Refinancing a commercial property loan means replacing your existing facility with a new one, usually from a different lender. It is worth doing in three situations: the pricing or structure available elsewhere clears the cost of switching, your current facility is coming up for review or expiry, or the property has grown in value and you want to release equity. Anything else is usually motion rather than progress.
Commercial refinancing differs from home loan refinancing in one important way. Commercial facilities are typically written for a defined term, often three to five years, and are reviewed rather than simply continued. That review is a scheduled event with a deadline, which makes commercial refinancing something you plan for rather than something you get around to.
Reason one: the facility is expiring or being reviewed
This is the most common trigger and the one with the least discretion attached. When a commercial facility reaches the end of its term the lender reassesses the property, the tenant, the covenant position and the borrower. They may extend on the same terms, extend on worse terms, reduce the limit, or decline to extend at all.
The mistake is starting the conversation the month it expires. Commercial refinancing takes time: valuation, legal, and credit assessment each add weeks, and a property with a complicated tenancy adds more. Starting six months out gives you a genuine alternative to accept or decline, which is also the only thing that makes the incumbent lender competitive.
Reason two: the pricing or structure has moved
Rates matter, but on commercial facilities the structure often matters more. Loan-to-value ratio, interest-only period, amortisation profile, whether the facility is full-recourse, what covenants apply and how often they are tested can each be worth more than a margin difference over the life of the loan.
A covenant that is comfortable today can become the binding constraint after a tenant leaves. If your current facility has an interest cover or LVR covenant that you are running close to, refinancing to a lender with more headroom can be worth doing even at similar pricing, because the alternative is a breach conversation at the worst possible time.
Reason three: releasing equity
If the property has appreciated or the loan has amortised, a refinance can release equity to fund a deposit on the next property, an expansion, or a capital purchase in the operating business. This is often the cheapest capital available to a business that owns commercial premises, because it is secured against real property rather than against trading performance.
Two cautions. Releasing equity increases the debt secured against the asset your business operates from, so the downside case deserves as much attention as the upside one. And if the equity is being released to fund something short-dated, a term refinance may be the wrong tool. What is bridging finance covers the short-dated alternatives.
What the switch actually costs
Break costs on a fixed-rate facility are the largest and least predictable item. They depend on the remaining fixed term and on where wholesale rates have moved since you fixed, so the only reliable figure is a written quote from your current lender for a specific settlement date.
Then there are valuation fees, which on commercial property are substantially higher than residential and are usually payable regardless of whether the deal proceeds; legal and settlement costs on both sides; discharge fees; and the new lender's establishment or line fees. Some or all can be capitalised into the new facility, which spreads them but does not remove them.
Work out the payback period in months and compare it honestly to how long you intend to hold the property. A switch that pays for itself in eighteen months is straightforward. One that pays for itself in five years, on a property you may sell in three, is not.
What the new lender will assess
Broadly the same things any commercial property lender assesses: the property type and location, the quality and remaining term of the lease, whether the property is owner-occupied or investment, the borrower's financial position, and serviceability tested at a buffer above the actual rate. Commercial property loan eligibility covers the assessment in detail, and how much deposit you need for a commercial property loan covers the equity side.
One point specific to refinancing: a lease that had five years to run when you bought may have eighteen months left now. Lenders assess against remaining term, not original term, and a short remaining lease can materially reduce what a new lender will advance. If a renewal is likely, getting it signed before you refinance is often the single highest-value thing you can do.
Where to from here
We arrange commercial property refinancing across our whole lender panel, including the non-bank funders that price differently on shorter lease terms and specialised property types. There are no fees to clients; the lender pays us when the finance settles. If your facility is up for review inside the next twelve months, book a 20-minute brief now rather than closer to the date.
Want to talk specifics?
Twenty-minute brief, no obligation.
A real broker on the other end of the line. No fees to clients.
