If your business is looking to expand, you may be in need of a mortgage to help pay for a new space. For building purchases that are larger than average, such as warehouses, storage units, and manufacturing plants, you’ll need to apply for an industrial mortgage in Toronto.
What is an industrial mortgage?
An industrial mortgage is a financial loan that has been created to cover large building purchases where manufacturing or other related work happens. It differs from a commercial mortgage, as an industrial mortgage is not used to buy a property that has housing units. A commercial mortgage is for a business’s real estate purchases when there are residential sections to the property.
How to Apply for an Industrial Mortgage
The application process for industrial mortgages calls for you to have the following documentation:
- A building appraisal
- Your company’s credit history
- For new businesses, a business plan must be submitted alongside proof of industry experience
- Established organizations need to have two years of accounts
- Details of the property you want to buy, including location and plan of use
- Any environmental reports pertaining to your industry
What is a commercial mortgage?
In contrast to an industrial mortgage, a commercial mortgage allows a business to purchase real estate that contains some portion of residential housing. This could include:
- Storefront with apartments
- Multi-family residential homes
- Commercial plaza
- Construction projects
Commercial mortgages can also be used to make investment purchases in residential real estate. It is important to keep in mind that a commercial mortgage is the one you’ll need if you want to buy an office or retail space. Some industrial properties may fall under commercial mortgage requirements. Contact an experienced mortgage broker if you have questions about the type of mortgage you need for your building purchase. Most mortgage brokers can help you understand the difference between an industrial mortgage and a commercial one.
What to Know About Commercial Mortgages
Business building purchases can be more complex than residential ones. While it usually takes a few weeks or months to close a residential mortgage, commercial mortgages can take significantly longer.
To get the best interest rates on your commercial mortgage, you should talk to a mortgage broker. Most lenders don’t advertise the details of their business mortgage products. Moreover, the details and terms of these mortgages can vary significantly.
Qualifying for a commercial mortgage can be more difficult than home mortgages. You’ll need to provide financial information such as:
- Debt service coverage ratio
- Credit history
- Current business situation
- Type of business
- Down payment
Lenders may also require you to have mortgage insurance for commercial properties. This is because they need some extra security that they will get their money back if your business fails.
Banks are not the only places that you can apply for a commercial mortgage. There are some private funds that may approve your loan, including pension funds, credit unions, and other specialized lenders.
If you are interested in learning more about industrial mortgages, call Northwood Mortgage™ at 888-492-3690 or contact us here.