Canada is a country in North America with many small businesses and a thriving economy. Part of the reason enterprises is financially successful in Canada is that of tools available to them like commercial mortgages. A commercial lease is for businesses that need to develop existing, or new property, in addition to projects in residential or commercial development. This is attractive to companies because the loans typically have lower interest rates, you gain equity with each mortgage payment, and makes it easy to plan financially for other critical business issues. Should you choose to pursue a commercial mortgage in Canada, there are specific criteria you need to satisfy. Mainly your debt service coverage ratio, your credit history, and your current business situation are evaluated.
At Smarter Loans, our goal is to make it easy as possible for you to get the commercial mortgage you are looking for. Below you will find a lost of the loan providers in Canada, who are willing and able to help you. You can compare the firms by the down payment required, repayment terms, and expected timeline of repayment. When you are ready, click “Apply Now” beside the company of your choice to finish an online application. Since accessing credit history is harder for commercial loans, it may take a bit longer to determine your approval status. Once approved, you can expect the money in just a couple of days, and if you don’t have a high credit score, don’t worry, many of the companies below can still help you.
You also have the option to “Pre-Apply” with Smarter Loans, and we will connect you to the most suitable commercial mortgage lender in Canada.
We can help connect you with the top commercial mortgage and mortgage refinancing providers in Canada.
A commercial mortgage is a mortgage taken out for a commercial property. Similar to a residential mortgage, the (commercial) property is used as collateral. But unlike a residential mortgage, instead of being an individual, the borrower is usually a company. The company may be a sole proprietorship, partnership or corporation.
Determining a company’s creditworthiness is more complex than that of an individual. Commercial mortgages also tend to be riskier and there are fewer lenders providing them. This results in the interest rates being higher on commercial mortgages than residential mortgages.
We’ve discussed what a commercial mortgage is. Now let’s talk about what a commercial property is.
There are various types of properties that may be considered commercial properties. You’ll want to determine the property type that you’re looking for mortgage financing for ahead of time to help you hone in on the best mortgage option.
You may be surprised to learn that residential properties can actually be purchased using commercial mortgages if you’re buying the property for investment purposes. The main types of commercial properties are pure residential (one to four units; five units and more) and residential commercial mixed. You’d also need a commercial mortgage if you were looking to buy industrial, office or retail properties.
Commercial mortgages tend to have a longer timeline than residential mortgages. Whereas residential mortgages tend to close in 30 to 90 days, commercial mortgages tend to close in two months to a year.
It’s important to shop around when you’re looking for a commercial mortgage. The terms and conditions between lenders can vary greatly, not to mention the interest rates, so you’ll want to do your own due diligence before signing on the dotted with any lender.
Since commercial mortgages tend to carry more risk than residential mortgages, lenders look at several criteria before extending you a commercial mortgage loan.
Similar to residential mortgages, lenders will look at your debt service coverage ratio. This is the main qualifying criteria lenders use. This ratio looks at the amount of cash required to repay the commercial loan payments. Most lenders will expect you to put in your own funds and reduce to the loan to value of the property.
Lenders will look at both your personal and business’s credit history. A lender will not only want to know you have a track record of paying off your personal debts; it will also want to know your business has a history of paying off debts, too.
The stability of your business is another factor lenders look at. A lender will want to know that your business has a history of stability in earnings and profit. A lender will also want to see financial projections. Some lenders will ask for a minimum net worth threshold before they’ll extend commercial mortgage financing to you.
Lenders expect you to have some skin in the game, too. Depending on the type of property you’re buying, you can be expected to put 20% down or more.