Commercial Mortgage Rates in Ontario, Canada

canada-moneyBuying property in a place as desirable as Ontario is never a bad investment, but that doesn’t mean it isn’t risky. Purchasing residential property is a fairly standard practice that most people are familiar with, but when it comes to purchasing commercial property the experience level drops substantially.

Aside from the complications of finding the right location for an office or business, the complex world of mortgages becomes even more so when it comes to commercial property.

As a reference for those who may be familiar with residential mortgages, but have a lack of knowledge on the commercial side, below is a short list of what differentiates commercial loans from their residential counterparts:

  • Higher interest rates and larger down payments, due to the fact that commercial mortgage loans are seen as riskier than residential mortgages; unlike residential properties, the primary goal of a commercial property is to generate income.
  • Short-term mortgages. Commercial mortgage loans are usually shorter than residential mortgages, and have payment plans that reflect this. Typically commercial mortgages have scheduled balloon payments, such as 3, 5, or 10 years.
  • Higher Fees, given the more rigorous appraisal process for commercial properties, as well as a variety of other inspections that may be required for opening business.
  • More paperwork and a longer processing time is required for commercial mortgage loan applications generally, because of the inherently more complex nature of opening a business than simply moving into a residence.

With commercial mortgage rates being higher, individuals applying for a commercial mortgage in Ontario need to be especially sensitive to the current interest rate climate. The same rebounding global economy that may spur an individual to purchase a commercial property is also driving interest rates up in tandem. These rising rates will have an effect on all commercial mortgage rates, and it is critical that borrowers find loan terms that will ensure financial stability in the long-term.

No matter the location, be it Ontario or Oklahoma, a commercial mortgage is used to buy property that is markedly different in purpose than residential. The risk of high commercial mortgage rates are compounded by the inherent risks of business, and depending on the money invested in the business itself, a borrower can easily find themselves “doubling down” in terms of risk. It is important that the commercial mortgage rates negotiated take into account projected business performance, and not overestimate performance, and by default overextend the borrower’s financial capabilities. View some resources to find a full list of payment options.

Generating income is the primary goal of a commercial property, and an unfavorable commercial mortgage rate can prevent a fledgling business from getting off the ground. Luckily the “for profit’ mindset is shared by the lenders themselves, and so the borrower should be able to arrange commercial mortgage rate terms that take into account, and work to give the business an opportunity to grow. It is in both the lender and borrower’s best interest to see the business succeed, and the mortgage payments paid on time.

 

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