Not all mortgages and loans are directed towards homebuyers. Whether you want to set up shop on a cozy urban corner and open the doors to a coffee shop or own an investment property to rent out, a commercial mortgage is just what you need to seek financing for. Intrigued but wondering “how to get a commercial mortgage loan?” and “what are commercial mortgage rates in Ontario?”. Let’s break down everything you need to know about commercial mortgages in Canada and, of course, how I can be of immense help to you.
What Is Commercial Mortgage?
A commercial mortgage is a loan granted to individuals who plan on utilizing a commercial property as opposed to a residential one. Simply, commercial mortgages are not granted to individuals who will seek shelter in the property but, instead, open a personal business, office, or consider it an investment property. However, there are instances when a commercial mortgage may be granted on a residential property in the case that it will be used as an investment property. Commercial mortgage rates typically differ from ones granted for residential purposes. For example, the interest rate will most certainly be higher, as I’ll cover in a little bit. Additionally, the loan-to-value ratio operates slightly differently in this case and that rate will fluctuate depending on the type of property you will be seeking a commercial mortgage for. In the case of commercial mortgages, the commercial property will act as collateral in the case of any issues with repayment, similar to how a home would be used as collateral in the case of first-time homebuyer mortgages.
5 Types Of Commercial Mortgages
The general premise of commercial mortgages is similar but they vary in type depending on the kind of property for which the financing will be registered against. The loan-to-value ratio may be different than, for example, in the case of a construction mortgage. Here are a few of the most common commercial mortgage types in Ontario and how they differ with their loan-to-value ratios:
- Vacant land or farm land — 65%
- Office — 75%
- Industrial — 75%
- Multi-family residential building — 80% (varies on number of units)
- Shopping center — 70%
Commercial Mortgage Eligibility Criteria
What is taken into account by the bank or commercial mortgage broker when you apply to receive a commercial mortgage? All of these:
- Credit history — This is a must when applying to any type of mortgage in general. The higher the number is, the more trustworthy of a borrower you are deemed to be by lenders.
- Business plan and situation — If you are already an owner of another business, then you may need to provide factual proof that you have an adequate financial standing in order to pay off the mortgage for a second one. You may also be required to submit a business plan to determine the legitimacy of success for your new endeavor.
- The down payment — You may be faced with a higher down payment rate when opting for a commercial mortgage: in the range of 20-35k.
Benefits Of Working With Commercial Mortgage Broker In Ontario
Why use a commercial mortgage broker at all and instead opt for a local bank? Commercial mortgages are notoriously known for high interest rates and down payments. Why? The simplest answer is that you will be acquiring some form of revenue when you put the property to use. That means you will likely generate funds that go beyond your current monthly earnings. For that reason, your current earnings are typically not a main factor that determines your rates for the commercial mortgage. A specialized commercial mortgage broker in Ontario, such as myself, is prepared to find a loan that provides you with the most comfortable rate that we can find with your business plan in mind. Dedicated mortgage brokers in Toronto have an expansive network with local lenders and aspire to get your commercial property up and running in no time thanks to that. Opting for alternative lenders is also optimal for individuals who already have existing mortgages with other banks and credit unions.
Please contact me, Jodi Habel, to make acquiring your commercial mortgage in Canada smoother than you can imagine. After all, it may be your first time opting for a commercial mortgage, but I have acquired relationships with major banks, credit unions, monoline, and alternative lenders through my 15 years of experience working in the industry.