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  • Writer's pictureLendX Financial

How to Obtain a Commercial Mortgage in Canada

If you are an individual who is running a business or a limited company, incorporated, or even a partnership you can apply to get a commercial mortgage. Commercial mortgages are loans taken for commercial properties or real estate. If you're wondering about the process to get a commercial mortgage in Canada, let us take you through the entire process. To be granted a commercial mortgage the business or company applying for the mortgage loan would need to prove its creditworthiness to lenders. In order to determine this, the commercial credit rating is evaluated by lenders. This is done in order to check if they will be able to pay the loaned amount back to the lender.

How is the company's creditworthiness evaluated:

  • Lenders tend to check the long-run creditworthiness of the company. If the company can prove this along with a great personal credit rating, the application is considered for commercial mortgages, sometimes, even if the company's credit history is not so good.

  • A willingness on the part of the borrower to invest some personal money in the new property is another factor which will take you a step closer to getting a commercial mortgage.

  • Lenders would also require evidence of a secure business which is profitable too or is on the course of becoming profitable. In order to convince the lenders of this you would need to present financial work and projections for the coming year which can prove the company's positive run in the market. You must note that the sum which will be given to you as a mortgage loan is directly related to the down payment you make, the value of the property being taken, and the loan to value ratio. You may wonder what the loan to value ratio is. It is the sum of loan against the property's value. Lenders may offer you up to 90% of the property value. However, this discretion rests with them as it depends on the kind of property being acquired, the down payment you make, along with the creditworthiness of the company.

How to proceed:

To apply for a commercial mortgage be prepared with all your financial documents and bank papers. We recommend using the services of mortgage brokers for advice and help as they take care of all the running around you may have to do. They shall also help you in getting the best terms of the mortgage at good rates. They will charge a fee for their services but this relieves you of many headaches if you were to make the same application all by yourself. Pro Tip: Mortgages insured by Canada Mortgage and Housing Corporation (CMHC) have among the lowest rates of interest you could get your hands on. But you do have to remember that CMHC does not insure properties purely meant for commercial use. They will, however, insure mixed ventures i.e. commercial and residential.

If you are planning to buy a commercial property in Brampton, please contact LendX Financial.

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