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Commercial mortgages in BC
Buying or refinancing an apartment building, a plaza unit or the building your business runs from? Commercial lending is about the property's income and the strength of the borrower. I package your file so lenders can say yes with confidence.
Service in English, Punjabi and Hindi · ਪੰਜਾਬੀ · हिन्दी
Property types
What I can help finance
- Apartment buildings with 5 or more units
- Mixed-use buildings, such as shops below and apartments above
- Retail: plazas, strip malls and individual commercial units
- Office buildings and office condos
- Industrial: warehouses, shops and truck yards
- Owner-occupied business property: buying the building your own business operates from
Purchases, refinances to pull out equity, and term renewals are all possible.
How lenders decide
DSCR and loan-to-value, in plain words
Debt service coverage ratio (DSCR) compares the property's net operating income (rent minus operating costs) with the yearly mortgage payments. A DSCR of 1.2 means the property earns $1.20 for every $1.00 of mortgage payments. Lenders set a minimum, and the property needs to meet it.
Loan-to-value (LTV) is the mortgage as a share of the property's appraised value. Commercial lenders generally lend a lower percentage than on a home, and the limit depends on the property type, its location and the lender.
For owner-occupied property, lenders also look closely at your business's financial statements, since the business pays the rent.
Multi-unit rentals
CMHC MLI Select and MLI Standard
For rental apartment buildings with five or more units, CMHC-insured financing can offer higher loan amounts, longer amortizations and lower rates than conventional commercial loans.
- MLI Standard: CMHC insurance for buying or refinancing existing rental buildings, and for new construction.
- MLI Select: better terms for projects that commit to affordable rents, energy efficiency or accessibility, scored on a points system.
CMHC charges an insurance premium and has its own application and fees, so it is not always the cheapest route. I'll compare insured and conventional options side by side.
Try the MLI Select points calculatorPreparing your file
What lenders ask for
- Rent roll showing each unit, the tenant, rent and lease dates
- Operating statements for the property, usually the last two to three years
- Copies of leases for commercial tenants
- Appraisal from a lender-approved commercial appraiser
- Environmental report (often a Phase I) and, for older buildings, a building condition assessment
- Personal net worth statement and your experience owning or managing property
- Business financial statements and tax returns for owner-occupied purchases, or corporate documents if buying through a company
Commercial deals can involve lender, appraisal, environmental and legal fees, and sometimes a fee for arranging the financing. I'll tell you upfront which costs to expect.
Questions
Frequently asked questions
What is the difference between a commercial and a residential mortgage?
Residential mortgages focus on your personal income. Commercial mortgages focus mainly on the property's income, its value and your experience and net worth. Buildings with five or more units are treated as commercial.
What is a good DSCR?
Lenders set their own minimums, and it varies by property type and lender. A higher DSCR means more room between the property's income and its mortgage payments, which makes approval easier.
Can I buy the building my business operates from?
Yes. Lenders will look at the property and at your business's financial statements, since your business is the tenant. It can be a good way to build equity instead of paying rent to a landlord.
Is CMHC financing only for new buildings?
No. MLI Standard and MLI Select can be used to buy or refinance existing rental buildings with five or more units, as well as for new construction.
How long does a commercial mortgage take?
Longer than a home mortgage. Appraisals, environmental reports and lender review often take several weeks, and CMHC-insured files can take longer. Building time into your purchase conditions helps.
Looking at a commercial property?
Send me the listing or your rent roll and I'll give you an honest read on financing. Service in English, Punjabi and Hindi.