RCRE - When Is The Best Time to Refinance?
Mike Taravella interviews Will Coleman about the best time to refinance
Key Information:
- Community banks have various seasoning periods ranging from 1-3 years depending on the bank
- Agency banks generally like to have 1-2 year seasoning period
- When you refinance the banks like for you to have “skin in the game”
- Know your prepayment penalties (yield maintenance or step-down)
- Yield Maintenance is calculated by taking the net present balance of the loan and multiplying it by the difference in the interest rate on the loan and the correlating bond yield.
- Step down is calculated as taking a predetermined percentage and multiplying it by the loan balance. If it is a 5-year term generally your step down will be 5% year 1, 4% year 2, 3% year 3, 2% year 4, and 1% year 5.
- Refinance is about helping you execute your long-term plan for the property
Expert Pro Tip: Know who and what you are, be clear on that, meditate on it, and then live and die by it (Nipsey Hussle)
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