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6 Things You Need to Know When Applying for a Commercial Mortgage

Whether you’re looking to purchase a commercial property or you want to leverage equity from a property you already own, a commercial mortgage is likely something you’ll need.

There are some differences between a residential and commercial mortgage that every borrower should know about before they complete an application.

Read on to learn more about this type of mortgage and what you need to do when you apply in order to get a smooth approval.

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1. A Commercial Mortgage May Take Longer to be Approved

The average residential property mortgage can take anywhere from a few weeks  to close. On the other hand, a commercial mortgage can take much longer when it comes to the final approval timeline. Whether you are purchasing or refinancing a multi-family unit, commercial income producing properties or even an industrial unit the process can take some time.

Generally speaking the delays stem from having a commercial real estate appraisal done. This process can take several weeks in some instances even months. It all depends on the nature and size of the property.

The length of time it takes to get approved can depend on a wide range of factors. As a rule, customized commercial mortgages are more complex than traditional residential mortgages.

2. Expect to Invest Some Money Upfront

The average homeowner generally only needs to apply 5% as a downpayment to purchase a home.  On the other hand, commercial financing may require a borrower to come up with anywhere from 35%-50% as a downpayment. By the same token, when refinancing or taking out an equity loan on a commercial property you will have to have sufficient equity.

Above all, commercial mortgage lenders expect buyers to invest some of their own cash flow when they seek commercial financing. This amount can vary, but it’s important to note that you will be expected to make a decent down payment or have sufficient equity left when refinancing.

3. Credit Matters

For a commercial property mortgage, lenders look at the health of your business. And,  they’ll also often want to see your personal credit score. If you’re a business owner who has bad credit, you will want to work with an experienced mortgage broker. Commercial mortgage brokerages can provide more options than just the big banks.

Be that as it may, your credit doesn’t have to be stellar, but you are likely wasting your time if you are considering applying with the big banks. Working with an experienced commercial mortgage broker can save a lot of time and money.

In other words, if you plan on purchasing or refinancing a commercial property, it pays to have experience on your side.  The commercial brokers at Turnedaway.ca have 30 years experience and can arrange commercial mortgages on just about any type of property. And, there are virtually no caps on the mortgage amounts we approve. We routinely finance:

  • Office space
  • Industrial Units
  • Multifamily properties
  • Retail Space
  • Hotels & Hospitality
  • Mixed Use
  • Land
  • Special Purpose, such as Gas Stations

As a matter of fact, Turnedaway.ca is one of the top Canadian Mortgage Brokerages when it comes to Commercial Mortgage Financing.

4. Choose Your Property Wisely

As you search for the perfect property for your business, make sure it follows the current regulations for use and zoning. Depending on where you’re located, laws can dictate which property can be used for business and for what specific purpose.

Whether it’s part of a strip mall or a private office building, your lender will perform an appraisal.  In fact, the appraisal process is similar to the ones you receive before buying or refinancing a home. That being said, they are much more comprehensive.  These appraisals show a property’s current market value, allowing a lender to determine how much they are prepared to lend.

Again, commercial mortgage loans can require borrowers to put down anywhere from 25-percent to as high as 50-percent of the value as a downpayment. Likewise, when borrowing against a commercial property you already own, you must have a sufficient amount of equity to be approved.

5. Get Ready to Prep Your Documentation

Aside from your personal and business credit reports, lenders may also need some other information before they can process a commercial mortgage. Again, an experienced broker can walk you through the process and help you gather your information.  This will help speed up the process to help you get approved quickly.

Moreover, a solid business plan that shows how you propose to use the property is important. Other documents may include proof of any business partners, your certification, and any licenses related to the business.

6. Consider Alternate Lenders or Loans

If you have bad credit or you’re concerned about being denied, there are other alternatives to the standard commercial bank loan. Turnedaway.ca specializes in finding alternative commercial mortgage loans.

Indeed, getting approved for a commercial mortgage is getting more difficult than ever before. That’s why many individuals and businesses are turning to other ways to get the financing they need for their property.

Start Your Journey Today

Regardless of the circumstance, with a bit of planning, you should be able to find the right commercial mortgage for your needs.

Whether you are looking to purchase, refinance or leverage equity from a commercial property, Turnedaway.ca can help.  We’ve been doing this for over 30 years and we make difficult financing look easy. Give us a call for a toll-free consultation at 1-855-668-3074 or Apply Online.

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