If you are a business owner or are considering buying properties for the purpose of renting, then you may be wondering how you can qualify for a commercial mortgage. Commercial mortgages differ from residential mortgages in a number of ways – including the fact that lenders often do not advertise their rates. This can make it difficult to know if you are getting a good deal on a mortgage unless you are working with a mortgage broker who is experienced in working with commercial mortgages.
There are also a variety of different types of commercial mortgages. Some common types include:
- Residential/Commercial mixed
- Multi-family residential
- Commercial plaza mortgages
- Office mortgages
- Farmland mortgages
- Construction mortgages
Depending on the type and terms of them commercial mortgage that you are looking for, the rates offered by lenders can vary greatly. It is essential therefore that you work with an experienced mortgage broker who can help you find the mortgage that is right for your business.
What do you need to qualify for a commercial mortgage?
There are many different factors that a lender will look at when determining your eligibility for a commercial mortgage. Some of the most important factors are:
- Debt service coverage ratio – this ratio is how much debt and how much cash you or your company have. This is important because it is a good indicator of your ability to make your mortgage payments.
- Credit history and credit score – The better your credit is, the more likely you are to be approved for a commercial mortgage. Also, with better credit is going to come better terms on your mortgage. If your credit isn’t great, talk to your mortgage broker about what your options may be.
- Current business situation – If your business is well established and profitable, you will have an easier time qualifying for a commercial mortgage than if your business is just getting off the ground.
- Type of business – depending on the type of commercial mortgage that you are looking for, the type of business that you have along with they type of property that you are looking to buy can play a role in the approval process.
- Down payment – commercial mortgages generally require much higher down payments than residential mortgages. For example, if you were purchasing a mixed property, you may require a down payment of 25-30% whereas a purely commercial property might require a down payment that is as high as 50%.
- Insurance – in order to qualify for a commercial mortgage, you will likely need to have insurance in place that protects the lender against default. Since CMHC does not insurance strictly commercial properties, you will have to find your own insurance provider. Your mortgage broker will be able to provide some guidance on this.
Contact Akal Mortgages today!
If you are looking for a commercial mortgage, our experienced team of brokers would be happy to help. Give us a call today.
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