Refinance
Refinancing replaces an existing commercial mortgage with a new loan — to lower the rate, extend the term ahead of a balloon, or pull out equity (a cash-out refinance). Lenders size the new loan on current NOI, current market value, and prevailing rates, so a property's refinance capacity changes with the market.
The classic refinance trap: a loan originated in a low-rate environment reaches maturity when rates are higher, and the same NOI now supports a smaller loan. The difference must come from the owner's pocket.
In New York, a CEMA (Consolidation, Extension and Modification Agreement) can carry the existing mortgage tax basis into the new loan, saving most of the mortgage recording tax on the refinanced amount.
Frequently asked questions
Can a commercial refinance fail even if the property's income hasn't changed?
Yes — the refinance trap above. DSCR is recalculated at the new loan's rate, not the rate the maturing loan closed at. If rates rose in between, the same net operating income supports less debt service, so DSCR and loan size both shrink with no change in performance. Owners typically close the gap with a cash paydown, an interest-only period, or gap financing such as mezzanine debt or preferred equity.