A commercial building may be specifically designed and built for a specific business. For any home, there are many potential purchasers and many potential renters.Ĭommercial buildings are more specialized, and as a result, they are less liquid. This non-specificity reduces the lender’s and the borrower’s risk, as the house can always be sold to repay the mortgage. The collateral in homeowner mortgages is often non-specialized. The other main difference between homeowner and commercial mortgages is the collateral. So while the main factors determining if you qualify for a homeowner mortgage are your debt service ratios, the main factors determining if you qualify for a commercial mortgage are the debt service ratio (DSR) or debt coverage ratio (DCR) of your future property. In contrast, a lender extends a commercial mortgage based on the property's ability to generate free cash flow sufficient to service its debt. The first difference is that a lender extends a conventional mortgage based on the borrower's ability and willingness to repay his loan. There are two main differences between a conventional mortgage and a commercial mortgage. RBC considers buildings with six or fewer units eligible for a conventional mortgage, while those with seven or more units are considered for a commercial mortgage. Buildings with five or more units qualify for rental housing mortgage. CMHC considers any building with four or fewer units as a house which qualifies for a homeowner mortgage. The border between commercial and non-commercial is not universally defined in residential buildings. In summary, any real property other than houses is commercial real estate. Commercial property can be a warehouse, mall, office building, medical centre, retail store or multifamily residential. Property income generation, Borrower's financialsĪ commercial mortgage is a mortgage offered against the security of a commercial property. Standard homebuyers, Small real estate investors Large real estate investment corporations
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