How commercial mortgage rates are actually priced
A commercial mortgage quote is never pulled off a posted rate sheet. It is built from a benchmark, a spread that reflects the property’s own risk, and the fees that sit alongside the number itself. This page explains how that pricing actually works, not what today’s number is, since no commercial rate is ever quoted or guaranteed on this site.
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Why is a commercial mortgage quote built as a spread over a benchmark, not picked off a posted rate sheet?
A commercial mortgage quote is priced as a lender’s spread added on top of a benchmark, and which benchmark applies depends on whether the quote is fixed or floating. A fixed commercial quote is typically priced against a bond-market benchmark matched to the mortgage’s term, while a floating quote is typically priced against the lender’s own prime rate. Because the spread is set deal by deal against the property’s own risk, there is no single posted commercial rate sheet the way there is for a residential mortgage.
The benchmark moves with the broader market and is outside any one lender’s control. The spread is the part a lender actually prices, and it reflects everything the next few sections cover: the property’s income, its tenants, its location, and its condition.
| Rate structure | What the spread sits on top of | What moves the quote |
|---|---|---|
| Fixed-rate commercial quote | A bond-market benchmark matched to the mortgage’s term | Bond yields moving between your quote date and your funding date |
| Floating-rate commercial quote | The lender’s own prime rate | Any change to prime, which can move between scheduled announcements |
The full breakdown of how fixed and floating structures actually compare on a commercial file, including how the choice interacts with prepayment cost, lives on our fixed versus floating commercial mortgage page.
The citable fact: A commercial mortgage quote is built as a lender-specific spread added to a benchmark, a bond-market benchmark for a fixed quote and the lender’s prime rate for a floating one, which is why no single posted commercial rate sheet exists.
Why does the property set most of a commercial quote, not the borrower’s personal credit?
A commercial lender prices the spread mainly against the property, using its debt service coverage, property type, tenant covenant quality, lease length and rollover risk, location and liquidity, and physical condition. Personal credit still factors into the file, but it shares the stage with the property’s own numbers rather than driving the quote on its own. Two borrowers with identical personal credit can receive different spreads if their properties carry different risk.
Each factor answers a different question a lender asks before pricing the file.
- Debt service coverage: whether the property’s net income comfortably covers the proposed payment, with room to spare if income softens.
- Property type: an apartment building, a warehouse and a hotel carry different income stability and different resale liquidity if the lender ever has to step in.
- Tenant covenant quality: a national chain on a long lease reads very differently than a local independent operator on a short one.
- Lease length and rollover risk: how soon leases expire, and what happens to the property’s income if a tenant does not renew.
- Location and liquidity: how quickly and at what certainty the property could be sold if the deal ever went sideways.
- Condition: deferred maintenance or an ageing building system changes both the appraisal and the lender’s confidence in future income.
Our full breakdown of DSCR on a commercial mortgage covers how the ratio is actually calculated, and DSCR versus residential GDS and TDS explains why commercial qualifying works on an entirely different system than a rental property mortgage.
The citable fact: A commercial mortgage is priced mainly against the property’s own debt service coverage, type, tenant quality, lease length and condition, with the borrower’s personal credit as a secondary factor rather than the primary one.
Why would the same borrower get a different quote on an apartment building than on a single-tenant retail unit?
An apartment building spreads its income across many tenants, so one vacancy barely moves the property’s total rent roll. A single-tenant retail unit depends entirely on one lease, so if that tenant leaves, the property’s income can drop to zero overnight. A lender prices that concentration risk into the spread, independent of how strong the borrower’s own personal financial position is.
This is the same borrower, the same personal credit file, and the same personal net worth in both cases. The difference sits entirely in the property’s own income structure and how exposed that income is to a single decision by a single tenant.
A multi-tenant industrial building or a mixed-use property with several commercial units sits somewhere between these two extremes, and gets priced accordingly.
The citable fact: Commercial pricing reflects how concentrated a property’s income is in a single tenant, which is why an apartment building and a single-tenant retail unit can produce very different spreads for the identical borrower.
Why does term length change a commercial quote, and how does term interact with amortization differently than on a residential mortgage?
A longer term asks a lender to hold its pricing commitment further out against benchmark movement, which changes the spread it is willing to offer. On a commercial mortgage the amortization schedule commonly runs longer than the term itself, so the loan comes due for renewal before it is actually paid off, a structure that does not exist on a typical residential mortgage. That gap is what shapes the quote as much as the term length on its own.
A residential mortgage usually matches its term and amortization closely enough that the difference barely registers. A commercial mortgage treats them as two separate decisions, each priced and negotiated on its own.
