Personal Finance

Mortgage Rates on Commercial Properties

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  • Oct 6th, 2005 1:52 am
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Deal Addict
Nov 26, 2004
4460 posts
4122 upvotes

Mortgage Rates on Commercial Properties

Anyone knows if mortgage rates for Commercial Properties are higher than residential properties?

Thanks
6 replies
Deal Addict
Jul 20, 2005
1293 posts
63 upvotes
Good question, I am interested in that too.

I was told that the minimum downpayment for a commercial mortgage is usually 35%.
Newbie
Sep 24, 2005
9 posts
I only deal with the personal side of things, however, I know that depending on the type of business, the down payment could be as high as 50% and a term loan, not an actual mortgage.
Jr. Member
Mar 14, 2004
188 posts
The answer to every short question about mortgages is - it depends.

Rates for a mortgage on an apartment building could be about the same as residential. There are a lot more things to consider when you are dealing with commercial mortgages. Such as - Net Operating Income, Debt Coverage Ratios, your personal credit history, location, age of the property, use of the property (apartments, stores, mixed, industrial, retail, restaraunt, bar, theatre), who the tenants are, how much of the appraised value is being borrowed.

You can get a mortgage on an apartment building with as little as a 15% downpayment.
Deal Addict
Feb 21, 2004
1584 posts
378 upvotes
Montreal
I bought a 12 Unit building last year so i'll speak from my personal experience


anything higher then 4-5 units is considered a commercial property

the SHDL will not touch it so you will have to have at least 30-35% down payment
and YES interest rates are higher then residential

Last year, i took in 5.75% for 5 years on a closed-term deal when the going rate
for residential was something like 3.75-4%
Jr. Member
Mar 14, 2004
188 posts
HoTiCE_ wrote:I bought a 12 Unit building last year so i'll speak from my personal experience


anything higher then 4-5 units is considered a commercial property

the SHDL will not touch it so you will have to have at least 30-35% down payment
and YES interest rates are higher then residential

Last year, i took in 5.75% for 5 years on a closed-term deal when the going rate
for residential was something like 3.75-4%
CMHC/SCHL (Don't know what SHDL is) will insure mortgages on apratment buildings allowing up to 85% Loan to Value (15% downpayment). The insurance premium for 85% financing is 4.5% of the value of the loan. The application fees are $150/Unit for the first 100 units and $100/unit for the remainder with a minimum application fee of $600 and maximum $50,000 per loan application. They also insure mortgages for nursing/retirement homes.

I'm working on a quote for 20-unit apartment for someone right now. Each application is looked at on an individual basis, and I think the only thing that might drive the rate up on this property is the location. I am expecting it to come in around 5% for 5 years. Once I get the quote I will update here.

As far as residential mortgage rates being around 3.75-4% for a five year fixed rate mortgage last year, you might have been lucky to find a rate in the 4.75-5% range. The rates have only been in the mid to low 4's since the spring for a five year fixed term residential mortgage.
Member
User avatar
Feb 26, 2003
304 posts
29 upvotes
Commercial mortgage rates are higher than residential only IF the property meets the following 3 criteria:

MTG < $1MM
loan to value < 65%
Property debt service < 140%

If you have a property with good cash flow a higher LTV can be accepted. I have seen 5 year fixed MTG @ 75% LTV for 4.95%.

PM me if you want more specifics...this is not a sales pitch as I don't do mortgages biut do work in Commercial banking...

Also FYI,,credit unions don't seem to adhere to the banks LTV policies. Many credit unions will treat your Commercial MTG the same as a residential one.
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