Commercial Mortgages

What You Should Know

  • Commercial mortgages are used for income-generating properties, such as apartments, offices, retail, and industrial properties
  • Commercial mortgage rates are based on government bond yields with a premium added on top
  • Most commercial mortgage lenders allow you to have a loan-to-value (LTV) of up to 85% and a maximum amortization of 25 years
  • CMHC-insured commercial mortgages are available for multi-family residential rental properties
  • You can get an amortization period of up to 40 years with a CMHC-insured commercial mortgage
  • Commercial mortgage lenders will look at the income-generating potential of the property and the borrower’s financials
  • Commercial mortgage rates are higher than residential mortgage rates
  • Some commercial mortgage lenders offer interest-only commercial mortgages

Commercial Mortgage Rates

Commercial mortgage rates are highly dependent on the conditions of the specific mortgage, property, and borrower. Recourse mortgages on stabilized properties with well-known and capitalized borrowers will get lower rates than non-recourse mortgages on land or new construction with borrowers with a short history. Generally, these mortgages will be priced based on similar government bonds with a premium determined by the situation.

CMHC-insured commercial mortgage rates, such as for multi-family rental properties or affordable housing projects, are much more predictable due to the CMHC guarantee. The guarantee allows the bond market to value the mortgages based on the credibility and solvency of the CMHC rather than individual borrowers. Generally, CMHC-insured commercial mortgages are priced at a small premium to Canadian Mortgage Bond yields, which are usually around 100 basis points (or 1 percentage point) above the 5-Year Government of Canada Bond Yield.

Current CMB Yield:
2.25% - 2.45%
As of 02 December, 2021

Canadian Mortgage Bond Yield History

CMB Bond Yield
5-Year GOC Bond Yield
Data from the Bank of Canada. CMB yields are estimated from a 90 to 110bp spread on 5-Year GOC bond yields.

What is a Commercial Mortgage?

A commercial mortgage is any mortgage for a commercial property including multi-family rental apartments, office buildings, retail spaces, industrial buildings, hotels, and more. While the available mortgage terms are similar to residential mortgages, they usually have higher interest rates and take more time to process due to the complexity of appraising the underlying property. In addition, they take into account the expected cashflow of the property (e.g. rent) and history of the borrower.

Commercial Mortgage Terms

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 TypesFixed, Variable, or Combined Rate
Loan-to-value (LTV) Up to 85%
Term length1 to 25 years
AmortizationUp to 25 years
(Insured up to 40 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

First National Commercial Mortgages

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%.

Loan Amount$2.5M to $10M
Loan-to-Value (LTV)Up to 75%
Term LengthUp to 5 Years
AmortizationUp to 25 Years
Eligible Property ClassesMulti-family, Retail/plaza, Office, Mixed-use, Industrial, and Hospitality
Eligible Mortgage TypeFirst Mortgage Only
Eligible RegionsMajor Population Centres

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.

Loan Amount$1M to $10M
Loan-to-Value (LTV)Up to 85%
Term LengthUp to 5 Years
AmortizationUp to 25 Years
(Interest-only Option Available)
Eligible Property ClassesTop-up: Multi-Family, Retirement Homes
Second Mortgage: Retail/Plaza, Office, Mixed-Use, Industrial, Hospitality
Eligible Mortgage TypeSecond Mortgage, Top-up
Eligible RegionsMajor Population Centres

MCAP Commercial Mortgages

MCAP offers commercial mortgages for new purchases, refinancing, and top-up/second mortgages for loan terms of 1-5 years and an amortization of up to 25 years. They also offer specialized CMHC mortgages for multi-family and retirement homes with amortization of up to 40 years.

CMHC Insured Commercial Mortgages

MCAP is one of Canada's largest originators of CMHC mortgages on multi-family properties, retirement homes, and affordable housing projects.

Loan Amount$2.0M to $100M
Loan-to-Value (LTV)Up to 85%
Term Length5 and 10 Years
AmortizationUp to 40 Years
(Premium Charged for>25 Years)
Eligible ApplicationsConstruction, Purchase, Refinance
Eligible Mortgage TypeFirst Mortgage, Second Mortgage, Pari Passu Mortgages, Top-ups
Eligible RegionsBC, AB, SK, MB, ON, QC, NS, NB

Conventional Commercial Mortgages

MCAP also offers conventional commercial mortgage loans to its clients for a variety of different property types.

MCAP Conventional First Mortgages

Loan Amount$2.5M to $10M
Loan-to-Value (LTV)Up to 75%
Term Length1 - 5 Years
AmortizationUp to 25 Years
Eligible ApplicationsConstruction, Purchase, Refinance
Eligible Property ClassesMulti-Family, Retail/Plaza, Office, Mixed-use, Industrial, Hospitality
Eligible RegionsMajor Population Centres

MCAP Conventional Second Mortgages and Top-up Financing

Loan Amount$1M to $10M
Loan-to-Value (LTV)Up to 85%
Term Length1 - 5 Years
AmortizationUp to 25 Years
(Interest-only Option Available)
Eligible Property ClassesTop-up: Multi-Family, Retirement Homes
Second Mortgage: Retail/Plaza, Office, Mixed-Use, Industrial, Hospitality
Eligible RegionsMajor Population Centres

CMLS Financial Commercial Mortgages

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. It is a first-mortgage program open to all property types.

Loan Amount$500K to $5M
Loan-to-Value (LTV)Up to 85%
Term Length5 and 10 Years
AmortizationUp to 40 Years
Eligible Property ClassesAll Properties Considered (Including Land)
Eligible Mortgage TypeFirst Mortgage, Second Mortgage, Pari Passu Mortgages, Top-ups
Eligible RegionsAll Regions Considered

CIBC Commercial Mortgages

CIBC offers competitive first mortgage commercial mortgages ranging from $1M to $40M for mutli-unit residential, retail plazas and centres, office buildings and medical centres, as well as industrial buildings.

Loan Amount$1M to $40M
Loan-to-Value (LTV)Up to 85%
Term LengthUp to 10 Years
Eligible Property ClassesMulti-unit Residential, Retail Plazas, Offices, Medical Centres, Industrial
Eligible Mortgage TypeFirst Mortgage Only

Desjardins Bank Commercial Mortgages

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.

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