Commercial and multi-unit lending

Alright, now we start to venture into the world ofcommercial and multi-unit lending. Most banks don’t have the staff tospecialize in each hence often times they combine both types of lending even ifthey are completely different mortgage creatures. Simply put, commerciallending refers to a property whereby 100% or the majority of revenues, i.e.rents, derived are commercial tenants such a storefront, restaurant, and/oroffices. On the other hand, multi-unit typically refers to properties that are100% residential and consist of 5 doors and up. Some mixed residential-commercial properties are still consideredresidential multi-unit but depends on the bank. When in doubt ask, as amulti-unit residential rate is lower versus a commercial mortgage.  

If you are looking to acquire your first multi-unit propertythen there are a couple points to keep in mind. First, banks typically areinterested to see that the property can financially support itself from day onehence they will finance up to a certain portion and you as the buyer will beresponsible for the rest. For example, a multi-unit property by law requires aminimum of 15% down payment but if the bank or Canadian Mortgage and Housing Corporation (CMHC) feels the propertyis over-priced then you may be required to put additional down payment.  In a recent purchase, my client was asked toput an additional 10% down on the property he eagerly wanted. In his case, hehad the extra down payment as we anticipated it.

Second, when purchasing a multi-unit or even commercialproperty for that matter such financing can take more time to receive financingthan a residential home. It’s a good idea to request at least 30 days forfinancing. Keep in mind that the bank needs time to review your information,review information about the subject property, you will need time for your owninspection, as well as the CMHC (in most cases) will need to perform theirevaluation. 

Finally, if your thinking of refinancing your commercial ormulti-unit property now is a great time as the banks are hungry for business. 

If you have any specific questions you’d like to discuss innext week’s article please feel free to email me.