Guide

Commercial Mortgages

This Page's Content Was Last Updated: October 27, 2026

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A commercial mortgage is a mortgage secured by a commercial property, such as a warehouse, mall, office building, medical centre, retail store, or multi-family rental building. In general, any real property other than a house is commercial real estate. Commercial mortgages are used by two main types of borrowers:

• Investors buying income property they rent out, such as apartment buildings, plazas, or office buildings.
• Business owners buying or renovating premises for their own business, such as a warehouse, clinic, or storefront.

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There is no universal unit threshold at which a residential building becomes commercial for mortgage financing purposes. Lenders and mortgage insurers have different eligibility requirements for multi-unit residential properties.

For example:

• CMHC: 5 or more units (1 to 4 units count as residential)
• RBC: 7 or more rental units
• CIBC: 5 or more rental units

Key Differences:

• How you qualify: A homeowner mortgage is based on your ability to repay, measured by your debt service ratios. A commercial mortgage is based on whether the property's cash flow can cover the debt, measured by its debt service coverage ratio (DSCR).
• Risk: A house is easy to sell or rent because there are plenty of buyers and renters. A commercial building can sit empty for months after a tenant leaves, and far fewer buyers are looking for one. That makes commercial property harder to sell if the borrower defaults, so lenders see commercial mortgages as riskier.
• Processing time: Commercial mortgages take longer to approve because the lender must appraise the property and review its income.

Commercial mortgages are offered by five main types of lenders.

Other institutional lenders, such as life insurance companies and pension funds, also provide commercial mortgage financing, typically for larger, established properties and borrowers.

Conventional commercial mortgage rates are set as a spread over the Government of Canada (GoC) bond yield with a similar term, usually the 5-year or 10-year yield. The lender then adds a premium based on the risk of the loan.

CMHC-insured multi-unit mortgages have the lowest rates because the insurance removes most of the lender's default risk. However, an insurance premium is charged on top of the mortgage interest. Lenders commonly use Canada Mortgage Bond (CMB) yields as a benchmark for pricing these mortgages, although rates may also be expressed as spreads over Government of Canada (GoC) bond yields.

CMBs are guaranteed by CMHC on behalf of the federal government and typically yield slightly more than comparable GoC bonds. The spread between CMB and GoC yields fluctuates based on market conditions, investor demand, bond issuance volumes, and government purchasing activity.

Avison Young's Q3 2026 Canadian Cap Rate and Investment Trends report found these spreads over the 5-year GoC bond yield:

To estimate today's rate range, add the spread to the current 5-year GoC bond yield. Your actual rate depends on the property, the borrower, and the loan.

• Property type: The more specialized the property, the higher the risk and the rate. Multi-family rental buildings are the lowest-risk commercial property type, so they get lower rates and higher LTVs.
• Property stability: Stabilized, leased-up properties get better rates than pre-construction or partly leased ones.
• Borrower strength: Well-funded borrowers with a long track record get better rates than developers with a short history.
• Loan structure: A higher LTV, a lower DSCR, or a non-recourse loan means a higher rate.
• Insurance: CMHC-insured mortgages get the lowest rates because the insurance removes most of the lender's default risk.

Use our commercial mortgage calculator to see how a change in your rate affects your payments.

CMHC is Canada's national housing agency. Its homeowner program insures homeowner mortgages against default to make it easier for Canadians to own their primary residence. For rental buildings with 5 or more units, it offers multi-unit mortgage loan insurance, mainly through MLI Standard and MLI Select. These programs aim to increase the supply of rental housing by insuring rental mortgages against default.

On top of the mortgage rate, you will need to pay for CMHC mortgage default insurance to purchase a commercial property with a CMHC-insured commercial mortgage. Premiums are a percentage of the loan amount, and MLI Select borrowers get a discount on them. The following table shows CMHC's insurance premiums for standard multi-unit rental housing, effective July 14, 2025.

