Residential lending is largely a matching exercise. Lenders publish rates, define their rules, and a broker's job is to identify which lender's rules fit your file and submit it properly.
Commercial lending does not work that way. There is no published rate for a twelve-unit apartment building in Fort Saskatchewan. There is a lender with an appetite for that asset class this quarter, an underwriter with a view on the location, and a negotiation.
That difference shapes everything about how these files are handled.
What actually gets negotiated
Far more than the rate.
The loan-to-value, which might be sixty-five percent or seventy-five depending on the asset and how it is presented. The amortisation, which affects cash flow considerably. The term, and whether there is a balloon payment. The required debt service coverage ratio. Recourse: whether you personally guarantee the debt, and how much. Covenants the lender will impose. Prepayment terms, which on commercial mortgages can be severe.
Each of those is worth real money and each is arguable. A file that is presented well gets better terms than the same file presented poorly, which is not really true in residential lending where the rules are the rules.
The package is the product
On a residential file you submit documents. On a commercial file you submit a case.
A proper commercial submission includes the property details and a rent roll, two or three years of operating statements, a stabilised net operating income calculation with realistic vacancy and management allowances, the borrower's financial position and experience, and a plan for the property.
Underwriters read that package and form a view. A submission that anticipates their objections, explains the vacancy in unit four, and shows realistic expense assumptions rather than optimistic ones gets taken seriously. One that presents best-case numbers gets marked down across the board, because the underwriter now distrusts everything in it.
Preparing that package is most of the work, and it is the main thing a broker contributes beyond access.
Access matters more here
The commercial lender universe is genuinely opaque. Alongside the banks there are credit unions with strong commercial appetites, insurance companies, pension funds, specialised commercial lenders, and CMHC-insured multi-unit programs that offer materially better terms for qualifying residential rental buildings.
Appetites shift. A lender enthusiastic about small industrial this year may be closed to it next year, having filled their allocation. That knowledge is current rather than published, and it is the practical reason to use someone who is in the market regularly.
The CMHC multi-unit programs in particular are frequently overlooked by borrowers approaching a bank directly, and for a qualifying apartment building they can be transformative on both rate and amortisation.
Fees are normal here
A genuine difference from residential, and it should be stated plainly.
On residential deals the lender pays the broker and it costs you nothing. On commercial deals a broker fee is standard, commonly a percentage of the loan amount, because the work is greater, the timelines longer, and lender compensation is different or absent.
It should be agreed in writing at the outset, including what happens if the deal does not close. Ask about it on the first conversation. A broker who is vague about their own compensation on a commercial file is not the right choice.
Timelines are longer
Expect sixty to ninety days rather than thirty. Commercial appraisals take longer and cost considerably more, frequently several thousand dollars. Environmental assessment may be required, and a Phase One that flags something can lead to a Phase Two and months of delay. Legal work is more involved.
Build that into your purchase conditions. Commercial condition periods are correspondingly longer than residential ones for good reason.
When you need this and when you do not
You are in commercial lending at five or more residential units in one building, on any genuinely commercial property, on mixed-use, and on land or development.
You are not in commercial lending on one to four unit residential properties, however many you own. Those remain residential files assessed against your personal income, even at property six. See financing multiple rentals.
For deal types and how debt service coverage is calculated, see commercial real estate financing. If you are buying premises for your own business to occupy, that is a distinct case with better terms, covered on business property mortgages.