Mortgage Refinance Could Provide Cash To Business Owners

In times of financial turmoil, cash-strapped business owners may not consider the benefits refinancing can have on their fortunes.

Although interest rates on 30-year fixed-rate loans have recently increased marginally, after settling in at record lows for the last three month, these sub-4 percent rates could be an advantage for business owners who need more cash to run their businesses.

In a piece for Inc.com, real estate expert and author Charles Farrell advocates for business owners conducting a mortgage refinance on their homes in order to make their monthly payments as low as possible. This way, if the economy continues its current malaise or businesses start to struggle, its owner will have more financial flexibility if necessary.

Farrell gives the example of a $400,000 mortgage that a mortgage lender will offer either through a 30-year note at 3.85 percent interest or 15 years at 3.25 percent. While the 15-year note features less interest, a monthly payment would be $2,800, compared to the $1,875 a business owner would owe over a 30-year period.

"Let's assume that the economy or your business hits a rough patch, and your business requires a cash infusion," Farrell writes. "One of the easiest ways to free up cash for the business is simply to pay yourself less. … The lower your mortgage payment is, the easier it is for you to reduce your pay to help keep the business going."

An experienced mortgage lender that has experience working with both residential and property owners can help these borrowers to achieve the best loan agreement for their needs. Lending agreements may not be universally acceptable to all borrowers, so special care should be afforded to all prospective buyers and owners.

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