How much is a commercial mortgage down payment in Canada?

If you are buying, refinancing, or renewing financing on a commercial property in Mississauga or elsewhere in Southern Ontario, the question of how much cash you must bring to the deal matters early. Unlike standard residential mortgages, commercial mortgage down payment requirements vary by lender, property type, borrower profile, and the income the property generates. This article walks you step by step from estimating the likely equity a lender will want through the exact documents you need for preapproval, practical ways to source or reduce the upfront cash, and the actions to take before you sign anything.

How commercial down payments differ from residential down payments

Do not assume the residential rules you know automatically apply. For example, federal guidance explains that for insured residential mortgages a down payment under 20% typically triggers mortgage loan insurance, and mortgage loan insurance is not available for purchases of $1,000,000 or more. See the federal down payment overview for residential mortgages on Canada.ca for details and limits (Canada.ca). Commercial mortgages are underwritten differently: lenders decide acceptable loan-to-value, the importance of rental income, and whether to require personal guarantees or corporate pledges. In short, there is no single national rule that sets one universal commercial down payment percentage, so treat any single quoted number as a lender starting point rather than a guarantee.

Which lender criteria most influence the required down payment

Lenders set required equity by evaluating the risk profile of the deal. The main underwriting factors are:

• Loan-to-value ratio, or LTV, which compares the loan amount to the property value
• Debt service coverage ratio, or DSCR, when the property will be financed against rental or business income
• Borrower credit, experience, and the legal entity used for the purchase (individual, corporation, or trust)
• Property type and quality of tenants, lease terms, and location
• Condition and environmental risk of the asset, and whether additional due diligence is required

Loan-to-value and what to expect

Conceptually, a lower LTV reduces the lender’s loss severity and often allows better pricing or easier approval. That means increasing your down payment to lower LTV can be the fastest way to improve terms. However, if adding equity drains working capital you need to operate the property, lenders may prefer additional guarantees or a co-investor over an unusually large cash injection. Prioritize reducing LTV when you can do so without leaving the business undercapitalized.

DSCR and income underwriting

When a property produces income, lenders look at the projected net operating income relative to required debt service, called the DSCR. If DSCR is strong, a lender may accept a higher LTV. If the business or rent roll is thin, expect higher equity requirements or personal guarantees. If your deal is DSCR sensitive, ask a broker to run multiple DSCR scenarios so you know the equity level that moves the application from a conditional to a firm approval.

What lenders will ask to prove your down payment at preapproval

Before issuing a preapproval, a lender or mortgage broker will verify your assets, income and debts, and will want to see proof you can pay the down payment and closing costs. Typical items lenders request are listed in federal guidance about getting preapproved on Canada.ca (Canada.ca). Expect to supply:

• Recent bank statements showing the account holding the funds and the deposit history
• Statements for other assets you intend to use, for example investment accounts or the sale proceeds of another asset
• Sale agreements or investor commitment letters if funds come from a partner or sale
• Corporate balance sheets, interim financial statements, or business bank statements when the buyer is a company
• Government identification, and proof of ability to cover closing costs

Stop point: no single document is universally sufficient. Lenders have varied checklist items and may request more evidence depending on the source and path of funds.

Verifying corporate or self-employed income

Self-employed or corporate borrowers should be ready to deliver tax returns, Notices of Assessment, T2 or T1 summaries, and business financial statements. Lenders may ask for audited or reviewed statements for larger or more complex loans, and they often require personal guarantees where the corporate cash flow is limited. The preapproval process therefore includes more than a bank balance check; it is a review of the full business and tax profile, as described in federal preapproval guidance on Canada.ca (Canada.ca).

Practical ways to source or reduce the required down payment

If you do not have the full equity a lender requests, several options exist. Each has trade-offs that change how the lender reviews the file:

• Personal savings or partner equity, the simplest source, preserves standard underwriting but concentrates risk on owners.
• Investor or equity partner, brings capital and can reduce lender-required cash, but dilutes ownership and may complicate decision making.
• Seller financing, where the seller carries part of the sale, can reduce immediate cash needs and may be acceptable to lenders with appropriate documentation.
• Mezzanine or second-lien financing, allows higher leverage but increases overall borrowing costs and may affect DSCR and lender willingness.
• Using equity from another property, often accepted if properly documented, but lenders will look at consolidated leverage and stress tests.
• Bridge loans, short term solutions that can fund closing while you arrange longer term capital, at higher cost.

