Mortgage Term Renewal - Fix or Floating?

[sherry]

Hi , I would like to ask an expert the following:
I have a large mortgage (1.4 milion) up for renewal on a Multi Tenant Commercial Building I have been quoted:
Fixed rate 3 Years - 5.49%
4 Years - 5.99%
5 Years - 6.45%
Should I Lock in a Rate or go with the low floating rate at this time? If not now when would be the appropriate time to Fix Rates?

Sherry

 

[Noel]

QUOTE (sherry @ Feb 20 2009, 08:39 AM) Hi , I would like to ask an expert the following:
I have a large mortgage (1.4 milion) up for renewal on a Multi Tenant Commercial Building I have been quoted:
Fixed rate 3 Years - 5.49%
4 Years - 5.99%
5 Years - 6.45%
Should I Lock in a Rate or go with the low floating rate at this time? If not now when would be the appropriate time to Fix Rates?

Sherry

Hi Sherry,

Nice to meet you. What`s currently being offered as a low floating rate?

 

[Thomas Beyer]

same questions here ??









see answer here: http://myreinspace.com/search/rein_members_only/Members-Only_Discussion/81-9744-51579-Are_these_rates_worthy_of_Fixing.html#51579

 

[VaughnandTwila]

I just locked in my personal residence for 4.49% for 5 years. Not sure if you can get the same for a commercial building but I would try for a better rate if you are going long term.

Vaughn

 

[Thomas Beyer]

QUOTE (VaughnandTwila @ Feb 22 2009, 08:07 AM) I just locked in my personal residence for 4.49% for 5 years. Not sure if you can get the same for a commercial building but I would try for a better rate if you are going long term.
anything under 6.5% for a commercial, non-residential mortgage would be considered "excellent" these days !

you can get CMHC insured 5 year money between 3.2% and 3.8% today .. a key reason why apartment buildings have held up in values whereas commercial properties have dropped significantly .. as CAP rates are usually 2% or so higher than the underlying risk-free mortgage rate !

Example:

Shopping centre with $600,000/year income using a 6% CAP rate was valued at $10M. Now with a 8% CAP rate, it would be valued @ $7.5M .. a 25% drop .. or a 50% equity drop if a $5M mortgage had been used. That is the reason why many commercial (or private) REITs here in Canada and the US have seen such significant corrections.