Understanding Commercial LTV

A loan-to-value (LTV) ratio is the mortgage amount divided by the property’s value, and it is the first number a commercial lender checks. Most lenders go to between 50% and 75% on commercial properties, depending on the type, and up to 85% on standard CMHC-insured rental housing. A lower LTV usually means a lower rate and an easier approval. A higher one means a bigger down payment, a higher rate, or a private lender.

Whether you’re an investor, developer or business owner, knowing your LTV before you apply helps you secure the best possible financing for your commercial project. Here is how it is calculated, how it affects your terms and your rate, and how to improve it.

What is a loan-to-value (LTV) ratio in a commercial mortgage?

The loan-to-value (LTV) ratio is a key number lenders use to judge the risk of a commercial mortgage. It is the percentage of a property’s appraised value or purchase price that the lender is financing. The formula is:

LTV Ratio = (Mortgage Amount / Property Value) × 100

Here’s a real-world example closer to home. Say you’re looking at a 6-unit multi-family building in Dartmouth, appraised at $1,400,000. A lender offers you a mortgage of $980,000. Your LTV ratio would be:

LTV = ($980,000 / $1,400,000) × 100 = 70%

This means the lender is financing 70% of the property’s value, and you’d need to cover the remaining 30%, or $420,000, as your down payment.

What is a typical LTV for a commercial mortgage in Canada?

Lenders set maximum LTV limits based on the type of property and the risk profile. Typical limits for commercial mortgages include:

• Multi-family residential properties: up to 85% for standard rental housing with CMHC mortgage insurance
• Office and retail buildings: 65% to 75%
• Industrial properties: 70% to 75%
• Special-purpose properties: 50% to 65%

If your LTV is too high, you may need a larger down payment or a different type of financing. These are general ranges, and each lender sets its own limits.

How do loan-to-value ratios affect commercial financing terms?

The higher the LTV, the more risk the lender takes on, so the lender asks for more in return: a bigger down payment, a higher rate, stricter conditions, or all three. A lower LTV does the opposite.

Approval and borrowing power

Your LTV decides how much a lender will advance against the property. If it is above the lender’s limit for that property type, the mortgage is reduced until the numbers fit, and you cover the difference.

Private vs. traditional lenders

Banks and institutional lenders keep to strict LTV limits. Private mortgage lenders may go higher in exchange for a higher rate, which can be a valuable option when you need more leverage and don’t qualify for traditional financing. You can read how that works on my private lending page, and what private lenders look at in how much equity you need for a private mortgage.

CMHC insurance on multi-unit properties

For multi-unit residential properties, CMHC mortgage insurance lets borrowers reach higher LTV ratios, up to 85% for standard rental housing, often with lower rates. Other CMHC programs have their own limits, so check which one fits your building.

Refinancing and equity access

LTV also decides how much equity you can pull out when you refinance. If property values rise, you may qualify for more financing at the same LTV. If values fall, your LTV rises and refinancing becomes harder.

How do loan-to-value ratios affect business mortgage rates?

Lower LTV mortgages generally get lower rates, because the lender has more equity as a cushion if something goes wrong. Higher LTV mortgages usually cost more, and the lenders who go to higher LTVs, such as private lenders, charge higher rates in return. Over the life of the mortgage, a lower LTV can mean real savings.

How can you improve your LTV ratio?

Here are some ways to lower your LTV and secure better terms:

• Increase your down payment. It is the simplest way to lower your LTV. It reduces the lender’s risk and improves your chances of a competitive rate.
• Consider CMHC-insured financing for multi-unit properties. It can give you access to higher LTV ratios with lower rates, which improves cash flow.
• Improve the property’s value. Renovations, tenant improvements or restructuring leases can raise the value and lower your LTV when you refinance.
• Look at alternative financing. If traditional lenders set tight LTV limits, a private lender or bridge financing may fit your goals.
• Work with a commercial mortgage broker. LTV rules and lender options are complex, and a broker can match your property to the lenders who suit it.

Is LTV the only number a commercial lender looks at?

No. Knowing your LTV tells you how much you can borrow. It doesn’t tell you whether the deal is a good one. That is what cap rate is for, and I explain it in how to calculate cap rate. I built a free tool that runs both cap rate and DSCR side by side, so you can see your borrowing power and your actual return in the same place.

Try the Cap Rate & Deal Analyzer →

Who compares commercial lenders for me?

I do. You send me one application, and I look at your property and your numbers, then compare the lenders who fit, including banks, CMHC-insured options and private lenders. You get one clear comparison, so you can see where your LTV works best. If you are planning a build, my post on how construction mortgage draws work shows how the money is released, and you can see what I do on my commercial financing page.

Frequently Asked Questions

What is a good LTV for a commercial mortgage in Canada?

It depends on the property type. As a guide, many lenders go to 65% to 75% on office, retail and industrial properties, 50% to 65% on special-purpose properties, and up to 85% on standard CMHC-insured multi-unit rentals. A lower LTV generally earns better terms.

How do you calculate LTV on a commercial property?

Divide the mortgage amount by the property’s appraised value or purchase price, then multiply by 100. A $980,000 mortgage on a $1,400,000 property is an LTV of 70%.

How do loan-to-value ratios affect commercial financing terms?

A higher LTV means more risk for the lender, so you can expect a larger down payment, a higher rate and stricter conditions. A lower LTV usually earns better terms and an easier approval.

How do loan-to-value ratios affect business mortgage rates?

Lower LTV mortgages generally get lower rates because the lender has more equity as a cushion. Higher LTV mortgages usually cost more, and private lenders who go to higher LTVs charge higher rates in return.

This post is general information, not legal or financial advice. Lender limits, rates and terms vary by lender, property and borrower. All financing is subject to lender approval.

Financing a commercial property? Send me your application and I will compare your options.

I look forward to hearing from you in regard to your mortgage needs.
902-465-5533. I answer.
Patrick

p.s. Ready to start? Apply here: https://craigburn-capital.mtg-app.com
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p.s. FSRA Principal Broker License #M23006699, Craigburn Capital. NS Brokerage 2026-3000179, NS Broker 2026-3000180.
p.s. Get the Craigburn mortgage app: https://craigburn-capital.mtg-app.com

Patrick Sawler is a mortgage broker and owner of Craigburn Capital, licensed in Nova Scotia and Ontario, with private financing available in New Brunswick and PEI. He answers his phone. Service aussi disponible en français.

Call 902-465-5533 or start your application today.