Commercial Mortgages
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.
What are Commercial Mortgages?
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.
Key Differences Between Commercial and Residential Mortgages
Property Type
Commercial mortgages are used for non-residential properties, while residential mortgages are for homes and residential properties.
Risk Assessment
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.
Terms and Interest Rates
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.
Down Payment
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.
Amortization Period
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.
Introducing the MLI Select Program by CMHC
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.
Key features of the MLI Select Program:
How Can We Help?
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.
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