Whether you (a) refinance and defease now, or (b) wait until maturity to refinance, you will pay all principal and interest due over the life of your loan. If you defease now, interest is paid as a lump sum discounted at treasury rates (because you’re buying a portfolio comprised of government treasuries structured to mature […]
Although structuring a defeasance transaction isn’t easy, borrowers should be familiar with the process so they can evaluate alternatives for extracting equity from their properties and make the most profitable decision. Chances are you’ve been hearing a great deal about defeasance lately. Why? The growing use of defeasance has been fueled by strong real estate […]
What is Defeasance? In the United States and Canada, many fixed-rate loans that encumber self-storage and other property types strictly prohibit prepayment during the term of the loan, if the lender securitized the loan (transferred it and other loans to a trust that issued bonds backed by the mortgages). However, most loan documents do allow […]
When negotiating new loan documents, consider the following valuable tips. They can save the borrower a lot of money on the defeasance transaction when it’s time to sell or refinance. These tips are not meant to be all-inclusive and are not a substitute for the advice of qualified legal and accounting professionals. As the context […]
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