Commercial Mortgage Down Payment: How Much?

The single biggest barrier to buying commercial property in Canada is the down payment. Most investors hear “commercial mortgage” and assume they need 35% down or more. Some do. But depending on the property type, the program you qualify for, and how you structure the deal, you might need as little as 5%.

The range is enormous, and the difference between 5% down and 35% down on a $2 million building is $600,000. That is life-changing capital you either keep working for you or lock up in a single property.

This guide breaks down exactly what you need by property type, which programs can slash your down payment, and the strategies experienced investors use to get into commercial deals with less cash out of pocket.

Down Payment Requirements by Property Type

Here is the reality across different commercial property categories in Canada. These ranges reflect what lenders and insurers actually require, not what you might see quoted on a generic website.

A few things jump out immediately.

First, CMHC-insured multi-family is in a league of its own. Through the MLI Select program, you can finance purpose-built rental buildings with as little as 5% down. That is not a typo. Five percent on a commercial building.

Second, if you are buying office, retail, or industrial, you are looking at conventional financing only. No CMHC insurance. Down payments start at 25% and can climb higher for properties with vacancy risk, deferred maintenance, or shorter lease terms.

Third, development land requires the most capital upfront. Lenders see undeveloped land as the highest risk, so 35-50% down is standard. Some lenders will not touch raw land at all.

CMHC Multi-Family: The 5% Down Advantage

The CMHC MLI Select program is the most powerful tool available for Canadian multi-family investors, and it directly impacts your down payment.

Here is how it works. CMHC insures the mortgage, which means the lender’s risk drops dramatically. In exchange, CMHC charges an insurance premium (added to your mortgage), but you get access to terms that conventional lenders would never offer.

With MLI Select, qualifying properties can access:

• 5% down payment on new construction purpose-built rentals
• Up to 50-year amortization (which crushes your debt service ratio)
• Lower interest rates because CMHC backing reduces lender risk
• A DSCR requirement of just 1.1 — the property only needs to earn 10% more than its debt payments

To hit the lowest down payment tiers, your project typically needs to score well on MLI Select’s social priority criteria: affordability, accessibility, and energy efficiency. A building designed with these in mind can qualify for the maximum leverage.

For existing multi-family acquisitions, CMHC typically requires 15% down. Still significantly better than the 25-35% a conventional lender would demand.

You can run the numbers on your own project using the CMHC MLI max loan calculator to see how much financing your building could support.

Calculate Your Down Payment Savings

Why Conventional Down Payments Are So High

If CMHC is not an option — because your property is office, retail, industrial, or because the multi-family building does not meet CMHC criteria — you are in conventional territory.

Conventional commercial lenders set their down payment requirements based on risk. The riskier they perceive the deal, the more skin they want you to have in the game.

Factors that push your required down payment higher:

• Property condition. Deferred maintenance or needed capital repairs signal risk.
• Vacancy rate. A building with 30% vacancy requires more down payment than one that is 95% occupied.
• Lease terms. Short-term leases or month-to-month tenancies make income less predictable.
• Location. Secondary or tertiary markets carry more risk than major urban centers.
• Borrower experience. First-time commercial buyers often face higher requirements.
• Property type. Single-tenant buildings are riskier than multi-tenant because losing one tenant means losing all income.

Understanding how to qualify for a commercial mortgage in Canada helps you anticipate these lender requirements. A fully leased, well-maintained, multi-tenant industrial building in Toronto might qualify at 25% down. A half-vacant retail strip mall in a small town could require 40% or more.

Strategies to Reduce Your Down Payment

Now for the part you actually came here for. Here are the strategies investors use to get into commercial deals with less cash.

1. Use CMHC Insurance Whenever Possible

If your target is multi-family rental property, structure the deal to qualify for CMHC insurance. Even if it means adjusting your building plans to meet MLI Select criteria, the down payment savings are massive.

On a $3 million building, the difference between 5% down ($150,000) and 25% down ($750,000) is $600,000. Even after the CMHC insurance premium, you come out way ahead on a cash-deployed basis. See our full comparison of CMHC insured vs conventional commercial mortgages for the detailed math.

