Our commercial mortgage service for multi-dwelling

The purchase of a rental property can be an excellent long-term investment and a good source of monthly income. However, the rules governing mortgage financing are different for the purchase of a 5-unit building than for the purchase of a residence with 4 units or less.

What is a multi-housing?

A multi-dwelling or multiplex is a residential building with 5 or more units. This property is not considered a conventional house or building with 4 units or less, but a commercial asset.

Notre service d’hypothèque commerciale pour le multilogement

The commercial mortgage

You can take out a conventional mortgage with your bank to finance the purchase of a building with 4 units or less. The financing of a rental building with 5 units or more will have to be done through a commercial mortgage. The difference between a conventional mortgage and a commercial mortgage lies mainly in the qualification criteria.

What does the bank rely on for financing a multi-unit building?

A financial institution considers many factors before providing financing for an income property, including:

the location of the building, its nomenclature, its condition, its age, its optimization potential and its occupancy rate;
your experience in real estate management;
your sources of income and available cash flow after financing to ensure that you can meet unexpected expenses;
the capital to be borrowed.

The lender will consider other important factors, including the gross revenue multiplier, net revenue multiplier, overall discount rate and debt coverage ratio.

What makes our commercial mortgage brokers different?

Going through a brokerage agency saves you the trouble of shopping around to different financial institutions and banks to find the best terms for your mortgage. By calling on our team dedicated to multi-housing, you benefit from many other advantages:

A tailor-made service and regular exchanges

Your mortgage broker establishes a personalized financial strategy based on your profile after a careful analysis of your file. We also make sure to keep you informed and explain the progress of your file.

Reactivity

Working with our mortgage brokers is the guarantee of quickly finding a commercial mortgage loan offer that meets your requirements, with an attractive interest rate, a reasonable amortization period and an interesting loan-to-value ratio.

A developed network

We work with more than 25 financial partners. Our perfect knowledge of their products allows us to find you the most suitable commercial mortgage loan for your situation in the shortest possible time.

Availability

One of our strengths is our availability and proximity service. We have eight agencies located in Montreal and on the South Shore. We can also come directly to your home during the week.

A CMHC correspondent

As a CMHC correspondent, our brokerage can submit your file directly to the mortgage loan insurance. It is no longer necessary to submit a certificate from your financial institution.

You can already make a simulation to get an idea of the mortgage interest rate applied to your future acquisition.

FAQ

How is the mortgage rate for a multi-family dwelling different from the interest rate for a building with four or fewer units?
Is the minimum down payment different for a multi-housing unit?

The down payment is not the same for a rental building with less than five units and a multi-unit building with five or more units. For a two or four unit building with one owner occupying one of the units, lenders require a minimum down payment of 5% or 10% of the purchase price. If you wish to rent out all the units, the down payment will be 20% of the purchase price.

In the case of a multi-family dwelling, the minimum down payment is 15% for a CMHC-insured loan. For a contract without loan insurance, a personal contribution of 25% of the purchase price of the building is required. The average amortization period for an insured commercial mortgage is 35 years, compared to 25 years for a conventional loan.
How much can the loan amount be for a multi-housing?
Is there a difference between a 5 or 6 plex and a 7 plex or more?

Yes, as far as the calculation of the financing amount is concerned. In the case of a building with 5 or 6 dwellings, the bank or financial institution considers the market value of the property, that is, its value on the market at the time of purchase. On the other hand, for a multi-dwelling with 7 or more units, the amount of capital loaned will be evaluated according to the economic value to minimize the risks. The economic value corresponds to the value of the multi-dwelling established by a bank according to its net income.
What are the documents required by financial institutions for a multi-housing?
Typically, financial institutions request documentation on:
- the applicant, including a tax return, proof of assets, business financial statements, confirmation of the last three months’ down payment, offer to purchase ;
- multi-housing, including a market evaluation, an environmental evaluation, a statement of expenses and income of the property, the history of renovations, the register of tenants, statements of the various taxes and energy expenses borne by the owner, a certificate of location.