Commercial mortgages across the Greater Toronto Area

Commercial lenders qualify the property first and you second. The number that decides the file is debt service coverage, the property's net operating income divided by the annual mortgage payments.

The properties we finance

• You are buying or refinancing a retail plaza, industrial unit, office space or mixed-use building.
• You own a multi-unit residential building of five units or more, which is financed commercially rather than residentially.
• You are an operating business buying the premises you currently lease.
• You are refinancing a commercial property to release equity for another purchase.
• You need construction or bridge financing on a commercial project.

What lenders look at first

• Most lenders want a coverage ratio of 1.20 or better, meaning the property earns at least 20% more than the debt costs.
• Plan for 65% to 75% loan to value on stable income-producing property, and less on special-purpose buildings or anything with vacancy questions.
• Amortizations commonly run 15 to 25 years with shorter terms than residential.
• Lender and broker fees are standard in this market, not a warning sign.
• Build 45 to 90 days into your purchase conditions. Appraisal, environmental report, lease review and credit committee all take time.
• Have clean rent rolls, leases and two years of financials ready before you approach a lender.

The package lenders expect

• Purchase agreement, or the current mortgage statement if refinancing
• Rent roll and copies of all leases
• Two to three years of property operating statements, income and expenses
• Two to three years of corporate financial statements and tax returns
• Personal net worth statement for each guarantor
• Environmental reports, building condition report or appraisal if already completed
• Business plan or projections for owner-occupied and construction files

How a commercial file runs

1. 01 Underwrite the property firstWe calculate net operating income and debt service coverage before approaching anyone, so you know early what the property will actually support.
2. 02 Assemble the packageCommercial lenders decide from a written package. Rent roll, leases, operating statements and covenant strength, presented properly.
3. 03 Term sheets and comparisonYou get term sheets to compare on rate, term, amortization, fees, prepayment terms and covenants, not on rate alone.
4. 04 Due diligence and closingAppraisal, environmental where required, lease review and legal. This is the longest phase and where most delays happen.

Questions we get asked

How much down payment do I need on a commercial property?

Typically 25% to 35% of purchase price. Owner-occupied properties and multi-unit residential buildings can sometimes go higher on loan to value, particularly with CMHC-insured multi-residential programs.

What is debt service coverage and why does it matter?

It is net operating income divided by annual debt payments. At 1.20, the property earns $1.20 for every dollar of mortgage payment. Below the lender's minimum, the loan gets reduced regardless of the purchase price.

Why are there fees on commercial mortgages?

Commercial files are underwritten individually rather than run through an automated system. Lender fees of roughly 1% and a broker fee are standard market practice. Every fee is disclosed in writing before you commit.

How long does a commercial mortgage take?

Plan for 45 to 90 days. Build that into your conditions. Files that fail usually fail on a deadline, not on the lending.