2. Vendor Take-Back Mortgage

A vendor take-back (VTB) mortgage is when the seller finances part of the purchase price. The seller essentially holds a second mortgage on the property.

This works especially well with motivated sellers. If a property owner has been trying to sell for months, they may accept a VTB of 10-15% of the purchase price. Combined with conventional financing at 75% LTV, you only need to bring 10-15% as your actual cash down payment instead of 25%.

The key: your primary lender needs to approve the VTB structure. Not all lenders allow subordinate financing, so this needs to be discussed upfront.

3. Blanket Mortgage / Cross-Collateralization

If you already own properties with equity, you can use that equity as part of your down payment on a new commercial purchase. This is called cross-collateralization or a blanket mortgage.

The lender takes security against both the new property and your existing property. Your equity in the existing building essentially substitutes for cash.

This works best when you have significant equity in a property that you plan to hold long-term. The downside is that your existing property is now tied to the new deal, which limits your flexibility.

4. Joint Venture Partners

If you have deal-finding skills and management experience but lack capital, a JV partner can bring the down payment. Typical structures give the capital partner 50% ownership while you manage the asset.

On a deal requiring $500,000 down, a JV partner contributes the cash while you contribute your expertise, management, and the deal itself. Both parties benefit from appreciation, cash flow, and mortgage paydown.

5. Refinance Existing Properties

This is the most common strategy for experienced investors. You refinance a property that has appreciated — either through market gains or forced appreciation from renovations — and use the extracted equity as your down payment on the next commercial acquisition.

If you bought a building three years ago for $1.5 million and it is now worth $2 million, a cash-out refinance at 75% LTV gives you $1.5 million in financing. That frees up roughly $500,000 in equity, minus your remaining mortgage balance.

Understanding when refinancing makes sense and how to prepare is critical before pulling equity from existing properties.

Explore Your Down Payment Options

Real Numbers: Three Scenarios

Let me walk through three scenarios so you can see how different down payment strategies play out.

Scenario 1: New Construction 20-Unit Apartment — CMHC MLI Select

• Total project cost: $4,000,000
• CMHC MLI Select financing: 95% ($3,800,000)
• Down payment required: 5% ($200,000)
• CMHC insurance premium: ~4% ($152,000, rolled into mortgage)
• Cash needed at closing: ~$200,000 + legal and soft costs

With $200,000 and a well-designed project, you control a $4 million building. The 50-year amortization keeps your payments low, and the DSCR requirement is just 1.1. If your rents support a 1.1 ratio, you are in.

Scenario 2: Existing 12-Unit Apartment — Conventional

• Purchase price: $2,400,000
• Conventional financing: 75% ($1,800,000)
• Down payment required: 25% ($600,000)
• Cash needed at closing: ~$600,000 + closing costs

This is a solid deal, but $600,000 is a lot of capital. If you can negotiate a 10% vendor take-back ($240,000), your cash requirement drops to $360,000 — a 40% reduction.

Scenario 3: Retail Strip Mall — Conventional with VTB

• Purchase price: $1,800,000
• Conventional first mortgage: 70% ($1,260,000)
• Vendor take-back: 15% ($270,000)
• Your cash down payment: 15% ($270,000)
• Cash needed at closing: ~$270,000 + closing costs

Without the VTB, you would need $540,000 cash (30% down). The VTB cuts that in half.

Common Misconceptions

“You always need 25-35% down for commercial.” Not true for multi-family. CMHC programs can bring that down to 5-15%. Even for other property types, VTBs and equity strategies can reduce your cash outlay.

“CMHC only works for residential.” CMHC insures multi-family rental buildings with five or more units. These are classified as commercial properties. The MLI Select program is specifically designed for this.

“More down payment is always better.” Not necessarily. Putting 35% down when you could put 5% down and deploy the remaining 30% into another cash-flowing asset might generate far more total return. The cost of CMHC insurance is often worth the leverage.