A 0.25% surcharge applies for every 5 years of amortization beyond 25 years.

MLI Select is CMHC's points-based version of multi-unit mortgage insurance. Borrowers earn points by committing to affordability, energy efficiency, or accessibility, and need at least 50 points to qualify. MLI Select discounts are 10% at 50 points, 20% at 70 points, and 30% at 100 points.

Learn more in our guide to rental property mortgages.

There are many different commercial mortgages for the different kinds of properties and use-cases. Due to the size and complexity of commercial mortgages and 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:

Typically, commercial mortgage terms can range between 1 and 10 years. Shorter-term bridge financing is also available, with terms of up to about 3 years at some lenders. Commercial mortgage borrowers prefer to lock in a long-term mortgage when interest rates are low. However, if rates are expected to drop soon, they might opt for a shorter-term loan.

Commercial mortgages have a loan-to-value of up to 85% depending on the property type and whether the loan has default insurance, or up to 95% under CMHC's MLI Select. Farmland or vacant lots can be restricted to an LTV of as low as 50%. In down payment terms, a 75% LTV means putting down 25% of the purchase price. CMHC-insured financing can cut that to 15%, or as little as 5% under MLI Select.

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1. Prepare your numbers: Gather the property's rent roll and operating statements, your financial statements, and a personal net worth statement.
2. Talk to a lender or broker before you make an offer: They can tell you how much the property will support and which conditions apply.
3. Make an offer with a financing condition: Give the lender enough time to review the deal and complete its due diligence.
4. Submit your application: The lender orders or approves an appraisal, a Phase I environmental site assessment, and, if needed, a building condition assessment.
5. Get a commitment letter: The lender sets out the loan amount, rate, term, and conditions you must meet before closing.
6. Close: Lawyers prepare and register the mortgage, and the funds are advanced.

Requirements vary by lender, but most will ask for:

• Purchase agreement, or for a refinance, the existing mortgage balance, amortization, and maturity date
• Property description, including its age, construction, number of units, suite mix, parking, and amenities
• 3 years of operating statements showing actual income and expenses, for an existing property
• Current rent roll with each unit's rent, size, and occupancy date
• Property tax, insurance, and utility bills for the last 12 months
• Recent property appraisal
• Building condition assessment, if required
• Financial statements for the last 3 years, and personal net worth statements for borrowers and guarantors

A commercial mortgage broker in Canada can help you find the best mortgage for your needs. Additionally, they can assist you with the complicated process of obtaining a mortgage. For example, they'll assist you with submitting paperwork like lengthy environmental reports and building condition reports.

A mortgage broker works with MFCs, private lenders and insurers, banks, trust companies, and credit unions in Canada to find the best deal for you. With their experience in the mortgage industry, they may help you quickly find a mortgage with lower interest rates than you could individually.

First National offers CMHC-insured and conventional commercial mortgages for multi-family, retirement, office, retail, industrial, and mixed-use properties. Its conventional terms typically run 3 to 5 years, with longer terms available, and its recent CMHC-insured financings include 10-year terms with 50-year amortizations under MLI Select. You can learn more about First National's mortgage rates and reviews here.

MCAP offers conventional commercial mortgages for purchases, refinances, and equity take-outs, with terms of 1 to 10 years and amortizations of up to 30 years. It also offers CMHC-insured term mortgages for multi-family, retirement, student, social and affordable housing, with amortizations of up to 40 years. We have a guide on MCAP mortgage rates and reviews to help you learn more.

CMLS offers CMHC-insured, conventional, high-yield, and construction financing, with fixed and floating rates. CMLS manages a mortgage portfolio of more than $45 billion and was acquired by nesto in 2024. Learn more about CMLS on our CMLS mortgage rates and reviews guide.

CIBC offers competitive first mortgage commercial mortgages ranging from $1M to $40M for multi-unit residential, retail plazas and centres, office buildings and medical centres, as well as industrial buildings. As one of Canada's largest banks, CIBC is known for its mortgage rates and reviews.

