BOLLARDCommercial Capital

06Calculator

Refinance break-even

A refinance is worth doing when the saving clears the cost of leaving — and on commercial paper the cost of leaving is usually the prepayment penalty, not the closing costs.

  • Break-even month
  • Monthly change in payment
  • Cumulative position curve
  • Cash-out sized into the new loan

Illustrative only. Bollard is a fictional business built as a website demonstration — the figures below are worked examples, not an offer, a quote or a rate sheet.

Your figures

The loan you have

The loan you would take

Costs and penalty are financed into the new loan, which is how most commercial refinances are done. That is why the new balance is larger than the old one even before any cash out.

Break-even

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Payment now

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Payment after

—

Monthly change

—

Cost of leaving

—

Cumulative position

When you are ahead

Below the line is money spent; above it is money saved

Cumulative saving from the refinance, starting negative by the cost of leaving and crossing zero at the break-even month

Totals

Over the remaining term

By year

Cumulative net position

YearSaved to dateNet position

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Assumptions and limits

What this model does and does not do

The comparison holds your current payment against the new one and charges the cost of leaving up front. A longer new amortisation lowers the payment and will always look better here — it is not the same as paying less interest, which is why the totals panel shows both.

Prepayment is modelled as a flat percentage of the balance. A step-down penalty falls each year, so the right figure is the one for the year you would actually close. Yield maintenance is not a percentage at all and has to be quoted by the servicer.

Nothing here models a defeasance, a new appraisal coming in low, or a lender that will not size the loan you have assumed. Those are the three reasons a refinance that models well does not close.

Cash out is added to the new loan and is not treated as a saving, because it is not one.

Deal intake

Have someone check your numbers

Send the scenario and a real desk would come back with the two or three structures worth pricing.

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The other five

01504 stackWhat does a three-part capital stack actually cost me each month?02Loan sizingHow large a loan does this property actually support, and which test stops it?03AmortisationWhat is left on the day this loan matures?04Lease vs ownIs buying the building better than renewing the lease?05Carry costWhat does short-term money cost me before the take-out?

Next bay

Model it, then let someone check it

Calculators answer the arithmetic. What they cannot tell you is whether a lender will believe your net operating income, or which programme your equity actually supports.

Submit a deal scenario Work the numbers first

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