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Everything You Need to Know About Commercial Mortgages

Everything You Need to Know About Commercial Mortgages

Commercial properties and business ownership often go hand-in-hand. Chances are, if you are a limited or incorporated business, you’ll likely require financial assistance in order to purchase commercial property. This means that you will likely have to get a commercial mortgage and it’s important to understand exactly what a commercial mortgage entails so you can make the most informed decisions possible.

As there are often significant differences between this type of mortgage and residential mortgages, we’ve broken down everything you need to know about commercial mortgages.

Woman signing commercial mortgage contract

What is a Commercial Mortgage?

A commercial mortgage is typically given to businesses and investors who intend to purchase a property that will produce income, also known as commercial properties. There are several different property types that can qualify for commercial mortgages, including retail or industrial locations, as well as office spaces. Occasionally, there may be residential properties that can also qualify as commercial, including:

  • A residential property that is comprised of one to four units
  • A residential property that is comprised of more than five units
  • A property that is composed of both residential and commercial

Retail commercial property

What Can You Expect When Looking for a Commercial Mortgage?

There are several different factors to take into consideration when looking for a commercial mortgage, including the fact that often, commercial mortgage rates will be higher than what is applied for residential mortgages. There is also often a much longer closing period when it comes to commercial mortgages, sometimes taking anywhere from three months to a year.

Each mortgage lender has its own criteria for determining property risk, and because each lender sets its own conditions and terms, it can be challenging to do commercial mortgage comparisons.

How Do You Qualify for a Commercial Mortgage?

One of the biggest factors that come into play when determining whether you will qualify for a commercial mortgage is how able you will be to meet your financial obligations. Although you will be applying for a commercial mortgage for your business, you as the owner will be expected to have good credit. If your business is currently in full operation, your lender will want to see your financials to ensure that your business is generating a profit and is stable.

Your mortgage lender will be able to go through the right steps with you to determine whether you qualify for a commercial mortgage.

Real estate agent discussing commercial mortgage with client

Commercial Mortgage Rates

Commercial mortgage rates are very dependent on both the conditions of your specific mortgage, as well as your property and borrower. Commercial mortgages that are insured through the Canadian Mortgage and Housing Corporation (CMHC) are likely to be more predictable due to their guarantee. Commercial mortgages typically have higher interest rates and often take longer to process due to the complexity behind appraising a commercial property.

There are many different types of commercial mortgages for all kinds of property. Because of the size and complexity of this type of mortgage along with the difficulty of selling commercial properties, the specific terms for commercial mortgages will differ on a case-by-case basis. Your lender will be able to go through the specifics of your mortgage with you to ensure you understand everything there is to know about commercial mortgages.

 

 

Ready to speak to someone about applying for a commercial mortgage? We’re ready to help! Contact us today to schedule an appointment to talk to one of our mortgage brokers.