Down Payment for Commercial Mortgage in Canada: How Much Do I Need?
- Cornell Haynes
- 6 days ago
- 4 min read
If you are looking to purchase or refinance a commercial property in Canada, one of the first questions you will face is: how much do I need for a down payment? Unlike residential mortgages - where a buyer could put down as little as 5% with a prime lender - commercial mortgages typically require 25% to 35% of the property value as an initial down payment. Understanding why, and how to plan for it, can save you time, money, and surprises at closing.
Why Are Commercial Mortgage Down Payments Higher Than Residential?
The answer comes down to lender risk. With most residential properties, lenders can obtain mortgage default insurance through CMHC, Sagen or Canada Guaranty, which protects them if a borrower defaults. For commercial properties - with the exception of multifamily residential (5+ units) - no such insurance exists. Lenders offset this uninsured risk by requiring Investors to contribute more equity upfront, typically 25% to 35% of the property's value or appraised value.
CMHC-Insured Multifamily: A Lower Down Payment Option
Multifamily commercial properties are the one exception. CMHC offers mortgage loan insurance for these asset types, which significantly reduces the risk to the lender and in return lenders are able to accept a lower down payment.
Standard CMHC Insurance for Multifamily Properties
Under CMHC's standard loan insurance program, Investors may qualify with a down payment as low as 15% to 20% of the property value or loan to cost on a construction project. CMHC-insured loans offer the advantage of amortization periods up to 40 years, reducing the monthly debt service payments.
MLI Select Insurance for Multifamily Properties
CMHC's MLI Select program can, in theory, allow down payments as low as 5% (up to 95% loan-to-value or loan-to-costs). However, qualifying at that leverage is uncommon. The property must still meet a minimum debt service coverage ratio (DSCR) of 1.10x - meaning the property's net operating income (NOI) must cover at least 110% of the annual principal and interest payments or debt service payments. In addition, MLI Select requires the project to meet social outcome thresholds in one or more of the following areas: affordability, energy efficiency, or accessibility. As of 2025, CMHC has also introduced rental achievement holdbacks that may require 25% equity before the first construction advance on higher-risk files. This did not even cover the Investor's network requirement or the minimum management experience required from the Investor or property manager. In short, it is not easy to qualify for this type of attractive financing.
Want the full scoop on MLI Select? Check out the CMHC website.
Common Down Payment Requirements by Commercial Property Type
For conventional (uninsured) commercial mortgages in Canada, here are typical loan-to-value maximum guidelines:
Property Type | Typical Max LTV | Minimum Down Payment |
Owner-occupied (retail, office, industrial) | 65% – 80% | 20% – 35% |
Retail | 65% – 75% | 25% – 35% |
Industrial | 65% – 75% | 25% – 35% |
Multifamily (CMHC-insured) | Up to 85% – 95% | 5% – 15% |
Multifamily (Conventional) | Up to 80% | 20%+ |
Hotel or special purpose | 50% – 70% | 30% – 50% |
Office (urban) | 50% – 65% | 35% – 50% |
Office (suburban) | 40% – 60% | 40% – 60% |
Let us assume that an Investor is purchasing a commercial property with a value of $10,000,000. The Investor should expect to provide between $2,500,000 and $3,500,000 as a down payment a typical commercial mortgage.
Closing Costs Beyond the Down Payment -
Every Commercial Mortgage is Expensive (E.C.M.E)
Down payment aside, it is good practice to budget an additional 5% to 7.5% of the purchase price for closing and transaction costs, including, but not limited to:
Legal fees;
Land transfer tax;
HST (where applicable);
Brokerage and lender fees;
Environmental site assessments (ESA I and if required ESA II and ESA III);
Building condition reports;
Appraisal reports;
Consulting and advisory fees;
Renovation budget or multifamily suite-turn reserves; and
Due diligence costs.
What initially appears as a down payment from $2,500,000 to $3,500,000 on a $10,000,000 property can quickly turn a total closing cash requirement from $3,000,000 to $4,250,000 for a commercial property. Planning for these costs upfront avoids last-minute scrambling and protects your deal.
Working with an Experienced Commercial Mortgage Broker in Ontario
The above mentioned is not meant to discourage you from buying commercial real estate - it is meant to prepare you. At Cornell Mortgages, our team has years of experience helping Investors and Business Owners across Ontario navigate the complexities of commercial real estate financing.
Whether you are purchasing your first commercial property, refinancing an existing asset, or underwriting a multifamily deal and need a second set of eyes on your financial modelling, we are here to help you from start to finish. A seasoned mortgage agent like Cornell with 13+ years in institutional real estate investment is here for you.
Book a meeting with Cornell Mortgages today to discuss your commercial mortgage needs.
Cornell K. Haynes, Mortgage Agent Level 2 is a mortgage agent specializing in commercial mortgages in Toronto; commercial mortgages in Hamilton; commercial mortgages in Southwestern Ontario (Guelph, Kitchener, Waterloo, Cambridge, London, St. Thomas, Windsor and everywhere in between). Cornell operates everywhere in Ontario, even doing commercial mortgages in Barrie and commercial mortgages in Ottawa.
Cornell K. Haynes
Mortgage Agent, Level 2
Licensed with
Ncompass Financial Inc. under RDM Financial Consultants,
Lic No. 10716
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