“Conventional lenders all require the same down payment.” Down payment requirements vary significantly between lenders. A major bank might require 30% on a deal where a credit union or alternative lender requires 25%. This is why working with a broker who shops multiple lenders matters — especially on commercial deals where a few percentage points of LTV represents hundreds of thousands of dollars.

“You cannot use borrowed funds for a commercial down payment.” Unlike residential, where CMHC requires proof of saved funds, many conventional commercial lenders are more flexible about the source of your down payment. Borrowed equity from another property, a line of credit, or even a personal loan can sometimes be used. Each lender has their own policies.

Building Your Down Payment Strategy

The smartest commercial investors do not just save cash and wait until they have enough. They build a system.

Start with residential properties to build equity. Refinance those properties as they appreciate. Use the The BRRRR Method: Build a Rental Portfolio Fast — buy, renovate, rent, refinance, repeat — to accelerate equity creation.

When you have enough equity across your portfolio, make the jump to commercial. Our guide to commercial mortgage rates in Canada can help you understand what financing will cost. If you want to learn more about commercial mortgage financing, we can walk you through every program option available. Use CMHC programs for multi-family to minimize your cash needs. Use VTBs and JV structures for other property types.

Every dollar you save on a down payment is a dollar you can deploy elsewhere. The goal is not to minimize risk by putting more money down — it is to maximize returns by keeping your capital working across multiple assets.

Structure Your Commercial Deal Today

Frequently Asked Questions

Written by

LendCity

Published

February 8, 2026

Reading Time

9 min read

Share this article

Tags

Commercial Properties Down Payment Cmhc Mortgage Basics Investment Strategy

Key Terms in This Article

Down Payment

Down Payment

The upfront cash payment when purchasing a property. For 1-4 unit investment properties, minimum 20% down is required. 5+ unit multifamily can use CMHC MLI Select with lower down payments, and house hackers can put as little as 5% down on owner-occupied 2-4 plexes.

Commercial Mortgage

Commercial Mortgage

Financing for commercial properties like retail, office, or multifamily buildings with 5+ units, with different qualification criteria than residential mortgages.

CMHC Insurance

CMHC Insurance

Mortgage default insurance from Canada Mortgage and Housing Corporation. For 1-4 unit investment properties, investors must put 20%+ down (no insurance available). However, CMHC offers MLI Select for 5+ unit multifamily properties, and house hackers can access insured mortgages with 5-10% down.

LTV

LTV

Loan-to-Value ratio - the mortgage amount expressed as a percentage of the property's appraised value or purchase price (whichever is lower). An 80% LTV means you're borrowing 80% and putting 20% down. Lower LTV generally means better rates and terms.

CMHC MLI Select

CMHC MLI Select

A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.

Equity

Equity

The difference between a property's current market value and the remaining mortgage balance. If your home is worth $500,000 and you owe $300,000, you have $200,000 in equity. Equity builds through mortgage payments, appreciation, and property improvements.

Bridge Financing

Bridge Financing

Short-term financing (90 days to 1 year) that covers the gap between purchasing a new property and selling or refinancing another. Investors use bridge loans to act quickly on deals or fund renovations before long-term financing is in place.

Refinance

Refinance

Replacing an existing mortgage with a new one, typically to access equity, get a better rate, or change terms. Investors commonly refinance to pull out capital for purchasing additional properties (cash-out refinance) while retaining ownership of the original property.

Cash Out Refinance

Cash-Out Refinance

Refinancing for more than you owe to pull out equity as cash, often used to fund down payments on additional investment properties.

Multifamily Financing

Multifamily Financing

Multifamily financing refers to mortgage loans specifically designed for purchasing or refinancing residential properties with five or more units, such as apartment buildings or large rental complexes. For Canadian real estate investors, these commercial-style loans typically require larger down payments and are evaluated primarily on the property's rental income and net operating income rather than personal income alone.

Hover over terms to see definitions, or visit our glossary for the full list.

Related Articles

• How to Refinance Commercial Property in Canada
• CMHC vs Conventional Commercial Mortgage Guide
• Choosing the Right Mortgage for Your Investment
• Office Building Financing Guide for Canadian Investors
• How to Finance Your First Multifamily Building