Commercial Mortgage in Canada: Loan-to-Value, Debt Service Coverage and What Lenders Require
A commercial mortgage is underwritten on the property’s income rather than yours. Expect 65% to 75% loan-to-value on a stabilised income property and a debt service coverage ratio of about 1.20 — meaning net operating income must exceed the mortgage payment by roughly 20%. Terms are shorter than residential, usually five years or less, and amortization runs 15 to 25 years. Multi-unit residential of five units or more is the exception: through CMHC’s MLI Select it reaches far higher leverage and far longer amortization than anything else in the market.
Apply nowWhere residential ends and commercial begins
The line is unit count and use, not price:
| Property | Treated as |
|---|---|
| 1–4 units, residential | Residential — see rental property mortgages |
| 5+ units, residential | Commercial multi-unit; MLI Select may apply |
| Mixed use (retail below, apartments above) | Commercial, weighted by the income split |
| Retail, office, industrial | Commercial |
| Raw land, serviced lots | Land lending — its own category and the most conservative |
| Construction and development | Draw financing against cost-to-complete, not value |
Crossing from four units to five changes the entire basis of the decision. A four-plex is assessed largely on you; a five-plex is assessed on the building’s net operating income, with your covenant as support.
The two numbers that decide it
Debt service coverage ratio is net operating income divided by annual debt service. At 1.20, a property producing $120,000 of NOI supports $100,000 of annual payments. Lenders set the minimum by asset class — tighter on single-tenant and specialised buildings, looser on well-located multi-unit residential.
Loan-to-value then caps the result independently. Even where coverage supports more, the advance is held to the class ceiling:
| Asset class | Typical LTV | Typical minimum DSCR |
|---|---|---|
| Multi-unit residential, 5+ units | Up to 75% conventional; higher insured | 1.10–1.20 |
| Industrial | 65–75% | 1.20–1.25 |
| Retail and office | 60–70% | 1.25+ |
| Special purpose | 50–65% | 1.30+ |
| Land | 50% or less | Not applicable — no income |
Note which number binds. On a strong multi-unit building LTV usually binds; on a thin-margin retail strip, coverage does. Knowing which one is limiting your file tells you whether more equity or more income is the fix.
MLI Select, and why multi-unit is its own market
CMHC’s MLI Select prices insured financing for five-plus-unit residential against three things: affordability of the rents, energy efficiency, and accessibility. Commit to more of each and the programme returns higher leverage and longer amortization than any conventional commercial lender will offer — which is why purpose-built rental economics in Canada are effectively set by this programme rather than by the banks.
It is also slow and document-heavy, and the commitments are binding for the life of the loan. The decision is usually whether the cheaper, longer money is worth the constraint and the timeline.
Lendmax sets out the MLI Select point structure and what qualifying requires.
Construction, land and the bridge in between
Construction lending is not valued the way a standing building is. It advances in draws against cost-to-complete, inspected at each stage, with holdbacks for lien periods. Lenders look at the budget, the pro forma, the builder’s track record and the exit — sale or a take-out mortgage on completion.
Land is the hardest category: no income, so no coverage ratio, and lenders price for the risk that a zoning or servicing assumption does not arrive. Expect 50% or less and a clear planning path.
Between completion and the take-out, bridge financing covers the gap. Private and MIC capital does most of this work because it can close in days and will take the interim position.
- Lendmax: commercial mortgages
- Lendmax: development mortgages
- Lendmax: land mortgages
- Lendmax: bridge loans
- Lendmax Capital: lending programs
Lendmax Capital MIC is under common ownership with Lendmax Inc., which owns RateShop.ca. It is one of the lenders in our directory.
What a lender will ask for
Commercial applications are property submissions, not personal ones. A complete package is the difference between a two-week answer and a two-month one:
- Rent roll, and the leases behind it.
- Two to three years of operating statements, plus a current-year pro forma.
- Personal and corporate financial statements, and a net worth statement for the covenant.
- Environmental assessment — Phase I at minimum on anything industrial or with a commercial history.
- A commercial appraisal, instructed by the lender rather than by you.
- For construction: budget, schedule, drawings, permits, and the builder’s record.
Model the cash flow first with the rental property calculator, and see private mortgages for the interim-financing side.
Common questions
What loan-to-value can I get on a commercial mortgage in Canada?
Typically 65% to 75% on a stabilised income property, 60% to 70% on retail and office, 50% to 65% on special purpose, and 50% or less on raw land. Insured multi-unit residential through CMHC reaches considerably higher.
What debt service coverage ratio do commercial lenders require?
About 1.20 as a general floor, meaning net operating income exceeds annual debt service by roughly 20%. Multi-unit residential can go to 1.10, while retail, office and special-purpose assets are commonly held to 1.25 or 1.30.
Is a 5-unit building a commercial mortgage?
Yes. One to four units is financed residentially; five or more is commercial multi-unit, underwritten on the building’s net operating income and potentially eligible for CMHC MLI Select.
What is CMHC MLI Select?
An insured financing programme for five-plus-unit residential that awards points for rent affordability, energy efficiency and accessibility. More points return higher leverage and longer amortization than conventional commercial lending, in exchange for binding commitments for the life of the loan.
How long are commercial mortgage terms?
Usually five years or less, with amortization of 15 to 25 years. Insured multi-unit is the exception and runs considerably longer. Construction financing is shorter still and advances in inspected draws rather than one lump sum.
MLI Select programme structure and insured multi-unit parameters: CMHC. Loan-to-value and coverage ranges are lender policy by asset class, confirmed per file rather than set by regulation. They move with the credit cycle. Verified 4 November 2026.
Have a commercial file to price?
When you are ready to do something with these numbers, we will introduce you to a licensed broker who can put the file in front of lenders. Nothing here obliges you to.
