If you’re a business owner in Alberta and you’re in need of financing to purchase a new commercial property or refinance an existing one, a commercial mortgage might be the right solution for you. Commercial mortgages provide funding for businesses to purchase real estate or finance other business ventures.
In this guide, we’ll go over the basics of commercial mortgages in Alberta, including the process, requirements, and types available. We’ll also provide some tips on how to choose the best commercial mortgage lender for your business needs.
What is a Commercial Mortgage?
A commercial mortgage is a type of loan that is secured by a commercial property. Commercial mortgages are used by businesses to purchase real estate or finance other business ventures. The property that is used as collateral for the loan is typically the property that the business intends to use for its operations.
The loan amount for a commercial mortgage is based on the value of the property and the business’s ability to repay the loan. Interest rates for commercial mortgages are typically higher than residential mortgages because commercial mortgages are considered riskier.
Types of Commercial Mortgages
There are several types of commercial mortgages available in Alberta, including:
- Fixed-Rate Commercial Mortgages: With a fixed-rate commercial mortgage, the interest rate is fixed for the entire term of the loan, usually 5 to 30 years. This type of mortgage provides stability for businesses as they can budget their payments accordingly.
- Adjustable-Rate Commercial Mortgages: With an adjustable-rate commercial mortgage, the interest rate fluctuates throughout the term of the loan. This type of mortgage is usually tied to the prime rate, and the payments can increase or decrease based on changes to the prime rate.
- Balloon Commercial Mortgages: A balloon commercial mortgage is a short-term loan with a large payment due at the end of the term. This type of mortgage is ideal for businesses that need to borrow a large amount of money but can’t afford the payments associated with a long-term loan.
- Bridge Commercial Mortgages: A bridge commercial mortgage is a short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing one. This type of mortgage is ideal for businesses that need to move quickly on a new property but haven’t sold their existing one yet.
Commercial Mortgage Process in Alberta
The process of getting a commercial mortgage in Alberta is similar to getting a residential mortgage. Here are the steps involved in getting a commercial mortgage:
- Determine Your Business’s Needs: The first step in getting a commercial mortgage is to determine your business’s needs. Consider factors like the size of the property you need, the location, and the type of property.
- Choose a Lender: Once you’ve determined your business’s needs, you’ll need to choose a commercial mortgage lender. Look for lenders that specialize in commercial mortgages and have experience working with businesses like yours.
- Gather Documentation: Before you can apply for a commercial mortgage, you’ll need to gather documentation. This typically includes financial statements, tax returns, and proof of income.
- Submit Your Application: Once you’ve gathered your documentation, you can submit your application for a commercial mortgage. Your lender will review your application and determine if you qualify for a loan.
- Underwriting: If your lender determines that you qualify for a commercial mortgage, they’ll begin the underwriting process. This involves verifying your income and credit history, as well as appraising the property.
