There is no single commercial mortgage rate.

Commercial financing is priced for the borrower, the property, the income and the structure of the deal. Use this guide to understand what a lender may examine and how to compare complete financing offers.

Important distinction

The Bank of Canada policy rate is not the rate a commercial borrower receives.

Policy rates and bond yields influence borrowing markets, but a commercial quote can also reflect lender cost of funds, loan size, property type, location, tenant quality, cash flow, loan-to-value, amortization, guarantees, borrower strength and lender appetite. Published residential specials should not be used to estimate a commercial or investment-property mortgage.

Choose the financing path

The lender starts with a different question for each property.

Owner-occupied commercial

The operating business, its cash flow and the property all support the request.

Commercial investment

The property income, leases, expenses, borrower and loan structure are considered together.

Multifamily

Conventional financing and insured programs can follow different underwriting and eligibility rules.

Owner-occupied commercial

Can the business carry the property and the debt?

What lenders commonly examine

Business cash flow and debt obligations, credit history, management experience, down payment, working capital, property condition, marketability and the proposed use. A lender may also test whether the business can absorb higher costs or a weaker period.

What to prepare

Two to three years of business financial statements and tax returns
Current interim financial statements and recent bank statements
Business plan, ownership structure and management background
Personal net worth statements, credit information and guarantees where required
Purchase agreement, property details and the planned business use
Down payment source, renovation budget and working-capital plan

Commercial investment property

Does the income reliably support the loan?

What lenders commonly examine

Net operating income, debt-service coverage, loan-to-value, occupancy, tenant quality, lease expiry, market rent, operating expenses, capital needs, property condition and the borrower financial strength. A strong purchase price alone does not establish financeability.

What to prepare

Current rent roll, leases, amendments and tenant information
Historical operating statements, property tax and utility records
Capital-repair history, deferred maintenance and planned improvements
Property appraisal, building reports and environmental information when required
Borrower financial statements, net worth, experience and ownership structure
Purchase agreement, sources and uses of funds and the proposed loan structure

Multifamily financing

Conventional and insured programs are not the same.

Conventional financing

A lender generally reviews the property income, expenses, vacancy, condition, location, borrower and loan structure. Requirements and pricing differ by lender and deal.

CMHC-insured financing

Eligible multi-unit properties may access mortgage loan insurance. CMHC MLI Select can provide financing incentives when a project earns points for affordability, accessibility or climate compatibility. Eligibility, scoring, premiums and underwriting must be confirmed for the specific project.

Review CMHC MLI Select

Compare the complete cost

The lowest headline rate may not be the lowest-cost or best-fit financing.

Commercial transactions may include appraisal, environmental, building-condition, lender, broker, legal, title, survey, inspection, monitoring, commitment, standby and renewal costs. Conditions, guarantees, reporting duties, prepayment limits and future renewal risk can matter as much as the quoted rate.

Questions to ask every lender or broker

Is the rate fixed, floating or a combination, and what benchmark is used?
What are the term, amortization, payment schedule and renewal assumptions?
What loan-to-value and debt-service requirements must be maintained?
Are guarantees or other collateral required, and is the loan recourse?
What fees, reporting covenants, holdbacks or reserve requirements apply?
What are the prepayment, early renewal, transfer and assumption rules?

Official and lender resources

Use current sources, then confirm the actual deal.

Important information

General education and planning information only. Financing availability, rates, fees, loan-to-value, debt-service requirements, guarantees and approval conditions vary by borrower, lender, property, market and transaction. Confirm current terms with a qualified commercial lender or mortgage professional and obtain independent legal, accounting and tax advice.

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Property-specific conversation

Start with the property, the purpose and the numbers.

We can help organize the real estate information your financing professional may need.

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