we took out to buy our company's building? We're currently paying 8 percent on a 15-year loan, and we still have six years left on it.

Answer: Deciding whether to refinance your mortgage is more than an exercise in doing the math. While short-term interest rates have fallen dramatically since the Fed started cutting interest rates last fall, long-term rates remain relatively high. Though 15-year mortgages are currently hovering at about 6.2 percent for residential property, rates on office buildings are still above 7 percent. Even if you can get a better deal on your building's mortgage, you might face stiff prepayment penalties in addition to legal fees, title insurance and other closing costs.

One way to get a lower rate is to "lock in" for a shorter term--say, five or 10 years--but there are risks involved in that strategy, too: If interest rates rise over the next few years, you might end up paying more than you would with your current mortgage.

"The rule of thumb is unless you can save at least 1 percent on your mortgage, it doesn't make sense to refinance," says Alex Vithoulkas, business development manager of Mortgage World Bankers Inc. "If you have a mortgage with a 15-year term, you're probably better off keeping it the way it is [rather] than refinancing your debt from the beginning."

Most of the calls coming in from commercial property owners these days are from investors with small mortgages who bought their buildings a long time ago and are now looking to cash out and buy additional property. Says Vithoulkas, "Now is as good a time as any to take advantage of the equity sitting in your investment property."

Rosalind Resnick is a New York-based freelance writer, entrepreneur, investor and author of The Vest Pocket Consultant's Secrets of Small Business Success.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Business News

Why Does Taylor Swift Keep Stopping Her Shows Mid-Song? It's Actually a Great Lesson in Leadership.

Taylor Swift has paused nearly half of her shows while on the European leg of her Eras tour, and the reason is something leaders can learn from.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

How to Start Your Dream Business This Weekend, According to a Tech CEO Worth $36 Million

He started his now 14-year-old company in one weekend for $60 — it made $300,000 the first year, and $3 million the second.

Franchise

Fully Promoted Franchises are the Worlds Largest Providers of Promotional Products!

Fully Promoted is a multi-faceted franchise opportunity, giving owners the chance to offer offer a complete marketing solution using a combination of branded apparel and promotional products to businesses, schools, and other organizations in their communities.

Leadership

The 4 Pillars of Leadership Success

Being a good leader can feel like an abstract goal, but it doesn't have to be. Here are the four pillars that I believe are the foundation of effective, successful leadership.