How Commercial Mortgages Workin Western Canada
At Max Capital Financial, we structure commercial mortgages across Alberta and British Columbia every day — from quick-close private commercial deals to CMHC MLI Select multifamily files. This guide walks through exactly what lenders look at, how the math works, and how to position your file to get the best terms available.
What is a commercial mortgage?
A commercial mortgage is a loan secured against income-producing or business-use real estate — office buildings, retail plazas, industrial bays, multifamily apartments (typically 5+ units), hotels, self-storage, and mixed-use properties. Unlike a residential mortgage, where the lender’s primary concern is the borrower’s personal income, commercial lenders underwrite the property first.
Loan-to-Value (LTV): how much you can borrow
Debt Service Coverage Ratio (DSCR): the cash-flow test
Most Canadian commercial lenders want a DSCR of 1.20× to 1.35× on conventional deals. CMHC-insured multifamily can go as low as 1.10× to 1.20× depending on the program. Private lenders are more flexible — some will fund deals at 1.00× or even on a stabilization basis if the exit makes sense.
Practical example: an Edmonton retail plaza generating $300,000 NOI with a $240,000 annual mortgage payment has a DSCR of 1.25× — comfortably bankable. If the same plaza loses an anchor tenant and NOI drops to $260,000, the DSCR falls to 1.08× and most conventional lenders walk away. That’s where private commercial financing or a structured bridge typically steps in.
Amortization: 25 years is the new normal
- Multifamily: 25 – 30 years conventional, up to 50 years with CMHC MLI Select
- Office, retail, industrial: 20 – 25 years
- Older properties (40+ years): often capped at 20 years
- Special-purpose assets: 15 – 20 years
The longer the amortization, the lower the monthly payment, and the easier it is to hit DSCR. That’s why CMHC MLI Select — which can stretch multifamily amortizations to 50 years — is such a powerful tool. A 50-year amortization can dramatically improve cash flow and unlock significantly higher leverage on the same NOI.
Term vs. amortization: don't confuse the two
The term is how long the rate is locked in (typically 1, 3, 5, 7, or 10 years). The amortization is the period over which the loan would fully repay. At the end of the term, you renew, refinance, or pay off the balance. Most commercial borrowers run a 5-year term against a 25-year amortization, then refinance at maturity.
Commercial mortgage rates in Western Canada
- CMHC-insured multifamily: bond + 80 – 130 bps
- Conventional commercial (A-class, low leverage): bond + 150 – 220 bps
- Conventional commercial (typical): bond + 200 – 300 bps
- Private commercial: 8% – 12%+ depending on LTV, term, and exit
What lenders want to see in your file
The cleaner the package, the faster the approval. Files that arrive disorganized commonly add 4 – 8 weeks to closing. We help our clients structure files at Max Capital specifically to avoid those delays.
Sponsor strength: net worth and liquidity
Conventional commercial lenders typically want to see borrower net worth equal to or greater than the loan amount, and post-closing liquidity of at least 10% of the loan. Experienced sponsors with a strong track record in the asset class get materially better terms. If your file is light on either, structuring options like co-sponsorship, vendor take-back, or private financing with a refinance plan can keep the deal moving.
Recourse vs. non-recourse
Most commercial mortgages in Canada are full recourse — the borrower (and often personal guarantors) are on the hook beyond the property itself. CMHC-insured loans and certain large institutional deals can be non-recourse or limited-recourse, with carve-outs for fraud, environmental damage, and bankruptcy. Recourse status materially affects rate, leverage, and sponsor liability — always confirm before signing a commitment.
Construction and bridge financing
If you’re building, repositioning, or buying a value-add property, you likely need an interim structure before a take-out commercial mortgage. Our commercial construction financing page covers draw schedules, lender holdbacks, and how to plan the take-out. For quick-close acquisitions or re-leasing scenarios, private commercial bridge loans typically fund in 2 – 4 weeks.
Refinancing to unlock equity
Once a property is stabilized — leases signed, NOI proven over 12 months — refinancing into a conventional or CMHC-insured mortgage is often the single most accretive move an owner can make. Lower rate, longer amortization, and equity take-out all in one transaction. Our commercial mortgage refinancing page walks through how we structure refis to maximize proceeds without breaking covenants.
Western Canada market notes
How Max Capital structures your commercial mortgage
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