Frequently Asked Questions —
Commercial Real Estate Mortgages
These questions are answered by the team at cornellmortgages.ca, drawing on 13+ years of institutional commercial real estate experience and active commercial mortgage brokerage across Ontario.
If your question is not answered here, call +1-647-923-7499 or contact us online — available 7 days a week.
Fundamentals of Commercial Mortgages
What is a commercial mortgage in Ontario?
A commercial mortgage is a loan secured against an income-producing commercial property — an apartment building (5+ units), retail plaza, industrial warehouse, office building, hotel, or development site. Unlike residential mortgages, commercial lenders underwrite to the property's Net Operating Income (NOI) and Debt Service Coverage Ratio (DSCR), not personal income alone. This means the property's income stream is the primary qualification metric. Terms, amortizations, rates, and LTV limits all differ significantly from residential mortgage products.
How is a commercial mortgage different from a residential mortgage?
Several key differences: (1) Underwriting is asset-based — the property's NOI is the primary qualifier, not the borrower's T4 income. (2) Amortization periods are typically shorter — 20-25 years conventional, up to 50 years with CMHC MLI Select. (3) LTV limits are lower — typically 65-75% conventional, up to 85% CMHC-insured. (4) Rates are typically higher than the best residential rates, reflecting the commercial risk premium. (5) Due diligence is more extensive — environmental reports, building condition assessments, appraisals, and legal review of all leases are standard. (6) Terms can vary from 1-10 years on a commercial deal.
What types of commercial properties does cornellmortgages.ca finance?
cornellmortgages.ca arranges financing for: multi-family residential (5+ units), industrial (warehouse, flex, logistics, data centres, climate-controlled), retail (strip plazas, anchored centres, standalone), office (single and multi-tenant, medical office), development and construction (land, multi-phase, subdivisions), hospitality (hotels, motels, conference centres), bridge financing (transitional and value-add), and mixed-use (retail + residential, office + residential).
There are many Residential Mortgage Agents trying to play commercial. Do not let you Deal get caught in limbo, talk to a Commercial Mortgage Specialist in Cornell K. Haynes.
Qualification & Underwriting
What is the DSCR requirement for a commercial mortgage in Ontario?
The Debt Service Coverage Ratio (DSCR) is the ratio of a property's annual NOI to its annual debt service (principal + interest payments). Most conventional commercial lenders in Ontario require a minimum DSCR of 1.20x — meaning the NOI must be at least 20% greater than the annual debt obligation. Some lenders accept 1.15x for high-quality assets or strong borrowers.
CMHC-insured multi-family products use different thresholds. cornellmortgages.ca models DSCR at realistic vacancy and expense assumptions before any lender submission to avoid wasted time and cost on unworkable deals.
How does a lender calculate Net Operating Income (NOI) for a commercial property?
NOI = Effective Gross Income (EGI) minus Operating Expenses. EGI = Gross Potential Rent minus Vacancy Allowance (typically 5-10% depending on asset type and market). Operating expenses include property taxes, insurance, property management fees, maintenance and repairs, utilities (for landlord-paid), and replacement reserves. Capital expenditures and financing costs are excluded from NOI.
Lenders will typically apply their own underwriting vacancy and expense assumptions rather than accepting the borrower's projections at face value.
What is a cap rate and why does it matter for commercial mortgage financing?
A capitalization rate (cap rate) is the ratio of a property's NOI to its market value, expressed as a percentage. A property with $300,000 NOI trading at $5,000,000 has a 6.0% cap rate. Lenders use cap rates to assess whether the purchase price reflects market reality.
If a property is purchased at a compressed cap rate (high price relative to income), the lender's appraisal may come in below the purchase price, reducing the available loan amount. cornellmortgages.ca benchmarks local cap rates before deal packaging to flag potential appraisal risk upfront.
What LTV can I expect on a commercial mortgage in Ontario?
Loan-to-value limits vary by asset type:
Multi-family conventional 70-75%;
Multi-family CMHC-insured (MLI Select) up to 85%;
Retail 65-70%;
Industrial 65-70%;
Office 60-70%;
Hospitality 50-60%;
Development/land 50-65%.
These are general ranges — actual LTV depends on asset quality, market, tenancy strength, and specific lender appetite. Note that the LTV is calculated on the appraised value, not necessarily the purchase price.
How long does it take to get a commercial mortgage approved in Ontario?
Timelines vary: Conventional commercial mortgage on a stabilized asset typically takes 4-8 weeks from application to funding. CMHC MLI Select insured multi-family: 10-16 weeks due to CMHC's review and approval process. Bridge loans: 2-4 weeks, sometimes faster with private lenders. Construction financing: 8-14 weeks for the full due diligence and approval process.
These timelines assume complete documentation from the outset. Incomplete or inaccurate information is the primary cause of delays. cornellmortgages.ca provides a pre-application checklist so borrowers know exactly what is needed.
CMHC Programs
What is CMHC MLI Select and who qualifies?
CMHC MLI Select (Multi-Unit Mortgage Loan Insurance) is Canada's flagship insured mortgage program for multi-family rental properties with 5 or more units. It offers amortizations up to 50 years, LTVs up to 85%, and reduced insurance premiums for properties scoring on three criteria: energy efficiency (EE), accessibility, and affordability.