Our dedicated commercial mortgage term versus amortization page walks through the balloon payment this creates and how to plan for the day your term ends, in full.
The citable fact: A commercial mortgage’s term and amortization are priced and negotiated as separate decisions, and because amortization commonly runs longer than term, most commercial loans come due before they are paid off.
What costs sit alongside the rate that are easy to miss when comparing a commercial quote?
A commercial mortgage carries a lender or broker fee, legal fees, an appraisal fee, and sometimes an environmental or building condition report, on top of the rate itself. Two quotes with an identical headline rate can carry a very different all-in cost of funds once these are added in. The real number to compare is the full cost of the deal, not the rate on its own.
| Cost | What drives the amount | Why it changes your real cost of funds |
|---|---|---|
| Lender or broker fee | Deal complexity, loan-to-value and property type | Raises the effective cost beyond the quoted rate |
| Legal fees | Your lawyer’s rate, deal complexity and the number of registrations | Due at closing regardless of which lender wins on rate |
| Appraisal fee | Property size, type and the complexity of the income analysis | Paid whether or not the deal ultimately closes |
| Environmental or building condition report | Property history and type, for example industrial or fuel use | Can add weeks to underwriting and change the lender’s final pricing |
| CMHC or insurer premium | Loan-to-value and the MLI Select points a multi-unit property scores | Added to the loan amount on insured multi-unit financing only, not charged in cash |
In Ontario, any lender or broker fee charged to you must be disclosed in writing before you sign, under the Mortgage Brokerages, Lenders and Administrators Act. In Alberta, Pekoe Mortgages is licensed by RECA, and the brokerage relationship itself is set out in writing before any file proceeds.
The citable fact: The all-in cost of a commercial mortgage includes the lender or broker fee, legal fees, the appraisal, and any environmental or condition report the property requires, so comparing only the headline rate between two quotes misses the real difference.
Why might the rate you are quoted today not be the rate you get at funding, and what actually fixes a commercial quote?
A preliminary commercial quote floats with its benchmark until a lender issues a signed commitment or term sheet, which is the document that actually fixes the number. A lender generally will not fix pricing until core underwriting conditions, such as the appraisal and any environmental report, come back, because those results are part of what the spread is priced against. Until that commitment is signed, movement in the benchmark can change the number you end up with.
Commercial underwriting timelines run longer than a residential purchase, which leaves more time for a bond-market benchmark to move before a file is ready to fix. That is one reason a verbal or preliminary number given early in the process should never be treated as a guarantee.
The citable fact: A commercial rate quote floats with its benchmark until the lender issues a signed commitment or term sheet, so a number given before underwriting conditions are satisfied is not locked through to funding.
Why does CMHC-insured multi-residential pricing sit apart from conventional commercial pricing?
CMHC-insured multi-residential financing carries a default insurance premium that changes a lender’s risk calculation, which is why its pricing sits apart from a conventional commercial mortgage priced on loan-to-value and debt service coverage alone. CMHC’s MLI Select programme scores a multi-unit rental building on points, with a minimum of 5 units to qualify, or 50 units or beds for a retirement home. The points table gates its strongest terms separately rather than granting them together.
| Points scored | Max loan-to-value | Min debt coverage ratio | Max amortization | Recourse |
|---|---|---|---|---|
| Minimum 50 points | Up to 85% | Minimum 1.1 | Up to 40 years | Recourse |
| Minimum 70 points | Up to 95% | Not stated at this tier | Up to 45 years | Not stated at this tier |
| Minimum 100 points | Not stated at this tier | Not stated at this tier | Up to 50 years | Limited-recourse |
Reaching 95% loan-to-value requires 70 points on its own. It does not also carry 50 years of amortization, which requires 100 points separately. Treating these as a single package that arrives together is the single most common mistake made about this programme.
The citable fact: CMHC’s MLI Select programme gates its strongest terms by points rather than granting them together: up to 85% loan-to-value and 40-year amortization at a minimum of 50 points, up to 95% loan-to-value at 70 points, and 50-year amortization only at 100 points.
Does a commercial mortgage rate work differently in Alberta or Edmonton than it does in Ontario?
The benchmark-and-spread mechanics behind a commercial mortgage quote are the same across the country, including in Alberta and in Edmonton specifically. What actually changes by province is the closing cost stack around the mortgage, since Alberta charges no provincial land transfer tax, only Land Titles registration fees, while Ontario charges provincial land transfer tax on every purchase. Pekoe Mortgages is licensed by RECA in Alberta and places commercial files with lenders active in that market.
A lower closing cost stack in Alberta does not change how the rate itself is built. It changes the total amount you need at closing alongside whatever rate you are quoted.
