If your bank has turned you down for a residential mortgage because your debt ratios are too high, don’t give up. There’s another option you might not know about: commercial financing.
Commercial mortgages work completely differently than residential ones. And that difference could be the key to growing your real estate portfolio.
How Commercial Financing Actually Works
Here’s the big difference: residential mortgages focus on you and your personal income. Commercial mortgages focus on the property itself.
When you apply for a residential mortgage, the bank looks at your income, your debts, and calculates your debt ratios and qualification limits. If those numbers don’t work, you’re stuck.
But with commercial financing, lenders care way more about the property’s numbers. Can the building generate enough rental income to cover its costs? That’s what matters most.
This is similar to how DSCR Loans for Foreign Nationals: US Real Estate Guide. The property needs to stand on its own.
Who Should Look at Commercial Mortgages?
Commercial financing makes sense for several types of investors:
- You own multiple properties and your debt ratios are maxed out
- You’re self-employed and don’t show traditional income on paper
- You want to buy larger multi-family buildings (six units or more)
- You’re building new rental properties from the ground up
The key is that you’re buying a property that generates rental income. Single-family rentals usually fall under residential rules. But once you get into duplexes, fourplexes, apartment buildings, office property financing, retail property financing, or even agricultural zoned property mortgages, commercial options open up. For a deeper dive, check out our guides on The Investor’s Commercial Financing Options Companion, buying commercial real estate, zero down payment commercial property financing, office building investment for beginners, and retail property investment for beginners.
If your debt ratios are maxed out but the building’s rental income is strong, commercial financing could be your way forward — book a free strategy call with LendCity and we’ll show you what options the property unlocks.
The CMHC MLI Select Program
One of the best programs for Canadian investors is the CMHC MLI Select program. This is specifically designed for rental properties.
Here’s what makes it powerful:
- Up to 95% loan-to-cost financing (you only need 5% down) — learn more about 100% financing for owner-occupied commercial properties
- Amortization periods up to 50 years (way lower monthly payments)
- You need a debt service coverage ratio of just 1.1
That debt service ratio means the property’s rental income needs to be 1.1 times the mortgage payment and other costs. That’s pretty easy to hit with the right property.
This program works especially well in cities like Edmonton where median rents are high. When you’re building new, you can design the building specifically to fit the program requirements.
Why Edmonton Works So Well
Edmonton has become a hot spot for this type of investing. The median rent sits around $1,665 (as of early 2026), which makes the numbers work really well for the MLI Select program.
Plus, Alberta generally welcomes landlords. The regulations are reasonable and the government wants rental housing built.
Many investors from expensive markets like Victoria and Vancouver are building their portfolios in Edmonton because the numbers actually make sense.
Get Your Property Pre-Qualified
Here’s a mistake many investors make: they find a property, get it under contract, and then apply for financing. Four to six weeks later, they find out it doesn’t work.
Smart investors do this backwards. They get pre-qualified first. And they analyze properties before making offers.
Good mortgage brokers who specialize in commercial deals have tools to analyze a property quickly. Within 24 hours, you can know:
- How much financing you can get
- What the terms will look like
- Whether the property fits CMHC programs
- If there are any gaps you need to fill
This saves you from wasting time on properties that won’t work. And it lets you move fast when you find a good deal.
With a DSCR requirement of just 1.1 and up to 50-year amortizations, the MLI Select numbers can be surprisingly easy to hit — book a free strategy call with us and we’ll check whether your project fits the program.
Why Working with Investors Matters
When you’re choosing who to work with for commercial financing, experience matters a lot.
You want someone who is actually doing what you’re trying to do. If your mortgage broker is building multi-family properties themselves, they understand the process from the inside.
They know which builders to work with. They know how to structure deals to fit CMHC requirements. They’ve been through the process multiple times.
Compare that to walking into a bank and talking to someone who has never invested in real estate. They might be able to process your application, but they can’t really guide you.
Shop Around for Better Terms
Another benefit of working with a mortgage broker: you get access to multiple lenders.
