A guide inside every deal.

• Schedule I banks

  Large lenders that value the whole relationship. Often suited to stabilized properties and borrowers who bank with them; personal guarantees are common.

• Credit unions and caisses

  Regional, cooperative lenders with local knowledge. Often suited to local owners, smaller loans and properties the lender knows well.

• Life insurance companies

  Long-term, conservative lenders. Often suited to high-quality, stabilized assets, longer fixed terms and lower leverage, sometimes with limited recourse.

• Trust and mortgage companies

  Often more flexible than banks on asset type, location or story, usually at a higher rate. Many are approved lenders for CMHC-insured loans.

• MICs and private lenders

  Short-term, higher-cost capital for bridge, construction, land or files that don’t fit elsewhere yet. Speed and flexibility over price.

• CMHC-insured lending

  CMHC does not lend: an approved lender makes the loan and CMHC insures it. For residential rental properties of five or more units, often with the lowest rates and longest amortization, in exchange for an insurance premium.

• Conventional

  The lender carries the risk itself. Criteria vary by lender; leverage is usually lower and amortization shorter than insured loans. Works for any asset type.

• CMHC Standard Rental

  CMHC-insured financing for multi-unit residential rental properties. The insurance lets approved lenders offer more leverage, longer amortization and lower rates than conventional, in exchange for a premium and CMHC’s own review.

• MLI Select

  A CMHC-insured program that scores the project in points. More points can unlock higher leverage and longer amortization, and a lower premium.

  • AffordabilitySome units rented below a set level.
  • Energy efficiencyBetter energy performance than a baseline.
  • AccessibilityUnits or common areas designed for accessibility.

CMHC, MLI Select and Standard Rental are programs of Canada Mortgage and Housing Corporation (CMHC). Levercomm is not affiliated with CMHC, and CMHC does not endorse it.

A lender works out the largest payment the NOI can carry at its minimum DSCR, turns that payment into a loan amount, then compares it with its maximum LTV on the value. The lower of the two is the loan.

• NOIRents and other income, minus operating costs, before the mortgage.
• DSCRNOI divided by the yearly loan payments.
• LTVThe loan as a share of the property’s value.
• Debt yieldNOI as a percentage of the loan.
• Cap rateNOI divided by the value.

• Fixed rates

  Often priced off the Government of Canada bond yield for a similar term, plus a spread that reflects the lender, the program and the risk. Insured loans usually get the tightest spreads.

• Variable rates

  Usually float off the lender’s prime rate, plus or minus a margin.

• Term and amortization

  The term is how long the rate and conditions hold, often five or ten years. The amortization is how long full repayment would take. At the end of the term, the balance is renewed or refinanced.

• Prepayment

  Fixed-rate commercial loans are often closed, or prepayable only with a penalty such as yield maintenance. Variable loans usually carry a smaller penalty. Read it before signing.

• Recourse

  Full recourse lets the lender pursue the guarantors beyond the property; limited or non-recourse caps that. Banks and credit unions often ask for guarantees; insured and life-company loans more often offer limited recourse.

1. 01Intake and documents

   Operating statements (T12), the rent roll, a signed net worth statement and your mandate.

2. 02Teaser and NDA

   A short teaser goes to matched lenders; interested lenders sign an NDA before they see the full package.

3. 03Term sheet

   Lenders reply with non-binding term sheets: rate, term, amortization, fees and conditions.

4. 04Commitment letter

   The chosen lender issues a commitment letter, binding once accepted, with conditions to clear.

5. 05Due diligence

   Appraisal, environmental Phase I, building condition assessment, and the CMHC application when the loan is insured.

6. 06Funding

   Conditions cleared, documents signed, and the loan is funded through the lawyers, or the notary in Québec.

7. 07Renewal

   Before the term ends, renew with the lender or refinance elsewhere. Start early.

• Low DSCR

  The fixSize the loan down, add equity, or look at a longer amortization or an insured program.

  Caught early byAnalyze · Rating factors and loan sizing

• Thin sponsor liquidity or net worth

  The fixAdd a guarantor or a partner, and document liquid assets.

  Caught early byCollect · signed net worth statement; Rating factors

• Missing or stale T12 or rent roll

  The fixSend current operating statements and a current, certified rent roll.

  Caught early byCollect · intake checklist

• Environmental or building condition issues

  The fixOrder the Phase I and the building condition assessment early, and budget the repairs.

  Caught early byCollect · intake checklist

• An unrealistic LTV ask

  The fixRight-size the request to the value and the program.

  Caught early byAnalyze · loan sizing, maximum by LTV

• A lender that doesn’t fit the asset

  The fixSend it to lenders that do this asset type, location and loan size.

  Caught early byPresent · LeverLink fit, with reasons

At renewal, the balance left after the term is re-priced at the new rate, usually on the remaining amortization. A higher rate on the same amortization means a higher payment, and the DSCR falls with it.

• Start six to twelve months before the maturity date.
• Ask your lender for its renewal offer, and compare it with what other lenders would do.
• Update the rent roll and statements first: a stronger NOI supports a better offer.

• Caisses

  Caisses populaires, Desjardins and others, are cooperative lenders and a major source of commercial mortgage financing in Québec, often for local owners.

• Closing before a notary

  In Québec, a hypothec on an immovable is signed before a notary (notaire), who also checks title and registers it. Elsewhere in Canada, lawyers usually handle the closing.

• Hypothec, not mortgage

  Québec civil law uses “hypothec” (hypothèque). The immovable hypothec is published at the land register (Registre foncier du Québec).

• French-language documents

  Lenders and notaries in Québec commonly work in French. Have the package and key documents in French, or in both languages. Language rules can apply to some contracts; check with the notary.

Net operating income: the rent a property brings in, minus its operating costs, before the mortgage.