RBC offers commercial mortgages to businesses buying or refinancing income-producing property worth more than $500,000. The property must be readily marketable and located in an active resale and rental market.

Desjardins Group is the largest cooperative financial group in North America. Desjardins offers commercial mortgages to buy, build, or expand commercial, industrial, and agricultural property, with amortization based on the property's useful life. It also offers separate financing for residential rental buildings. The rates can be fixed or variable.

The Business Development Bank of Canada (BDC) lends to business owners buying, building, or renovating premises for their own business. Its Commercial Real Estate Loan offers:

BDC doesn't finance the construction or operation of private schools, retirement homes, or projects zoned for residential use.

• TD: TD's Commercial Mortgage Group lends on income-producing property including retail, industrial, office, self-storage, hotels, and multi-unit residential, both conventional and CMHC-insured.
• BMO: Term and demand commercial mortgages for residential, retail, industrial, and office properties, as well as CMHC MLI financing.

• Credit unions lend on local commercial property and can be more flexible with smaller deals and local investors. You usually need to become a member to borrow.
• Life insurance companies also make commercial mortgages, mostly on larger, stabilized properties. Most borrowers reach them through a commercial mortgage broker.

Private lenders, mortgage investment corporations (MICs), and other alternative lenders finance deals that banks and CMHC won't, such as:

• Vacant or partly leased buildings
• Properties needing renovation
• Land
• Borrowers with limited history or weaker credit

They focus more on the property's value and your exit plan than on DSCR, but charge higher rates and fees and offer shorter terms. Most borrowers use them as a bridge, then refinance with a conventional or CMHC-insured lender once the property is stabilized.

Commercial mortgages are the standard way to finance rental buildings with 5 or more units and other income-producing property in Canada. However, commercial mortgages cost more and are harder to qualify for than homeowner mortgages. Commercial lenders focus on the property's cash flow, so the DSCR, LTV, and property type determine both your mortgage rate and how much you can borrow. CMHC-insured financing offers the lowest rates and highest leverage for apartment buildings, while a commercial mortgage broker can help you compare banks, MFCs, credit unions, and private lenders.

In Canada, rental buildings with 5 or more units are generally financed with commercial mortgages, since CMHC's homeowner and small rental insurance covers only properties with 1 to 4 units. Some lenders set the line higher. For example, RBC's commercial mortgage requires at least 7 rental units.

Many conventional lenders require at least 25% down on a commercial property, because they cap first mortgages at 75% LTV. CMHC-insured financing for rental buildings with 5 or more units can lower the down payment to 15%, or as little as 5% under MLI Select. Business owners buying their own premises may qualify for up to 100% financing through BDC.

Most commercial lenders require a minimum DSCR between 1.10 and 1.30. CMHC requires 1.10 to 1.30 for standard rental housing and 1.10 under MLI Select, while MCAP requires 1.20 for a conventional first mortgage. Non-residential spaces need a higher DSCR: a DSCR of at least 1.40 on the non-residential portion.

Commercial mortgages usually require a commercial appraisal, a Phase I environmental site assessment (plus a Phase II if the Phase I flags possible contamination), a building condition assessment, and legal fees. You will also pay land transfer tax in most provinces. Lenders may charge an application or commitment fee. Unlike residential mortgages where broker services are free, brokers may charge a fee for commercial mortgages. CMHC-insured loans add an application fee starting at $150 per unit, plus an insurance premium.

Generally, yes. Interest on money borrowed to buy property that earns rental or business income is deductible, but principal repayments are not. You can also claim capital cost allowance (CCA) on the building, though not on the land. Speak with an accountant about your situation.

Conventional commercial mortgages are typically amortized over 25 to 30 years at most. CMHC-insured mortgages on rental buildings allow up to 40 years for existing buildings and 50 years for new construction, and up to 50 years on existing buildings under MLI Select with 100 or more points.