Commercial Mortgages in Canada: Rates, Down Payments, DSCR & How to Qualify

Written by Radu Arvatescu August 05/2026

Whether you’re buying your first retail plaza, refinancing an apartment building, or purchasing office space through your corporation, commercial financing works very differently from a residential mortgage. This guide answers the questions we hear most from investors and business owners, from qualification to closing.

What Is a Commercial Mortgage?

A commercial mortgage is a loan secured against a property used for business or investment purposes rather than as a personal residence — think retail plazas, office buildings, industrial units, apartment buildings, and mixed-use properties.

How Does a Commercial Mortgage Work?

Unlike a residential mortgage, a commercial mortgage is underwritten primarily around the property’s ability to generate income, not just the borrower’s personal finances. Lenders look at the asset’s net operating income, the strength of any tenant leases, and the borrower’s (or corporation’s) overall financial position before setting the loan amount, rate, and amortization.

Commercial vs. Residential Mortgages: What’s the Difference?

Residential mortgages are standardized, often insured through CMHC, and priced mainly on the borrower’s personal credit and income. Commercial mortgages are individually underwritten, typically require a larger down payment since most commercial properties don’t qualify for mortgage default insurance, and are priced using property performance metrics like Debt Service Coverage Ratio alongside the borrower’s financials.

How Do I Qualify for a Commercial Mortgage?

How Much Down Payment Is Required?

Down payment requirements vary by property type and use:

• Owner-occupied commercial property: often 20%+
• Investment/income properties: typically 30% or more
• Special-use buildings (hotels, gas stations, etc.): often 35%+
• Multi-family properties (5+ units): as low as 15% under CMHC-insured programs, including MLI Select

For a full breakdown by property type, see MCI’s guide on how much of a down payment you need for a commercial mortgage in Canada.

What Credit Score and Income Do I Need?

Most lenders want to see a credit score in the high 600s or better, along with financials that support the loan — either personal income (for smaller owner-operated deals) or the property’s rental income (for investment deals). Self-employed borrowers and first-time commercial investors can absolutely qualify; lenders will simply lean more heavily on business financials, a solid down payment, and — for a first deal — sometimes a co-signer or additional collateral.

What Documents Will I Need?

Expect to provide financial statements, tax returns (personal and/or corporate), a rent roll or lease summaries if the property is tenanted, a property appraisal, and a business plan for owner-operated purchases. Our guide on commercial mortgage business plans covers what lenders expect to see.

What Are Commercial Mortgage Rates Today?

Commercial mortgage rates in Canada move independently of residential rates because they’re priced off different benchmarks. Fixed commercial rates typically track Government of Canada bond yields, while variable rates move with the Bank of Canada’s overnight rate and prime rate. CMHC-insured multi-family deals tend to land at the lower end of the range, while conventional, uninsured commercial loans price higher to reflect the added lender risk.

How Do I Get the Lowest Commercial Mortgage Rate?

The rate you’re offered depends on the property type, loan-to-value, the strength of the income (DSCR), and how the deal is structured. Working with a commercial mortgage broker who can shop multiple lenders — rather than relying on a single bank’s in-house rate — is typically the fastest way to find the most competitive offer. See MCI’s current commercial mortgage rates for a sense of where pricing sits today.

What Types of Commercial Properties Can Be Financed?

Nearly every commercial asset class can be financed, though terms vary by property type:

• Retail plazas and retail outlets
• Office buildings and medical or lawyers’ offices
• Industrial and warehouse properties
• Mixed-use buildings (residential + commercial)
• Multi-family apartment buildings
• Hotels and special-purpose properties
• Vacant commercial land and construction projects

Lenders assess each property type differently — a leased office building is evaluated on tenant covenants and lease terms, while vacant land financing hinges more on the borrower’s development plan and equity contribution. Browse MCI’s property-specific guides, including multi-family homes, industrial properties, land, and hotels.

How Do Lenders Evaluate Investment Properties?

What Is DSCR?

The Debt Service Coverage Ratio (DSCR) measures whether a property’s income comfortably covers its mortgage payments. It’s calculated by dividing net operating income by total debt service (principal plus interest). Most commercial lenders in Canada look for a DSCR of around 1.20–1.25 or higher, meaning the property earns at least 20–25% more than what’s owed on the loan each year (Corporate Finance Institute).

What Cap Rate and Cash Flow Should I Look For?

Cap rate expectations vary widely by city, asset class, and market conditions, so it’s worth comparing a property against similar recent sales rather than a fixed benchmark. What matters most to a lender is that the property cash flows after all expenses and debt payments — with enough of a cushion to absorb a rate increase or a vacancy.

Can I Get a Commercial Mortgage Through My Corporation?

Yes — many commercial mortgages are held in a corporation for liability and tax reasons. Lenders will typically require corporate financial statements and, in many cases, a personal guarantee from the principal(s), especially for newer corporations without an established financial track record.

The Commercial Mortgage Process: Approval, Appraisal, and Closing

How Long Does Approval Take?

Commercial mortgage approval generally takes longer than residential — often a few weeks to a couple of months — since it involves a property appraisal, environmental review (for certain property types), and a more detailed underwriting process.

What Are Closing Costs, and Are There Penalties for Paying Early?

Closing costs for commercial deals typically include appraisal fees, legal fees, lender fees, and — where applicable — CMHC premiums. Most commercial mortgages carry prepayment penalties if paid off before maturity, so it’s worth reviewing the penalty structure before signing.

Can I Refinance or Renew My Commercial Mortgage?

Yes, both are common. Refinancing lets you pull out equity, consolidate debt, or secure a better rate before your term ends (usually subject to a penalty), while renewal — like with residential mortgages — happens at maturity and is a good opportunity to renegotiate terms or shop the market.

Should I Use a Bank or a Commercial Mortgage Broker?

Banks can offer competitive rates for straightforward, well-qualified deals, but a commercial mortgage broker typically has access to a wider range of lenders — including alternative and private lenders — which matters most for complex deals, first-time investors, or properties that don’t fit a bank’s standard box. For financing options tailored to your business, explore commercial investment properties financing or Business Development Bank of Canada (BDC) commercial real estate loans as a comparison point.

Bottom Line

Commercial mortgages hinge on the strength of the property and the deal structure as much as the borrower’s own financials. Whether you’re financing your first small retail unit or a multi-family portfolio, working with a broker who understands DSCR, lender appetite, and property-specific requirements will save you time — and often money — on the way to closing.