FAQ
Commercial mortgage FAQ
The 16 questions British Columbia borrowers ask us most, answered plainly, with links to the full explanation where there is one.
Getting started
You do not have to use one, but on commercial files it usually changes the outcome. Every lender has a different appetite by asset type, location and borrower profile, and those appetites move. A broker knows which lenders are writing your kind of deal this month, packages the file the way each one wants to read it, and runs several conversations at once instead of one at a time. See why CCM for how we work.
Expect roughly 30 to 60 days from a complete package to funding on a conventional deal, and longer where CMHC insurance is involved. Term sheets often come back within a week. The delays are almost always third party reports and missing documents, which is why the package matters. Private and bridge financing can close far faster when speed is the priority. Our process page sets out the stages.
On most institutional deals the lender pays the broker, so there is no separate cost to you. On private, construction and complex files a broker fee is normal, and it is always agreed in writing before any work begins and disclosed the way BCFSA requires. You will never see a surprise fee at closing.
We generally work on files from 1 million dollars up, anywhere in British Columbia. Smaller commercial deals are possible but the lender pool narrows and the cost of the third party reports weighs more heavily on a small loan.
Qualifying
Debt service coverage ratio is net operating income divided by the annual mortgage payments. Most conventional commercial lenders want 1.20 to 1.25, meaning the property earns 20 to 25 percent more than the payments. Because the payment is capped by that ratio, the income test frequently sets the loan size before the leverage limit does. Read how DSCR sets your loan amount.
Plan on 25 percent on conventional multifamily, 25 to 35 percent on retail, office and industrial, and 40 to 50 percent on raw land. Insured multifamily programs can go far lower. The full breakdown by asset type is on the down payment page.
Yes, though less than on a residential mortgage. The property carries the loan, but lenders still review the personal credit of the guarantors for judgments, arrears and how existing debt has been handled. Bruised credit does not end a deal on its own; it moves it toward lenders who price for it. For the wider picture of what changes when a file becomes commercial, see commercial versus residential mortgages.
A common benchmark is net worth at least equal to the loan amount, with liquid funds covering the down payment, closing costs and a reserve after closing. Lenders want to know a shortfall can be absorbed without the property being sold. The requirements page covers this in detail.
Rates and costs
A commercial rate is a base cost of funds plus a spread for risk. Fixed rates track bond yields of matching term, floating rates track the prime rate, and the spread reflects asset type, leverage, coverage, term and borrower strength. Two identical buildings can price differently because of covenant and leverage alone. See commercial mortgage rates in BC.
CMHC insured multifamily debt prices well below conventional because the lender's loss risk is insured. You pay an insurance premium for that, and the property and the sponsor have to meet program rules. On qualifying apartment deals the interest saving over a long amortization usually outweighs the premium comfortably.
Beyond the down payment, budget for appraisal, environmental reports, legal fees on both sides, property transfer tax on a purchase, lender commitment or application fees, and a broker fee where one applies. On most purchases these land around 2 to 4 percent of the price, and lenders want to see cash for them remaining after closing.
They can be significant. Fixed rate commercial debt often carries an interest rate differential charge, and some commitments are closed entirely for the term or allow prepayment only with yield maintenance. Read the prepayment clause before you sign, not when you decide to sell. The term is defined in our glossary.
Process
Property documents such as the rent roll, leases, operating statements and the purchase contract, plus borrower documents including personal net worth statements, notices of assessment, corporate financials and identification. A short executive summary of the deal on top of that moves a file faster than anything else. The deal submission checklist lists everything.
The lender instructs both, from its own approved list, and you pay for them. An appraisal establishes the value the loan is measured against, and a Phase 1 environmental assessment is standard on industrial, older commercial and any site with a fuel or chemical history. A Phase 2 with sampling follows only if the Phase 1 raises a concern.
Construction financing is advanced in stages as work is completed rather than in one lump. A quantity surveyor inspects, the lender advances against verified cost to complete, and a builders lien holdback is retained from each draw. Your equity normally goes in first. Read how construction draws work.
Yes. You keep the client, we run the commercial work, and you are paid a referral fee at funding, agreed in writing beforehand. There is a written no solicitation commitment so all future residential business stays yours. Details are on the brokers page.
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