If you know about how a traditional mortgage works, a commercial mortgage is not much different from it, as it requires you to borrow money to finance a piece of real estate too. However, unlike a traditional mortgage where the property is used for residential purposes, when you get a commercial mortgage, it is for commercial use by businesses like partnerships, limited companies, and corporations. Therefore, no matter whether you are looking for commercial or residential property, most banks, and financial institutions will offer you mortgages. You will also be able to borrow money from private lenders for your commercial mortgage without any issue.

The commercial mortgage rates in Canada are higher compared to traditional mortgages because it carries a higher level of risk for the lenders. As a Canadian business owner, you can apply for different types of commercial mortgages with different features. Most commercial mortgage rates in Canada are classified as fixed, variable, or mixed, and the Loan to Value ratio can go as high as 85% in some situations. Depending on the mortgage amount you borrow and how you want to pay your interest, the mortgage term may last from a year to 25 years, with an amortization period of 25 years maximum, and insure upto 40 years.

Things to know about commercial mortgages in Canada

If you are looking for commercial mortgage rates in Canada, there are some additional things you must know about:

1. If you have income-generating properties with more than four units, you are eligible to apply for a commercial mortgage.

2. Commercial mortgage rates are higher than residential mortgage rates because it carries a higher risk for the lender but lower than construction loans.

3. Even though most commercial lenders offer you a maximum Loan to value of 85%, with a 25-year amortization period, it can extend upto 40 years if you borrow a Canada Mortgage and Housing Corporation (CMHC) insured mortgage.

How Do Commercial Mortgages Differ from Residential Mortgages?

Commercial mortgage and residential mortgages have their own rate and repayment options and conditions; however, it also differs from each other in various ways. Here are some of the major differences between both types of mortgages -

1. Requirements: To apply for a residential mortgage in Canada, you will need to provide information about personal income, credit score, and outstanding debts. To apply for a commercial mortgage, you will have to provide a detailed statement of income, expenses, and budget aspects of your business.

2. Down payment: Naturally, for a commercial mortgage, you will be required to put more money than you will be required to do for a residential property. If it requires you to pay a down payment of 25% for your residential property, for commercial mortgages, the down payment will increase to 35%.

3. Processing time: When you are trying to close a residential mortgage deal, it might take upto four weeks; however, for most commercial mortgages, the time period may stretch from 6 weeks to 1 year, depending on various other factors.

4. Credit history: While applying for a residential mortgage, the lender will look at your personal credit history; for a commercial mortgage, they will look at both personal and business credit history.

If you are looking for more information about applying for a commercial mortgage in Canada, Best Mortgage Online offers some in-depth details about the process and how to get the best out of your deal.