Options For Commercial Mortgages

Financing commercial properties can be a challenge. The qualification process can be very complicated and the criteria can differ greatly depending on the type of property you are buying or refinancing. At Verico Mortgage Options Ltd., we will work with you to make sense of the process and help you find the right lender at the right rate.

If you have shopped for a commercial mortgage previously, you know how specific banks can be on the types of properties they will finance. We have access to several mortgage lenders who specialize in mortgaging these tough to finance properties, just give us a call and we will start immediately working on your behalf!

Mortgage Options

Variable Rate Mortgages

What is a variable rate mortgage?: A variable rate mortgage is a home loan whose rate fluctuates with the banks prime lending rate. The interest rate on the mortgage can vary depending on the lenders cost for funds but usually they are in the prime minus 1% to prime plus 1% range. These loans have a higher element of risk associated with them as your payments can go up with the prime rate.
Can I switch to a fixed term mortgage during my term?: Yes you usually can; most lenders offer a policy whereby you are able to lock the rate in to the going fixed term rate which is at least as long as the term you have remaining. This takes some of the risk out of the product.
Can I pay it off at anytime?: There are 2 options for variable rate mortgages, open and closed. If you take an open product you can pay it off at anytime without penalty. With a closed product you would have an interest penalty to pay if you were to pay the mortgage off early in full. Usually there are prepayment privileges if you only wish to pay out part of the mortgage.
What is the biggest risk to the product?: There are really 2 things to be aware of when you take a variable rate mortgage. First off, you must pay attention to what is happening with the prime lending rate. We advise all clients that work with Verico Mortgage Options Ltd. to keep in touch regarding the prime lending rate should they choose this product. Secondly, you always want to be sure that you know exactly what you are getting should you choose to lock the mortgage in at some point down the road. Some banks will only offer you posted rates, others a small discount off of the posted rates. Working with a mortgage broker who knows their lenders and their products is very important to getting the lenders 'fully discounted' rates should you lock in is a must to this product. This is the most critical point in shopping for a variable rate mortgage.

Fixed Term Mortgages

What is a fixed term mortgage?: Fixed term mortgages are those that have a locked in interest rate for the full term of the mortgage. Generally in Canada, the terms can be anywhere from 6 months to 25 years although 5 year tends to be the term of choice. Fixed terms add security for the borrower as they know that their payments will not fluctuate through the term, and they are able to budget accordingly.
Can you make extra payments on a fixed term mortgage?: Yes, usually you can unless its specified specifically in the mortgage document. A typical prepayment privilege would be 15 or 20% increase in your monthly payment per year as well as a 15 or 20% lump sum payment per year. This allows someone to be very aggressive with a mortgage and pay it off quite quickly. If you want to pay more than the amount allowed or pay the mortgage off in full, you will be required to pay a penalty to get to out of the mortgage. This penalty is usually 3 months interest or the interest rate differential.
Will I pay more interest on a fixed rate mortgage than a variable or adjustable rate mortgage?: There are too many variables involved in this to give a definitive answer but usually you do pay a bit of premium for the security a fixed rate mortgage.
What type of payment options do I have with a fixed term mortgage?: Although this does vary by lender, usually you have all the same weekly, biweekly, semi monthly and monthly options as other terms.