Commercial Mortgage Characteristics

There are many different types of commercial mortgages for the different kinds of properties and use-cases. Due to the size and complexity of commercial mortgages as well as the difficulty of selling commercial properties, the specific terms of a commercial mortgage will differ from case to case. However, generally speaking most commercial mortgages for developed properties like multi-residential, retail, office, and hospitality share the following terms:

  • Rate Types: Fixed, Variable, or Combined Rate
  • Loan-to-value: Up to 85%
  • Term length: 1 to 25 years
  • Amortization: Up to 30 years

Term Lengths

Commercial mortgage terms can range between 1 and 25 years.

Loan-to-Value (LTV)

Commercial mortgages usually have a loan-to-value of up to 85% depending on the property type. Farmland or vacant lots can be restricted to a LTV of as low as 50%. In contrast, residential mortgages can have a LTV of up to 95%. The lower LTV is due in part to three reasons:

  1. No mortgage insurance means the lender has to take on the full risk of the mortgage for higher LTVs.
  2. Borrowers will usually rely on cashflow from their property to make payments for the mortgage. If something happens to the property, both the value of the property and the borrower's ability to pay will be affected.
  3. A less active and transparent market for commercial properties can mean valuations are only a "best guess". Some property types such as rural lots are even more difficult to appraise, making it necessary for the lender to build in a valuation buffer.

Commercial Mortgage Lenders

Desjardins Bank

Desjardins Bank offers commercial mortgages for both purchases and new constructions with a mortgage term of 1 to 10 years and an amortization of up to 20 years. Residential rental properties can have an amortization of up to 25 years. Fixed, variable, and combination rates are offered.

Multiproject Option

Desjardin's Multiproject Option is a "reusable" mortgage loan where the some or all of the principal can be withdrawn for another project. This allows you to use a single loan contract for multiple projects.

Managed-Rate Option

Desjardin's Managed-Rate Option allows you to split a term or mortgage loans into up to three independent loans, each with their own rates, terms, and amortization periods. Total amortization can be up to 25 years with each loan having a term of up to 10 years. Fixed, variable, and combination rates are offered.

First National

First National offers commercial mortgages for purchases, new constructions and refinancing/second mortgages. First National classifies their mortgages into two main offerings: First Mortgage Financing and Top-up Financing and Second Mortgages.

First Mortgage Financing

First National offers First Mortgage Financing for mortgage loans between $2.5 million and $10 million for properties in major population centres in Canada. 1 to 5 year terms are offered with an amortization of up to 25 years. Maximum LTV is 75%.

Applicable property types: multi-family, retail/plaza, office, mixed-use, industrial, and hospitality.

Top-up Financing and Second Mortgages

First National offers Top-up Financing and Second Mortgages for mortgage loans between $1 million and $10 million for properties in major population centres in Canada. 1 to 5 year terms are offered with an amortization of up to 25 years. Maximum LTV is 85%. An interest-only option is also available.

Top-up financing property types: multi-family and retirement homes. Second mortgage property types: retail/plaza, office, mixed-use, industrial, hospitality.

Applicable property types: multi-family, retail/plaza, office, mixed-use, industrial, hospitality

CMLS Financial

CMLS Financial offers commercial mortgages for both purchases and new constructions with a mortgage term of 1 to 25 years and an amortization of up to 30 years. Fixed, variable, and combination rates are offered.

Conventional Term

CMLS Conventional Term commercial mortgages are offered for most property types. 1 to 25 year terms are offered with an amortization of up to 30 years. Recourse and non-recourse loan options are available. Other features include interest-only periods and a forward rate fix.

Small Loans Program

CMLS offers a Small Loans Program for commercial mortgages from $500,000 to $5,000,000. All property types can be considered including land. 5 and 10 year terms are offered with an amortization of up to 40 years. Mortgages under the Small Loans Program have to be first mortgages and can a LTV of up to 85%.