As a business owner or investor, you may be on the lookout for a property that can house your company. Or, you may be looking for a larger residential property you can rent out to tenants. In order to secure funding for buildings of this nature, you will need a commercial mortgage.

What is a commercial mortgage?

A commercial mortgage is a loan that is to be used specifically to fund commercial real estate. The borrower in the case of a commercial mortgage is a company or business instead of a couple or individual, like is the case in a residential mortgage.

What sort of properties are considered commercial?

Properties that have a multi-purpose function are the only properties that are considered commercial. These properties include office buildings, retail spaces, and multi-residential properties with 5 or more units. Also, the property you wish to purchase must be located in an active resale or rental market. Lenders aren’t too keen on providing funding for properties in the middle of an industrial wasteland if there’s no chance they can’t be resold later on.

What conditions do I need to meet to get this type of mortgage?

Commercial mortgages require certain criteria to be met such as:

  • Excellent credit history – Your personal credit score and your business’ score will be verified.
  • Debt to service ratio – This is the ratio of cash on hand/available to make the required loan payments.
  • Type of business you run – This will determine if you are better suited for an industrial mortgage instead of a commercial one.
  • Down payment – Unlike a residential mortgage, your down payment will need to be between 20-35% and in some cases 50% depending on the size of the property.
  • The state of your business at present – You will need to prove to lenders that your existing business is profitable and will maintain a steady profit for the duration of your mortgage. If your company is not yet operational, a business plan with detailed financial projections is required to show that your business will be profitable in the future.

How long does it take for a commercial mortgage to close?

Unlike their traditional counterparts that can close in approximately 90 days, commercial mortgages can take anywhere from two months to a full year. In order to get the ball rolling, meet with a broker to secure funding for your commercial building. Apply now so a qualified mortgage broker can find you the perfect mortgage package sooner rather than later.