Your loan matures in 18 months. Start now.

Most refinance problems are timing problems. When a maturity is six months away, the options have already narrowed and the borrower is negotiating from the weakest seat at the table. Starting 12 to 18 months ahead keeps every option open.

What changes between closing and maturity

When your current loan closed, the lender sized it to the rate, the income, and the value at that time. All three can move over a five to ten year term. A refinance is underwritten fresh, at today's rates and today's numbers, so the same property can support a very different loan.

Lenders typically size a loan to the most restrictive of three tests:

• Debt service coverage (DSCR): net operating income divided by the new annual payment.
• Loan to value (LTV): the new loan divided by the appraised value.
• Debt yield: net operating income divided by the loan amount.

When rates are higher than they were at closing, the coverage test often binds first. The payment on the same balance goes up, so the same income supports a smaller loan. The gap between what you owe and what the property can now carry is the most important number in your refinance.

An 18 month plan

18 to 12 months out: know the number

• Pull the note. Confirm the maturity date, any extension options and their conditions, and the prepayment terms.
• Put together a trailing 12 month operating statement and a current rent roll.
• Size the refinance at today's rates. Our Loan Maturity Check does a first pass in a few minutes.

12 to 9 months out: choose a path

If the property sizes to the current balance, the decision is about terms, structure, and which lender fits. If it does not, you still have time to close the gap on your terms:

• Bring in preferred equity or a joint venture partner.
• Use a bridge loan to finish a lease up or renovation before permanent financing.
• Pay down principal from other sources.
• Negotiate an extension or modification with your current lender.
• Sell, if the business plan has run its course.

Each path has a different cost in money, control, and time. This is where a capital plan earns its keep.

9 to 4 months out: go to market

Prepare a clean package and take it to lenders whose criteria fit the request. Appraisals, environmental reports, and property condition reports often take several weeks, so order them early once you have chosen a lender.

The last 4 months: close

Diligence, loan documents, and funding. Commercial refinances commonly take 60 to 120 days from application to funding, which is why the earlier steps matter.

What waiting costs

• Fewer options. Some lenders will not look at a deal that has to close in weeks.
• Weaker terms. A lender who knows you are out of time has the leverage.
• Real expenses. Extension fees, default interest, and rushed third party reports add up.

Four questions to answer this quarter

1. Exactly when does the loan mature, and what does it take to extend it?
2. What prepayment cost applies if we refinance early?
3. Does the property size to the current balance at today's rates?
4. If not, how large is the gap, and which option closes it at the lowest cost to ownership and control?

If a maturity is on your calendar in the next two years, run the numbers or schedule a conversation. We will help you see the options while you still have all of them.