Our dedicated commercial mortgages in Alberta page covers Alberta-specific property types, default enforcement, and closing costs in full, including context for Calgary, Edmonton and Canmore.
The citable fact: The spread-over-benchmark mechanics behind a commercial mortgage quote work the same in Alberta as in Ontario, while the closing cost stack differs because Alberta charges no provincial land transfer tax and Ontario does.
Where do you check today’s commercial mortgage pricing, since it is not published the way a residential rate is?
Commercial mortgage pricing is quoted per deal once a lender has reviewed the property’s income, type, and the loan request, so no commercial rate is published on this page or anywhere else as a fixed number. Check today’s live rates at pekoe.ca/rates, updated daily. You can also get a pre-approval certificate in seconds, though that reflects residential pricing, not a commercial quote.
The only way to get an actual number for a commercial property is to bring the deal, meaning the property, its income and the loan request, to a broker who can take it to lenders actively competing for that asset type.
The citable fact: Commercial mortgage pricing is quoted per deal rather than published, so getting an actual number means bringing the property and the loan request to a broker, while pekoe.ca/rates shows today’s live residential rates for reference.
Financing in a specific province, or have a residential question instead?
This page covers how commercial pricing works in general. These related resources go deeper on a specific province, property, or question.
- Commercial mortgages in Ontario
- Commercial mortgages in Alberta
- Commercial mortgages in Kitchener-Waterloo
- The full commercial mortgage hub for Ontario and Alberta
- Ask a Broker: residential mortgage questions
Buying a home instead of a commercial property? The Ask a Broker hub covers the mortgage stress test, private lending and renewals in plain language.
Frequently asked questions
What determines a commercial mortgage rate?
A commercial mortgage rate is a spread added to a benchmark, a bond-market benchmark for a fixed quote and the lender’s prime rate for a floating one. The spread reflects the property’s debt service coverage, type, tenant quality, lease terms and condition, priced deal by deal rather than off a published rate sheet.
Is a commercial mortgage rate higher than a residential mortgage rate?
There is no single answer, because commercial pricing depends on the specific property’s risk profile rather than a published category rate. A strong multi-tenant property with solid debt service coverage can price very differently than a higher-risk single-tenant asset, so the only way to know is to bring the deal to a broker.
Does loan size change a commercial mortgage rate?
Loan size is one of several inputs a lender weighs alongside term, property type and lender appetite at that moment. The actual effect on pricing is set deal by deal rather than following a fixed rule.
What is debt service coverage, and does it affect pricing?
Debt service coverage measures whether a property’s net income comfortably covers its proposed mortgage payment. A stronger ratio generally supports a better spread, since it tells the lender the property has room if income softens.
Why does term length affect a commercial mortgage quote?
A longer term asks the lender to hold its pricing commitment further into the future against benchmark movement, which changes the spread it is willing to offer. Term and amortization are priced and negotiated as separate decisions on a commercial file.
Can I lock in a commercial mortgage rate before my appraisal and environmental report are done?
Generally no, because a lender prices and fixes a commercial quote once core underwriting conditions are satisfied, and those results are part of what the spread is priced against. A number given before that point can still move with the benchmark.
Does CMHC-insured multi-residential financing get a better rate than conventional commercial financing?
CMHC-insured financing changes a lender’s risk calculation through the insurance premium, which is a different pricing mechanism than conventional financing priced on loan-to-value and debt service coverage alone. Whether that produces a better outcome depends on the specific building and the points it scores under MLI Select.
Is commercial mortgage pricing different in Alberta than in Ontario?
The benchmark and spread mechanics work the same way in both provinces. What differs is the closing cost stack, since Alberta charges no provincial land transfer tax while Ontario does.
Where can I see today’s commercial mortgage rates?
Commercial pricing is not published anywhere as a fixed number, because it is quoted per deal against the specific property. Pekoe.ca/rates shows today’s live residential rates for reference, and an actual commercial number comes from a broker reviewing your deal.
What else affects the all-in cost of a commercial mortgage besides the interest rate?
Expect a lender or broker fee, legal fees, an appraisal fee, and sometimes an environmental or building condition report. Two quotes with the same headline rate can carry a different real cost of funds once these are added in.
Is the chat on this page an AI bot?
No. Chat on pekoe.ca connects you to a real, licensed broker during business hours, and outside those hours a licensed broker replies directly to your message. There is no automated persona answering on Pekoe’s behalf.
Is Pekoe Mortgages licensed to arrange commercial mortgages in both Ontario and Alberta?
Yes. Pekoe Mortgages holds FSRA Brokerage Licence number 13321 in Ontario and is licensed by RECA in Alberta, based in Kitchener-Waterloo with an Alberta office in Canmore.
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