03 Sep Latest Commercial Mortgage Rates 2024 in Canada
A commercial mortgage is a loan applied to buy a commercial property or, in some cases, made using a commercial property as collateral. Commercial property can include a warehouse, mall, office building, medical center, or retail store.
Canada Mortgage and Housing Corporation (CMHC) considers any building with four or fewer units to be eligible for a homeowner or residential mortgage. Buildings with five or more apartments are eligible for rental housing or investment property mortgages. Buildings with six or fewer units are eligible for a conventional mortgage, while those with seven or more units are eligible for a commercial mortgage.
5-Year Trends in Commercial Property Prices in Canada from 2019 to 2024
| Year | Average Commercial Property Price Change |
|---|---|
| 2019 | +2.5% |
| 2020 | -3.0% |
| 2021 | +5.1% |
| 2022 | +6.3%/*-++ |
| 2023 | +4.7% |
| 2024 | +3.8% (projected) |
Source: CRSPI, CMHC
The trends in commercial property prices clearly depict the percentage rise in average commercial property price in the last five years. This price rise is expected to take a leap in the coming years.
Do You Qualify For A Commercial Mortgage?
The key elements deciding whether you qualify for a business mortgage are your future property’s debt service ratio (DSR) or debt coverage ratio (DCR). The interest rate you pay will vary depending on several factors, including:
- Loan Size
- The duration and quality of the tenant’s lease
- Type of lender
- The loan-to-value ratio (LTV)
- Your Credit History
- The financials and strength of the firm
The interest rate is likely to be lower if you intend to use the property for your own business rather than renting it out. Lenders would set the mortgage rate and maximum LTV based on their risk tolerance. Thus, commercial mortgages have higher rates and a lower maximum LTV than homeowner mortgages, while commercial multifamily mortgages have lower rates and a greater LTV.
Latest Commercial Property Trends To Look At
Commercial mortgages are a sort of investment property mortgage. However, the rates are heavily influenced by the mortgage type, property, and borrower conditions. You can use a commercial mortgage calculator to determine how a change in your mortgage rate will affect your monthly payments.
5-year commercial mortgage rate trends in Canada from 2019 to 2024
| Year | Average 5-Year Conventional Mortgage Rate |
| 2019 | 3.6% – 4.0%=* |
| 2020 | 2.5% – 3.0% |
| 2021 | 2.8% – 3.2% |
| 2022 | 3.0% – 4.5% |
| 2023 | 4.5% – 5.5% |
| 2024 | 5.0% – 5.8% |
Source: CRSPI, CMHC
The commercial mortgage rate trends in the above table clearly depict a rise in average mortgage rate and are increasing year after year. In the end of 2024, the rate is expected to hike up to 5.8% approximately.
CMHC-insured Commercial Mortgage Rates for Rental Properties
Given the low risk to lenders, CMHC-insured commercial mortgage borrowers receive the best rates. This is because, unlike traditional commercial mortgages, which are benchmarked to the BBB corporate yield, CMHC mortgages are linked to the Canadian Mortgage Bond (CMB) Yield. CMHC guarantees CMBs on behalf of the federal government and are among the safest investments in Canada.
To apply for a CMHC-insured commercial mortgage for commercial rental properties, you must meet the following requirements:
- The building must have a minimum of five rental apartments.
- Have a maximum LTV of 85 percent
- Have at least five years of property management experience (or a reputed property manager).
- Your net worth must be more than 25% of the loan value.
- Guarantee the entire loan amount until you have 12 consecutive months of consistent rent.
*5-Year Rent of Commercial Properties Trends in Canada, 2019–2024
| Year | Percentage Change in Commercial Rent |
| 2019 | +2.5% |
| 2020 | -3.0% |
| 2021 | +3.8% |
| 2022 | +4.5% |
| 2023 | +4.2% |
| 2024 | +3.5% (projected) |
Source: CRSPI, CMHC
The above table on commercial property rent trends depicts the percentage hike in commercial property rent. You can see that rent hikes are rising every year. This means investing in a commercial rental property can bring you significant returns in the coming years.
Is Now The Right Time To Get A Commercial Mortgage?
A commercial mortgage can do more than just purchase a property; it can also consolidate a company’s existing debts into a lower-interest loan. This frees up cash flow for investment, allowing borrowers to grow their business, add more staff, or simply invest in new property.
Owning a property provides you with more control over your business. You can make property alterations, decorate whenever you want, and even sublet spare space to earn extra money. Since the commercial real estate market is strengthening in several ways, if you buy a property now, its value may rise dramatically over time, generating long-term equity for your business.
Conclusion
Rent and rate of commercial property is increasing with every passing year. To save dollars on your property purchase, rent, and rate of interest, it’s better advised to invest in a commercial property now.
If you are paying rent for your office or business space, buying your own commercial property will save you dollars spent on rent as well as appreciate the value of property over time. In case you don’t need a commercial property for business purposes, you can buy one for rental use. Doing so will help you earn a consistent rental income that you can use to pay your mortgage installments.
Choose an Award-winning Mortgage Broker
An experienced and award-winning commercial mortgage broker in Abbotsford, Canada, can assist you in obtaining the best mortgage for your specific requirements. They can also help you navigate the complex mortgage application procedure and assist with application submission and paperwork.
Not only this, they can negotiate with large banks, trust firms, and credit unions to get you the best rate and terms possible.
Satbir Bhullar Mortgages is a trusted name when it comes to applying and getting approved for a commercial mortgage in Abbotsford. File an application with Satbir Bhullar and get the funding you need to buy a dream commercial property in the least possible time.