Expert: Terrence Cullen - 12/15/2010

Question
QUESTION: My evil mortgage company "renews" my commercial mortgage every three years.  The first three years are up and I'm having to do a lot of paper work I don't have time for.  Is this three-year thing standard (Alabama)?  If I refinanced somewhere else, would it be the same?  I feel as if the bank could take advantage of me, i.e., make me pay fees or higher monthly payments, and there's nothing I can do about it.  I would appreciate any advice on this you may have.  I appreciate you in advance for this.

ANSWER:     Banks can set loan terms anyway that suits them. Usually, banks do 5 year balloons for larger loans and 5 or 7 year fully amortizing for smaller loans. I have only done Fannie loans In Alabama and  have never worked with the local banks.
  The bank can only take advantage of you if you let them. They will make mistakes in their favor, rarely to your benefit. You have to read your loan docs.
  What kind of property is it and what is the loan to value. I might have an alternative.

Good Luck, TC



---------- FOLLOW-UP ----------

QUESTION: Thanks for your response.  Per your question, my bank insists on a 3-year-only balloon term.  I'm currently paying 7.75 percent interest and would love to refinance somewhere else, but commercial loans require 20 percent cash from me.  So....  After I bought the property for $90K, the Tennessee tax assessor doubled its value.  This is a 2-story, four-unit building on the courthouse square in Fayetteville, Tenn.

Answer
The best bet are credit unions. If the value of the property is 50% of the value and you want to do a no cash refi it should be easy if your credit score is 680 and above. Try to get them to roll the fees in and shoot for a 5 year term even the rates are up. My guess is that the rates are not going to go back lower but you never know. Look for a 6.5% rate if possible.