Do not hide subordinated debt or additional monthly obligations from the lender. Underwriting will include those obligations, and undisclosed debt can cause delays or denial.

Trade-offs to consider before using non-traditional funding

Before you accept non-traditional funding, ask two questions: what is the total cost of capital including fees and interest, and will the lender accept that structure in underwriting? Cost of capital, repayment timing, and how subordinated debt affects DSCR and debt service tests are the core decision criteria. If the structure raises costs or risk materially, it may be better to bring more equity or adjust the purchase price.

Timeline and separate costs to budget besides the down payment

Commercial transactions typically follow these ordered steps from preapproval to closing: 1) get preapproval and compile documents, 2) secure a conditional commitment subject to appraisal and due diligence, 3) complete property due diligence and obtain lender conditions, and 4) receive firm commitment and close. The federal mortgage overview highlights the preapproval and preparing steps lenders follow on Canada.ca (Canada.ca). Important: closing costs are separate from the down payment. Budget for legal fees, appraisal and environmental reports, title insurance, land transfer tax where applicable, and any lender fees or disbursements.

Mississauga and Southern Ontario notes that affect lender appetite

Market context matters. In the Greater Toronto Area and Mississauga, demand and tenant strength for certain asset classes such as industrial and logistics properties may increase lender competition and availability. Conversely, soft office markets or properties with short-term tenancy may trigger higher equity needs. Local broker relationships matter because many regional lenders and specialty funds underwrite deals with local market knowledge. For local support and tools like Instant Eligibility, calculators, and mortgage guides, see MiiGrowth’s client resources on the MiiGrowth site (MiiGrowth).

Step-by-step checklist to prepare a commercial mortgage down payment and get preapproved

1. Estimate likely lender requirements. Assess the property type, expected LTV, and DSCR range and decide whether you can raise equity or prefer guarantees. Pause if projected DSCR is below lender minimums and run alternate scenarios.
2. Gather proof-of-funds and identity documents. Prepare recent bank statements, sale or investor letters, government ID, and any corporate financials. Lenders require clear, traceable source-of-funds documentation for down payments, according to Canada.ca (Canada.ca).
3. Run an eligibility and affordability check. Use calculators and an eligibility review to see what loan size and payment the deal will tolerate. This is the point to involve a broker who can run DSCR scenarios and identify lenders likely to consider the structure.
4. Disclose all existing debt and subordinated financing plans. Lenders will include these in stress testing. Do not assume an ad hoc mezzanine will be ignored in underwriting.
5. Obtain conditional financing and complete property due diligence. Once a conditional commitment is in place, order appraisals, environmental reports, and legal title work. Expect the lender to confirm conditions before firm commitment.
6. Close with funds on hand and confirmed closing budget. Confirm wire and closing instructions early and keep contingency funds for final adjustments.

Quick preapproval document checklist you can use today

• Government ID for all principals
• Last 3 to 6 months of business and personal bank statements
• Business financial statements, T1 or T2 returns, and Notices of Assessment
• Proof of deposit source, sale agreements, or investor commitment letters
• List of liabilities and existing loan statements
• If income property, copies of leases or a rent roll
• Purchase agreement or letter of intent

Red flag items that delay approval include unexplained large deposits, inconsistent income documentation, and environmental concerns flagged during a site review. Address these early with your broker or lender.

When to hire a mortgage broker and how MiiGrowth can help

You should engage a broker when your deal is complex, when income is non-standard, when you need to use non-traditional funding, or when the purchase price or asset type exceeds typical residential underwriting norms. A broker like MiiGrowth can run Instant Eligibility checks, assemble and present the preapproval package, shop multiple lender pools, and negotiate terms that match your commercial objectives. For more information about local support and tools, visit MiiGrowth on the official website (MiiGrowth).

Frequently asked questions

Need a quick eligibility check or help assembling your preapproval package? Visit MiiGrowth to start.