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Commercial Mortgages In Montreal
With over 4 million inhabitants, Montreal is a prime destination for choice commercial properties. The city of Montreal is one of the most vibrant commercial centers of Canada, and the available employment helps to drive the demand for rent as many working class individual find renting an apartment more economical than buying their property. This is why commercial real estate has become lucrative in Montreal. For businesses and groups that want to take advantage of the booming housing market in Montreal, a commercial mortgage might be needed to actualize their goals in the housing sector.
What Is Commercial Mortgage?
A commercial mortgage is a loan taken to finance a commercial real estate using the property as collateral. The borrowers in a commercial mortgage are usually a business such as a corporation, partnership, or limited liability company. A commercial mortgage is different from a residential mortgage because it is used for financing properties that will be on rental and involves companies instead of individuals. A commercial mortgage is given by the profitability of the proposed project. This increases the risks involved than in residential mortgages which are based on the ability of the borrower to repay the loan. Also, commercial mortgages are usually short-term and require higher and non-negotiable down payments.
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When To Take A Commercial Mortgage
A commercial mortgage is used to finance a commercial property, i.e., a property built for as an investment. There are three types of investment property:
- Pure residential property consisting of 1-4 units
- Pure residential property with 4 or more units.
- Residential Commercial Mixed.
You can also use a commercial mortgage to finance an office, retail, or industrial property.
- Types of Commercial Mortgage
- The following are the types of commercial mortgages:
- Multi-family residential (1-4 units)
- Multi-family residential (5 or more units)
- Storefront with Apartments/Residential Commercial (Mixed)
- Office mortgage
- Commercial plaza mortgage
- Industrial mortgage
- Farmland mortgage
- Construction project
Montreal being a hotbed of commerce and industry in Canada and especially the Quebec region, building any of these commercial properties can be an excellent investment decision. A mortgage from a Montreal mortgage broker will provide the needed funds to bankroll the project if you qualify.
The requirements for getting a commercial mortgage are higher as the funds are usually massive amounts of money, and the risks are considerably greater than in residential mortgages. The lender will assess the following:
- Debt service coverage ratio: This is the ratio of available funds to the required loan payments, and it is the most important factor assessed by the lender.
- Credit History: Lenders will need proof of your business’ creditworthiness, and you must also have an excellent credit rating.
- Current State of your business: Lenders will check if your company is generating enough income to make your payments
- Type of Business: The kind of business you operate and the kind of property you intend to buy will determine the type of commercial mortgage and the terms of the loan.
- Down Payment: This is determined Based on your risk profile. The lender will set a higher down payment if the project is purely commercial, but if it is a mixed property, the down payment will be lower.
What To Do Next
If you want to go into commercial real estate development, the best course of action is to hire a professional commercial mortgage broker. The agent will guide you through the whole process, and advise you of the best sources of funds and the best time to take the loans. With the increasing number of people renting apartments in Montreal and its environs, investing in a commercial property can be a great source of revenue now and in the future.
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Montreal Mortgage Frequently Asked Questions
What is a Mortgage Term?
The loan that you make to buy a house or some other property is called a mortgage. The principal refers to the amount borrowed. Each mortgage payment pays off part of the principal plus the interest.
You have custody over the property. However, if you fail to pay the loan and interest according to the terms of the contract, the lender may repossess the property.
What is a Down Payment?
A down payment refers to the money you pay for real estate property. This money is paid upfront and the rest of the cost of your new home is covered by your mortgage. For properties that cost up to $500,000, the minimum down payment in Canada is 5% – however, do take note that your lender may sometimes require a higher down payment.
But what if the cost of the property is more than $500,000? If that is the case then the interest is 5% for the first $500,000 and then 10% for the remainder of the cost.