Welcome to our guide on commercial mortgages, tailored specifically for businesses and
investors in Canada. Whether you’re looking to finance a new property, expand your business
premises, or invest in real estate, understanding the nuances of commercial mortgages is crucial
for making informed decisions.
Commercial mortgages are loans secured by commercial property, such as office buildings, retail spaces, industrial facilities, or multi-family residential buildings with five or more units. Unlike residential mortgages which are primarily used for personal housing, commercial mortgages are utilized for business purposes.
Commercial mortgages typically have shorter terms than residential mortgages, often ranging from five to twenty years, with amortization periods usually longer than the term. Our lenders assess the viability of the property, the borrower’s creditworthiness, and the potential cash flow from the business occupying the property before approving a commercial mortgage. Additionally, commercial mortgages may offer adjustable interest rates, providing flexibility.
Commercial mortgages are used for non-residential properties, while residential mortgages are for homes and residential properties.
Lenders evaluate commercial mortgages based on the income potential of the property, the creditworthiness of the borrower, and the business’s financial stability, whereas residential mortgages are often assessed primarily based on the borrower’s creditworthiness and income.
Commercial mortgage terms typically range from 5 to 25 years, with interest rates based on the property’s risk, the borrower’s creditworthiness, and market conditions. Residential mortgages often have longer terms and lower interest rates.
Commercial mortgages usually require larger down payments, typically ranging from 20% to 40%, compared to residential mortgages, which may require as little as 5% down payment.
Commercial mortgages typically have shorter amortization periods than residential mortgages, often ranging from 15 to 25 years, while residential mortgages may have amortization periods of up to 30 years.
The MLI Select Program, offered by the Canada Mortgage and Housing Corporation (CMHC), is
designed to facilitate the financing of multi-unit rental properties. This program provides
mortgage loan insurance for eligible commercial properties, helping borrowers access financing
with lower down payments and competitive interest rates.
Small rental properties with 5 or fewer units, including residential properties with commercial components.
Borrowers may be eligible for financing with down payments as low as 15%.
Access to competitive interest rates, helping to reduce borrowing costs.
Mortgage loan insurance coverage provided by CMHC, offering protection to lenders, and enabling borrowers to secure financing more easily.
Simplified application and approval process, making it easier for borrowers to access financing for eligible properties.
As commercial mortgages are designed for real estate investors, Dave’s other company, Better Mortgage Select is dedicated to working primarily on mortgages for rental properties and guiding Investors with strategic planning, portfolio scaling and much more.
Click on the video to learn more about Better Mortgage Select.
Utilize our mortgage calculator below to accurately assess monthly payments for commercial
mortgages, helping you make strategic financial decisions for your business investments.
Explore our diverse range of mortgage calculators designed to simplify your home financing
journey. Each of these calculators are user-friendly and designed to empower you with the
information you need to make informed decisions. Start planning your financial future today!
Join thousands of clients who rely on Dave to get the latest mortgage rates and market insights – our information could save you money on your next loan.
© 2024, Dave Butler.
