Commercial Mortgages: Everything You Need to Know

Posted on 16th November 2015

A commercial mortgage can help you finance a new property or expand the existing premise. You can also use a commercial mortgage to consolidate your business debts. That said, the criteria for obtaining a commercial mortgage are significantly different from getting a residential mortgage. Commercial mortgage rates are also typically significantly higher than residential rates because of increased risk. But with rates near record lows, it’s still a great time to consider a commercial mortgage with a commercial private mortgage lender .

Getting a Commercial Mortgage in Toronto

A commercial mortgage is a loan taken out on commercial real estate with the property used as collateral. The borrower is a company or business and can be a partnership, limited company, or incorporated.

When it comes to a commercial mortgage, most people think of retail stores, hotels, or a construction site. But a number of different properties can qualify for a commercial mortgage.

For example, in addition to getting a commercial mortgage to finance an office, retail, or industrial property, residential real estate can qualify for commercial mortgage financing if it is being used as an investment property. Even here, residential investment properties are broken down further into three different categories: pure residential, 1-4 units; pure residential, 5 or more units; and residential commercial mix.

That’s why it’s important to identify what type of property you want to finance.

What Do Lenders Look for in a Commercial Mortgage?

While both commercial and residential mortgage loans come from a bank, lending institution, or private lender, the similarities end there.

  • A commercial mortgage can only be used toward a commercial building or land zoned for commercial use. You cannot build a home zoned for commercial use. At the same time, you cannot operate a business on land that is zoned for residential use.
  • When it comes to getting a commercial in Toronto, lenders will want to know about the business itself. Is it stable and profitable? Lenders may want to see a business plan, financial statement, and future growth projections. They will also want to know that the people running the business have a good credit history as well.
  • Lenders also consider the debt service coverage ratio; which is the ratio of available cash to the loan payment required.
  • The loan-to-value ratio is also important. That is the mortgage value compared to the assessed value of the property. Most commercial loan-to-value ratios are between 55% and 70%. With a residential mortgage, the loan-to-value ratio can be 80% or higher.
  • Commercial mortgage repayment structures are also unique. In a residential mortgage, you accept the terms of the loan and agree to pay it off over a set amount of time. A commercial mortgage has two different components: the amortization (term of the loan) and balloon payment (after which time, the borrower either pays the remaining balance, refinances, or sells the property). Toronto’s Commercial Mortgage Experts

Because of all these different factors, it can be difficult to qualify for a commercial mortgage. Businesses that are new, struggling, or heavily indebted may find it difficult to qualify for a commercial loan. Canada’s big banks can also turn you down if they don’t like your credit score.

As the nation’s leading private mortgage professionals , offers mortgage solutions for commercial mortgages in Toronto, Mississauga, Oakville, Vaughan, Scarborough and the surrounding locations that are ideally suited to meet each client’s cash flow needs.

Using a private mortgage professional like is imperative for those seeking a commercial mortgage. Unlike residential mortgages, it’s not easy to compare lending rates. In fact, because of the different lending criteria mentioned above, terms and conditions can vary widely. Commercial loan rates are more difficult to figure out because commercial properties are considered to be riskier since the loan repayment is dependent upon how well the business does.

To ensure you get the best commercial mortgage rates and terms possible, it’s better to use the licensed, independent agents at . Where the big banks will only offer you their own financial products, has access to hundreds of commercial mortgage lenders. Many of whom provide commercial mortgages to clients with bruised credit or filed for bankruptcy.

No matter what type of commercial mortgage you need, can get commercial mortgages approved for any amount for business owners in Toronto, Brampton, Mississauga, Markham, Newmarket, and all across Ontario.

To apply for a commercial mortgage, contact today . Or apply o nline and a lending specialist will help you set up an appointment for a free personal consultation at your earliest convenience.

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