Commercial mortgages

What the lender is actually looking at

On an income-producing property, the central test is debt service coverage: net operating income divided by the annual debt payment. Lenders set a minimum, and it varies by asset class and by how the rent roll looks. Your personal covenant matters, but it is not the first thing read.

Expect a lower loan-to-value than residential, a shorter term, and a lender fee that is part of the deal rather than an exception. Terms are negotiated per file; there is no posted sheet.

Lender fit is most of the work

Chartered banks, credit unions, life insurance companies, mortgage investment corporations and private lenders all participate, and each has an appetite for specific asset classes, locations and borrower profiles. A file that is routine for one is an automatic decline at another — not on merit, but on mandate.

Our job is knowing which door to knock on, and presenting the file in the format that lender underwrites in.

What to have ready

A rent roll, two to three years of operating statements, the leases, an environmental report where the use calls for one, and a clear statement of what you are doing and over what horizon. Commercial approvals run weeks, not days, and the timeline is set by how complete the package is on day one.