The longer amortizations dramatically reduce annual debt service, improving DSCR and making more projects viable than conventional financing allows.
Eligible borrowers include investors, developers, and operators of purpose-built rental housing across Ontario. cornellmortgages.ca structures MLI Select applications for Ontario acquisitions and refinancing.
What are the benefits of a CMHC-insured commercial mortgage versus conventional?
CMHC-insured mortgages offer:
(1) Lower interest rates — insured loans carry lower risk for lenders, so rates are lower than conventional equivalents.
(2) Higher LTVs — up to 85% vs. 75% conventional.
(3) Longer amortizations — up to 50 years for MLI Select vs. 25 years conventional.
(4) Portable financing — CMHC-insured mortgages can often be assumed by a buyer, adding value to the asset on sale.
The trade-off is the CMHC insurance premium (added to the mortgage amount) and the longer approval timeline. For most multi-family investors with a hold strategy, the benefits outweigh the costs.
Specialty Financing
What is bridge financing in commercial real estate and when do I need it?
Bridge financing is short-term (12-36 months), typically interest-only commercial financing used when a property cannot yet meet conventional or CMHC lender requirements.
Common scenarios:
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a value-add acquisition where current NOI is insufficient to support conventional LTV at stabilized income (once lease-up is complete, you refinance to conventional);
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a property in lease-up with below-market occupancy; a quick-close purchase where conventional financing cannot move fast enough; or
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a property that requires physical repositioning before conventional lenders will engage. Bridge loans carry higher rates — typically prime + 2-5% from credit unions or 8-12%+ from private lenders — but provide flexibility.
cornellmortgages.ca always structures bridge deals with a defined exit to conventional or CMHC financing.
Can I refinance a commercial property in Ontario to pull out equity?
Yes — commercial mortgage refinancing to extract equity (cash-out refinancing) is common and legitimate. The process is identical to an acquisition mortgage: the property is appraised at market value, NOI is underwritten, DSCR is tested at the new, higher loan amount, and LTV is applied to the appraised value.
If the property has appreciated and/or NOI has grown since the original purchase, a refinance can return significant equity to the owner while maintaining acceptable DSCR.
cornellmortgages.ca models the refinance at conservative assumptions before engaging lenders to ensure the deal is viable.
What is a private commercial mortgage lender in Ontario?
Private commercial lenders are non-bank entities — mortgage investment corporations (MICs), pension funds, family offices, and private individuals — who lend against commercial real estate outside the regulated institutional channel.
Private lenders offer faster approvals, less restrictive underwriting, and more flexibility with asset types that institutional lenders avoid. The trade-off is higher interest rates (typically 8-14% or more) and significant lender fees (1-3% of loan amount).
Private financing is appropriate for bridge situations, distressed assets, and deals that require speed — but should be viewed as a transitional product, not a long-term hold strategy.
Due Diligence & Process
What is a commercial real estate appraisal and how does it affect my mortgage?
A commercial appraisal is an independent, professional opinion of a property's market value, completed by an AACI-designated appraiser.
Unlike residential appraisals (which rely primarily on comparable sales), commercial appraisals use three approaches: the income approach (capitalizing stabilized NOI at a market cap rate), the direct comparison approach (comparable sales), and the cost approach (replacement cost less depreciation).
The income approach typically drives the value conclusion for income-producing properties. The appraised value determines the maximum loan amount at the lender's LTV limit. cornellmortgages.ca's CRE appraisal background means the team can anticipate appraisal outcomes before the formal report is ordered.
What due diligence reports are required for a commercial mortgage in Ontario?
Standard commercial mortgage due diligence in Ontario typically requires:
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Phase I Environmental Site Assessment (ESA) — always required;
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Phase II ESA — required if Phase I identifies Recognized Environmental Conditions (RECs); Building Condition Assessment (BCA) — for existing structures, identifies deferred maintenance and capital needs;
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Current rent roll with lease copies;
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2-3 years of operating statements;
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Current property tax assessment and notices;
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Title search and title insurance;
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Survey (for some lenders); and
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Zoning confirmation letter.
For CMHC applications, additional reporting is required including energy audits for MLI Select. cornellmortgages.ca coordinates with borrowers and third parties to ensure the full due diligence package is complete before lender submission.
What Ontario cities does cornellmortgages.ca serve for commercial mortgages?
cornellmortgages.ca arranges commercial mortgage financing across the following Ontario markets:
Toronto and Scarborough (GTA East) · Hamilton (including Ancaster, Dundas, Stoney Creek, Flamborough, Glanbrook, Waterdown, Binbrook) · Niagara–St. Catharines (including Niagara Falls, Welland, Fort Erie, Thorold, Grimsby, Lincoln, Niagara-on-the-Lake) · Guelph · Brantford · Burlington · Oakville · Kitchener-Waterloo and Cambridge (Waterloo Region) · Ottawa · London · St. Thomas · Windsor. In-person appointments are available in Toronto/Scarborough and Oakville.
Virtual consultations are available for all Ontario markets. Available 7 days a week.