When you go direct to one bank, you get their rates and their terms. Take it or leave it.
For commercial deals that can be hundreds of thousands or even millions of dollars, a small difference in your interest rate adds up fast.
Building Generational Wealth
The real goal here isn’t just to buy one property. It’s to build a portfolio that creates lasting wealth for you and your family.
Commercial financing opens doors that residential financing can’t. You can scale faster, buy bigger properties, and structure deals that actually cash flow from day one.
Whether you’re just starting out or you’re a seasoned investor looking to go bigger, understanding Development Mortgage Financing changes the game.
Get your financing lined up before you start looking at properties. Work with people who have real experience. And build your portfolio strategically instead of just buying whatever you can get approved for.
Frequently Asked Questions
What's the main difference between commercial and residential mortgages?
Can I get commercial financing if my debt ratios are too high?
What is the CMHC MLI Select program?
How much do I need for a down payment on commercial property?
Should I get pre-qualified before looking at properties?
Why do investors choose Edmonton for multi-family properties?
What size property qualifies for commercial financing?
Should I use a mortgage broker or go directly to a bank for commercial financing?
Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.
Written by
LendCity
Published
December 22, 2025
Reading Time
6 min read
Amortization
The period over which a mortgage is scheduled to be fully paid off through regular payments of principal and interest. In Canada, common amortization periods are 25 or 30 years, though the mortgage term (when you renegotiate) is typically 1-5 years.
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.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management.
DSCR
Debt Service Coverage Ratio - a metric that compares a property's net operating income to its mortgage payments. A DSCR of 1.25 means the property generates 25% more income than needed to cover the debt. Lenders typically require a minimum DSCR of 1.0 to 1.25 for investment property loans.
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.
Interest Rate
The cost of borrowing money, expressed as a percentage. It determines how much you pay on top of the principal borrowed.
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.
Single Family
A detached home designed for one household, the most common property type for beginner real estate investors.
Blanket Mortgage
A single mortgage that covers multiple properties, often used by investors to simplify financing for a portfolio. Allows release of individual properties as they're sold.
Mortgage Broker
A licensed professional who shops multiple lenders to find the best mortgage rates and terms for borrowers. Unlike banks, brokers have access to dozens of lending options.
Coverage Ratio
A measure of a property's ability to cover its debt payments, typically referring to DSCR. Commercial lenders often require a minimum of 1.2, meaning the property's net operating income exceeds debt payments by at least 20%.
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.
Commercial Lending
Financing for commercial real estate or business purposes, typically qualified based on property income (NOI) rather than personal income. Includes mortgages for multifamily buildings (5+ units), retail, office, and industrial properties.
Multifamily
Properties with multiple dwelling units, from duplexes to large apartment buildings. Often offer better cash flow and economies of scale.
Rental Income
Revenue generated from tenants paying rent on an investment property. Gross rental income is the total collected before expenses, while net rental income subtracts operating costs to show actual profitability.
Loan-to-Cost Ratio
The percentage of a development project's total cost that a lender will finance. Unlike LTV which compares loan to appraised value, LTC compares loan to actual project costs including land, construction, and soft costs.
Debt Service Ratio
A broad term for ratios measuring a borrower's ability to service debt. In Canadian residential lending, the key ratios are GDS and TDS. In commercial lending, the DSCR serves a similar function but focuses on property income rather than personal income.
100% Financing
A mortgage structure where no down payment is required from the borrower's personal funds. In Canada, this is available for owner-occupied commercial properties through CMHC programs and for residential purchases using gifted down payments, borrowed down payments (where permitted), or vendor take-back mortgages combined with a first mortgage.
Construction Financing
A short-term loan that funds the building or major renovation of a property, disbursed in stages (draws) as construction milestones are completed. Once building is finished, the construction loan is typically replaced with a permanent mortgage through a process called takeout financing. Interest is charged only on the amount drawn.
Hover over terms to see definitions, or visit our glossary for the full list.