Commercial mortgages differ from residential ones in several ways. Lenders underwrite the property’s income rather than your personal income. Terms run shorter, and rates sit higher. In addition, the application process requires financial statements, rent rolls, and an appraisal before you lock a rate. Here is what you need to know.
Loan-to-Value Ratios by Asset Class
Commercial lenders typically cap LTV at 65-75%. However, CMHC-insured multi-family loans can reach 85% LTV. Specifically, this represents the best leverage in Canadian commercial real estate.
| Asset Class | Conventional Max LTV | CMHC-Insured Max LTV |
|---|---|---|
| Multi-Family (5+ units) | 75% | 85% |
| Office | 65-70% | N/A |
| Retail | 65-70% | N/A |
| Industrial | 70-75% | N/A |
| Development Land | 50-65% | N/A |
Debt Service Coverage Ratio (DSCR)
The DSCR serves as the commercial lender’s primary underwriting metric. Specifically, it measures whether the property’s net operating income covers the mortgage payments.
DSCR = NOI / Annual Debt Service
Conventional lenders want 1.20x minimum. In other words, the property must generate 20% more income than the mortgage payment. CMHC-insured loans require 1.15x for multi-family. However, stronger properties with national tenants can push to 1.10x with the right lender.
Rate Spread Over Residential
Commercial mortgage rates run 150-300 basis points above residential rates. Therefore, in mid-2026, expect:
- CMHC-insured multi-family: 4.25-5.00% (5-year fixed)
- Conventional multi-family: 5.00-6.00%
- Office/retail/industrial: 5.50-7.00%
- Construction/development: 6.50-9.00% (interest-only during construction)
Amortization and Term
Commercial mortgages amortize over 20-30 years. However, terms are short — typically 5, 7, or 10 years. At term maturity, you refinance or renew. As a result, this creates refinancing risk. For instance, if rates rise or the property’s NOI falls, you may not qualify for the same loan amount.
Lender Requirements
Be ready to provide the following documents:
- Three years of property financials (or pro-forma for new construction)
- Current rent roll with lease expiry dates
- Personal net worth statement (for recourse loans)
- Phase I environmental site assessment
- Appraisal from a lender-approved firm (AACI-designated)
- Building condition assessment (for older properties)
Frequently Asked Questions
Do I need to personally guarantee a commercial mortgage?
Most conventional commercial mortgages require personal recourse. In particular, this applies to first-time investors and properties under $5M. However, CMHC-insured multi-family loans are typically non-recourse.
Can I use a residential mortgage for a duplex or triplex?
Yes. Properties with 1-4 units qualify for residential mortgages, including CMHC-insured with as little as 5% down. However, at 5+ units, you enter commercial territory.
What fees should I budget beyond the down payment?
Legal: $2,500-$5,000. Appraisal: $3,000-$7,000. Environmental Phase I: $2,500-$5,000. In addition, CMHC premium: 2.0-3.75% of loan amount (financed into the mortgage). Finally, lender fees: 0.5-1.0% of loan.