Commercial lending is underwritten on the property, then you
A residential lender starts with your income. A commercial lender starts with the building's net operating income and asks whether it services the debt. Your covenant, experience, and liquidity matter, but the property carries the file. That is why a clean rent roll and realistic operating expenses do more for your terms than anything else you can send.
The two numbers that set your loan amount
Loan-to-value caps how much of the value can be borrowed. Debt service coverage ratio (DSCR) - net operating income divided by annual debt service - caps how much the cash flow will carry. Lenders take the lower of the two. Most conventional commercial lenders want a DSCR of about 1.20 to 1.35 depending on asset class.
- Multi-residential: typically the highest leverage and lowest pricing
- Retail and office: leverage driven by tenant quality and lease term
- Industrial: strong lender appetite across the GTA
- Land and special-purpose: lowest leverage, often private or bridge capital
CMHC-insured multi-residential
For apartment buildings, CMHC-insured financing - including MLI Select for projects hitting affordability, energy efficiency, or accessibility targets - can deliver higher leverage, longer amortizations, and materially lower rates than conventional debt. The tradeoff is an application premium and a longer approval timeline, so it suits holds rather than quick flips.
What to send with a commercial submission
The difference between a two-week answer and a two-month one is usually the completeness of the first package. Send this and we can circulate to lenders the same week.
- Property address, description, and photos
- Current rent roll and two to three years of operating statements
- Purchase agreement or current mortgage statement
- Personal net worth statement and liquidity for the sponsors
- Environmental and building condition reports if you have them
- For construction: budget, permits, plans, and the builder's track record
Construction and bridge financing
Construction facilities advance in draws against completed and inspected work, with interest paid only on funds advanced and a holdback per the Construction Act. Bridge loans cover the gap between purchase and stabilization, or between one lender and the next. Both are priced on the exit, so the plan to repay matters as much as the asset.
Frequently asked questions
- How much down payment do I need for a commercial mortgage in Toronto?
- Typically 25% to 35% of purchase price for conventional financing, depending on asset class and cash flow. CMHC-insured multi-residential can require less; land and special-purpose assets require more.
- What debt service coverage ratio do commercial lenders want?
- Most conventional lenders look for roughly 1.20 to 1.35 times, meaning net operating income exceeds annual debt payments by 20% to 35%. Multi-residential is often at the lower end.
- How long does commercial mortgage approval take?
- Conventional deals commonly take four to eight weeks from complete package to funding. CMHC-insured files take longer; private and bridge financing can close in a couple of weeks.
- What is CMHC MLI Select?
- A CMHC insurance program for multi-residential properties that rewards affordability, energy efficiency, and accessibility commitments with higher leverage, longer amortization, and better pricing.
- Can I get a commercial mortgage through a private lender?
- Yes. Private capital funds quickly and is priced on the asset and the exit plan, which suits repositioning, construction, and time-sensitive purchases. It is typically a one- to two-year bridge.
- Do commercial mortgages have prepayment penalties?
- Most do, and they are often stricter than residential - yield maintenance or a locked closed period is common. Always check the prepayment terms before signing a commitment.