Question 1

Are these calculators accurate?

Accepted Answer

These calculators provide educational estimates for planning purposes only. Actual financing terms depend on lender underwriting, property specifics, borrower qualifications, and market conditions. Always consult with a licensed mortgage professional for personalized guidance.

Question 2

What is DSCR and why does it matter?

Accepted Answer

Debt Service Coverage Ratio (DSCR) measures a property's ability to cover its debt obligations from operating income. Calculated as NOI divided by annual debt service, most commercial lenders require a minimum DSCR of 1.20 to 1.25, meaning the property generates 20-25% more income than needed for debt payments.

Question 3

How is Net Operating Income (NOI) calculated?

Accepted Answer

NOI equals Effective Gross Income minus Operating Expenses. Start with gross rental income, add other income sources, subtract vacancy allowance to get EGI, then subtract operating expenses (property taxes, insurance, maintenance, management fees, utilities). NOI excludes debt service and capital expenditures.

Question 4

What is cap rate and how do I use it?

Accepted Answer

Capitalization rate (cap rate) is NOI divided by property value, expressed as a percentage. It measures the unlevered return on a property and helps compare investments. Lower cap rates typically indicate lower-risk properties or stronger markets, while higher cap rates suggest higher risk or secondary markets.

Question 5

What affects LTV for commercial mortgages?

Accepted Answer

Loan-to-Value ratios for commercial properties depend on property type, location, tenant quality, borrower strength, and market conditions. Conventional commercial mortgages typically offer 65-75% LTV, while CMHC-insured multi-unit properties may qualify for up to 95% LTV with MLI Select benefits.

Question 6

Does CMHC insurance apply to 5+ unit buildings?

Accepted Answer

Yes, CMHC offers mortgage insurance for purpose-built rental properties with 5+ units through programs like MLI Select. These programs provide benefits including longer amortization (up to 50 years), lower rates, and higher LTV ratios for properties meeting affordability, accessibility, or energy efficiency criteria.

Question 7

What documents do I need for a commercial mortgage?

Accepted Answer

Commercial mortgage applications typically require: rent roll and lease summaries, T12 (trailing 12-month) income/expense statements, property tax bills, insurance certificates, environmental reports, property appraisal, borrower financial statements, and corporate documentation. Requirements vary by lender and deal type.

Question 8

When should I book a call with a broker?

Accepted Answer

Contact a broker early in your process — ideally before making offers or finalizing construction budgets. A broker can help structure your financing strategy, identify potential challenges, connect you with appropriate lenders, and ensure your documentation is lender-ready.

Question 9

What is bridge financing used for?

Accepted Answer

Bridge financing provides short-term capital (typically 6-24 months) for transitional situations: acquiring properties requiring repositioning, covering gaps between purchase and permanent financing, funding lease-up periods, or facilitating time-sensitive acquisitions. Bridge loans carry higher rates but offer speed and flexibility.

Question 10

How do construction draws work?

Accepted Answer

Construction loans fund in stages (draws) as work progresses. Lenders release funds based on completed milestones verified by inspections. Typical draw schedules include 4-8 draws covering foundation, framing, mechanical, finishing, and completion. Interest typically accrues only on disbursed amounts.

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