Canada Commercial Mortgage FAQs
Common Commercial Mortgage Questions Answered
The commercial mortgage process can feel overwhelming. That’s why we created this guide to answer the most common questions business owners and investors have. Whether you’re a first-time borrower or expanding your portfolio, this FAQ guide is intended to help you make informed decisions with confidence.
What Are the Basic Requirements for Commercial Mortgages?
What Are the Basic Requirements for Commercial Mortgages?
Most lenders require a credit score of 680+, though exceptions exist for strong business financials or alternative lenders. Both personal and business credit are considered, and we are happy to help you navigate options for lower scores.
It depends, and can vary drastically!
Unlike residential loans, commercial down payments are usually higher, typically ranging from 20% to 50% of the property’s value. The exact amount depends on factors like the property type, your financial strength, and the lender’s criteria.
However, at Legacy, we offer more flexible options. For strong businesses with solid financials and corporate guarantees, we can arrange financing up to 100% of the property value, meaning no traditional down payment may be required. Additionally, if you qualify for CMHC MLI Select financing on purpose-built rental properties, you may be able to finance with as little as 5% down.
This means whether you’re a well-established business or investing in affordable rental housing, Legacy can help you access a down payment structure that fits your unique situation and goals.
Lenders will require business financial statements, tax returns, and information about your business’s Debt Service Coverage Ratio (DSCR). They typically look for a DSCR of 1.25 or higher, which shows that the property’s income is sufficient to cover its debt payments.
How Does the Commercial Mortgage Process Work?
Timeline and process can be a huge source of anxiety for first-time commercial borrowers, especially if there’s a deal that’s time-sensitive. Here are some answers to common questions! Address timeline and process questions – the biggest source of anxiety for first-time commercial borrowers.
Pre-approval takes 3–5 days, full approval 2–4 weeks, and funding can take 30–45 days. Banks may take longer than alternative lenders.
Prepare 2 years of recent financial reporting, rent rolls, property details, business registration, personal tax returns, and organization structure.
Yes, an appraisal is required for commercial financing. The cost can range on average from $2,000 to $6,000 and the timeline for completion is typically 1 to 2 weeks.
What Types of Commercial Properties Can Be Financed?
Timeline and process can be a huge source of anxiety for first-time commercial borrowers, especially if there’s a deal that’s time-sensitive. Here are some answers to common questions! Address timeline and process questions – the biggest source of anxiety for first-time commercial borrowers.
We help clients secure financing for apartment buildings and multi-family properties with five or more units. We can also help with CMHC financing options, which may offer lower interest rates, longer amortization periods, and down payments as low as 5%!
Yes! We have experience with owner-occupied and investment properties across various sectors. The terms and conditions for these loans will vary based on the property type, your financial strength, and the level of risk perceived by the lender.
What Will My Commercial Mortgage Cost?
It’s natural to be concerned about the total cost of financing. A commercial mortgage includes more than just the interest rate and can include fees and regulatory impacts.
Commercial interest rates are generally higher than residential rates because commercial properties are considered a higher risk for lenders. Rates are priced based on market conditions, your risk profile to lenders, and the risk of the financing purpose.
Expect origination fees (0.5–2%), legal fees ($2,000–$5,000), appraisal costs, and environmental assessments.
What About Construction and Development Financing?
Construction and development financing is a specialized area that has unique considerations.
Funds for commercial construction projects are typically disbursed through a “draw” process, where money is released monthly based on a percentage completed (as assessed by a surveyor).
Payments are often interest-only during construction, often with a reserve built into the financing to improve cashflow management. Often, repayment doesn’t begin until construction is complete.
Development loans carry a higher risk than standard commercial mortgages. They often have shorter terms and higher interest rates and may include requirements for pre-sales.
What If My Application Gets Declined by Banks?
A bank’s “no” doesn’t have to be the end of the road for your dream project. Many commercial deals don’t fit traditional bank criteria, so we work with alternative lenders to come up with Plan B solutions!
If your application is declined by a traditional bank, you still have options. We work with a wide network of private lenders, Mortgage Investment Corporations (MICs), and credit unions that offer more flexible underwriting criteria. These lenders often focus more on the property’s income potential and loan-to-value ratio than on rigid credit scores or business history. This makes them ideal for borrowers with non-traditional income, time-sensitive deals, or unique property types
Private commercial mortgages can be approved faster and tailored to your needs, though they may come with higher interest rates due to increased risk.
Absolutely! We specialize in financing special-purpose properties such as gas stations, marinas, self-storage facilities, and mixed-use buildings. These assets often fall outside the comfort zone of traditional lenders due to their niche operations or valuation complexity.
We also assist clients with non-traditional income sources, challenging credit profiles, or start-up businesses by structuring deals that meet lender requirements while supporting long-term viability.
How Do I Choose the Right Commercial Mortgage Broker?
Choosing the right broker who will partner with you on your financing journey is an important decision. Here are some helpful tips to choosing the right broker for your commercial financing needs.
Mortgage brokers offer access to multiple lenders, including banks, credit unions, and private lenders. They can negotiate better rates, compare products, and streamline the application process—often at no cost to the borrower, since brokers are typically paid by the lender.
Banks, on the other hand, offer only their own products and may have stricter lending criteria. If your financial situation is complex or you want to explore more options, a broker is often the better choice.
When you work with Legacy Mortgage Group, you benefit from:
- In-house underwriting for faster approvals
- Advisory services for $5M+ commercial loans
- Deep relationships with lenders across Western Canada
- Expertise in CMHC-insured multifamily, construction, and owner-occupied financing
- Expert understanding of the local commercial real estate market and provincial/federal regulations
Our team works closely with business owners, accountants, and legal advisors to structure deals that support growth and long-term success
When selecting a broker, there are some things you’ll want to know up-front. Here are some questions to ask when evaluating a broker:
- How do you select a lender? Some brokers may work specifically with just a few lenders, so finding out if they have a large network – and what their criteria is for selecting the best deal! – can help you weed out the brokers who will chase the best lender compensation, not the best deal for your business.
- What are your expected timelines for submission, and how long does approval take? If your application is time-sensitive, you want to make sure that your broker is working diligently to get your deal submitted and approved in a timely manner.
Can you explain [commercial mortgage question] to me? By asking your broker a question about the process, you’ll get an idea of how much they’re able to simplify the topic and educate you, so you can make informed decisions. If they seem annoyed or flippant, it’s best to find another broker! You want the relationship to feel like a partnership, not like you’re in the dark on what’s going on.
Commercial financing is a longer process than residential lending. Consult with your broker to discuss timeline expectations prior to preparing an offer to purchase.
These questions help ensure transparency, alignment with your goals, and confidence in your broker’s expertise!
Still Have Questions?
Legacy Mortgage Group is here to guide you through every step of your commercial financing journey. From pre-approval to closing, our team offers personalized service, strategic advice, and access to top lenders across Alberta and B.C.
Book a consultation today to get your questions answered by our commercial mortgage experts, and let’s build your business future together.
