Commercial Mortgages in Ontario: A Borrower’s Guide
Commercial mortgage underwriting is driven by both the property and the borrower. This guide explains the core numbers, documents and decisions that typically shape a financing request in Ontario.
How commercial mortgage underwriting differs from residential lending
Commercial financing is usually evaluated as a business transaction. Lenders may review property income, operating expenses, debt-service coverage, leverage, tenancy, location, property condition, borrower experience, liquidity, net worth and the proposed business plan. The relative importance of each factor changes by lender and asset class.
The numbers lenders usually examine
Net operating income, debt-service coverage ratio, loan-to-value, debt yield, occupancy and lease maturity are common starting points. A property can have substantial value and still support less debt than expected if cash flow is weak. Conversely, strong income does not eliminate leverage, property-condition or borrower requirements.
Common commercial financing channels
Depending on the transaction, financing may come from chartered banks, credit unions, commercial mortgage lenders, CMHC-approved lenders, alternative lenders or private capital providers. Pricing, leverage, amortization, recourse, reporting and closing requirements can differ considerably.
Documents that can speed up an initial review
A useful package often includes the property address, purchase agreement or current value, rent roll, operating statement, existing mortgage details, requested loan amount, ownership structure, borrower background and target closing date. Construction and development transactions usually require additional budgets, plans, approvals and project information.
How to prepare before approaching lenders
Start by defining the financing objective: acquisition, refinance, construction, bridge, equity take-out or another purpose. Then organize the property financials, identify timing constraints and calculate a realistic range using the DSCR, LTV and mortgage-payment tools. A cleaner initial package generally makes lender feedback more useful.