Commercial Property Refinance: Six Steps Before Your Loan Matures
A commercial property refinance replaces the loan on your building with a new one, usually to pay off a maturing balloon, lower your payment or take out equity. The owners who get the best result start early, know their numbers before a lender asks, and keep a fallback ready in case the first plan falls short.
This guide walks through the steps in order, with what to check at each one.
Why timing matters more than it used to
A lot of commercial debt is coming due at the same time. The Mortgage Bankers Association's 2025 Commercial Real Estate Survey of Loan Maturity Volumes found that $875 billion of the $5.0 trillion in outstanding commercial mortgages, or 17%, is scheduled to mature in 2026.
Not all of those loans will refinance cleanly. Trepp reported that the CMBS delinquency rate rose 51 basis points to 7.86% in July 2026, and that non-performing matured balloons made up 66% of newly delinquent balances (MBA Newslink summary of Trepp's July report). A matured balloon is a loan that reached its end date and was not paid off.
The lesson is simple. If your loan matures in the next year or two, the refinance work starts now, not in the final few months.
Step 1: Read the exit terms in your current loan
Before you call anyone, pull your note and mortgage and look for:
- Maturity date and any extension options, with the conditions attached.
- Prepayment terms, such as yield maintenance, defeasance, a step-down penalty or an open window near maturity.
- Recourse carve-outs that could matter if things go wrong.
- Reserve and escrow balances that may come back to you at payoff.
Prepayment terms decide whether refinancing early makes sense at all. An open window near the end of the term can save real money. Paying a large yield maintenance charge to refinance a year early often doesn't pay off.
Step 2: Rebuild your numbers the way a lender will
A lender sizes a new loan off the property, not off your history with it. A few measures drive most decisions:
| Measure | What it is | Why it matters |
|---|---|---|
| Net operating income (NOI) | Income after operating expenses, before debt payments | The base for every other test |
| Debt service coverage ratio (DSCR) | NOI divided by annual loan payments | Caps how much payment the property can carry |
| Loan to value (LTV) | Loan amount divided by appraised value | Caps the loan against what the property is worth |
| Debt yield | NOI divided by loan amount | A check that doesn't move with interest rates |
Use trailing actual results, not a budget. Lenders will normalize your expenses, add a management fee if you self-manage, and set aside a reserve for replacements. If your own math skips those items, your loan estimate will run high.
Hypothetical example: a building with $1,000,000 of NOI and a proposed annual debt payment of $800,000 has a DSCR of 1.25. If a lender wants more coverage than that at current rates, the loan gets smaller even though the building itself hasn't changed.
Step 3: Size the refinance gap early
The most common problem in a commercial property refinance right now is a gap: the new loan the property supports is smaller than the balance you owe. It happens when rates are higher than when you borrowed, when the value has slipped, or both.
If you find a gap, you have choices, and you want time to use them:
- Pay down the balance with cash.
- Bring in a partner or preferred equity.
- Ask your current lender for an extension, usually in exchange for a paydown or tighter terms.
- Take a short-term bridge loan while you raise income, then refinance.
- Sell.
Each choice has a cost. Finding the gap months ahead turns a forced decision into a planned one.
Step 4: Get the property ready to be underwritten
Lenders and appraisers see the building as it is on the day they visit. Before then:
- Clean up the rent roll and make sure it matches the leases and bank deposits.
- Gather current leases, amendments and tenant estoppels for major tenants.
- Fix deferred maintenance an inspector is sure to flag.
- Have several years of operating statements, current tax bills and insurance ready to send.
For office and retail, lenders look hard at lease expirations early in the new loan's term. A large tenant rolling soon after closing can reduce proceeds or add reserve requirements.
Step 5: Compare commercial property refinance offers on more than the rate
Lending standards are shifting, and lenders don't all look alike. In the Federal Reserve's July 2026 Senior Loan Officer Opinion Survey, moderate and modest net shares of banks reported easing standards for loans on nonfarm nonresidential and multifamily properties. Banks also said standards for those loans remained relatively tight compared with their range since 2005.
So a loose market for one lender can still be a tight one for another. When offers come in, compare:
| Term | What to ask |
|---|---|
| Proceeds | How much, and which test (DSCR, LTV or debt yield) is limiting it? |
| Recourse | Full, partial or non-recourse, and what are the carve-outs? |
| Prepayment | What will it cost to leave early? |
| Reserves | What is held back at closing and collected monthly? |
| Rate structure | Fixed, floating, or floating with a rate cap? |
| Term | When does the next maturity arrive? |
A lower rate with heavy reserves and a harsh prepayment penalty can cost more than a slightly higher rate with flexible terms.
Step 6: Run the closing and the backup plan side by side
Appraisals, third party reports, title and legal review all take time, and any of them can surface a problem. Keep your fallback (extension, bridge or paydown) alive until the new loan actually funds. Don't let an extension deadline pass on the assumption that the refinance will close.
If your loan falls between $5M and $30M and you want an outside view, Northern Ridge Capital works as a broker, not a lender, on commercial property refinance requests in that range. The broker's job is to match your file with lenders whose rules fit it.
FAQ
How early should I start a refinance?
Start with your loan documents and your numbers well before maturity. That leaves time to close a gap or line up a fallback if the first lender says no. Your prepayment terms tell you when refinancing becomes affordable.
Can I refinance if my property value has dropped?
Often, yes, but the new loan may be smaller than your current balance. You would cover the difference with cash, new equity, or a bridge loan while income recovers.
What will lenders ask me for?
Expect to provide a rent roll, trailing operating statements, leases, tax bills, insurance and entity documents. The lender will also order an appraisal and third party reports.
Is the lowest rate always the best commercial property refinance?
No. Recourse, reserves, prepayment penalties and the next maturity date can outweigh a small rate difference, so judge a commercial property refinance on its full terms.