A commercial mortgage provides financing to purchase income-producing properties, such as apartments, retail, offices, and industrial buildings. Use the commercial mortgage calculator below to see how much a commercial mortgage would cost, if you would be eligible for a CMHC-insured commercial mortgage, and to see your amortization schedule.
Most conventional commercial mortgage lenders allow you to borrow up to 75% of the value of the property, while CMHC-insured commercial mortgages can have a loan-to-value of up to 85%. With CMHC’s new MLI Select product, CMHC-insured mortgages for both new and existing multi-unit rental properties may be eligible for an LTV of up to 95% for the residential portion of the loan and 75% for non-residential portions.
Commercial mortgage lenders often allow greater LTVs for residential commercial mortgages compared to other commercial property types. For example, MCAN’s average LTV at origination for multi-family residential commercial mortgages was 74%. In comparison, MCAN’s other commercial mortgages had an average LTV of 53.7%.
CMHC commercial mortgage rates are linked to the Canada Mortgage Bond (CMB) yields that match the term of the mortgage, plus an extra spread on top. This spread is around 100 to 150 basis points (1% to 1.5%).
For example, to find the estimated rate for a five-year insured commercial mortgage, you would like at the purchase yield of a Canada Mortgage Bond with a maturity in five years. A CMB issued by the CMHC in March 2020 with a maturity date of June 2025 has a yield of 0.963%. The estimated mortgage rate would be 1.96% to 2.46%.
June 2026 Canada Mortgage Bonds (5-year maturity) had a yield of 1.21%, while March 2031 (10-year maturity) had a yield of 2.03%.
The average five-year mortgage spread increased to 1.76% for 2020. Insured commercial mortgage rates are linked to CMB yields due to the CMHC guaranteeing both the commercial mortgage and Canada Mortgage Bonds.
Uninsured commercial mortgages are not backed by the CMHC, which means that they are based solely on the borrower. This makes commercial mortgage rates tied to corporate bond yields. Due to commercial mortgages being less liquid than corporate bonds, commercial mortgage rates are higher than corporate bond yields.
The five-year commercial mortgage premium over BBB corporate bonds was just under 1% as of April 2021. This is higher than the average spread of 0.5% over the past five years. To learn more about commercial mortgages rates you can view our article.
|5-Year CMHC-Insured||4.5% - 5.0%|
|5-Year Conventional||6% - 8%|
Some commercial mortgages are interest-only. There are also CMHC-insured interest-only mortgages. This means that they require only interest payments for the term of the mortgage, rather than also requiring principal payments. This results in smaller mortgage payments.
CMHC-insured mortgages can only have an amortization of up to 25 years before a surcharge is applied. If the CMHC-insured mortgage is interest-only for a five year term, then the monthly mortgage payments will switch back to both principal and interest at the end of five years. These monthly payments will be for an amortization period of 20 years.
Similarly, an initial interest-only term of 10 years will result in an amortization period of 15 years after the end of the initial term.
You can have an amortization period of up to 50 years with CMHC-insured commercial mortgages for eligible properties with CMHC MLI Select. CMHC’s standard multi-unit loan insurance for rental properties allows a maximum amortization of 40 years. Otherwise, the maximum amortization period is 25 years for commercial mortgages in Canada.
Multi-unit rental properties need to be residential in order to qualify for CMHC insurance. This includes properties offering student housing or retirement housing. To be considered residential, at least 70% of the property’s floor space or loan value must be residential. The other 30% or less can be mixed-use, such as for retail space.
To qualify for an amortization period of up to 50 years, the property will need to meet certain commitments, such as having a certain percentage of units being accessible, or for the building to beat certain energy efficiency thresholds. To learn more about CMHC Select, visit our page about CMHC mortgage rules.
For CMHC’s regular multi-unit loan insurance products, a premium surcharge applies for amortizations greater than 25 years.
|Amortization||Surcharge (% of Loan Value)|
|25 Years or Less||0%|
|Up to 30 Years||0.25%|
|Up to 35 Years||0.50%|
|Up to 40 Years||0.75%|