Commercial Mortgages - Finance Multi-Family With As Little As 5% Down

In this episode of the Close More Deals Podcast, host Scott Dillingham breaks down the essential differences between conventional bank financing and CMHC-insured programs for multifamily properties with five or more units. For real estate professionals and investors working with apartment building purchases, understanding these financing options can mean the difference between a deal that works and one that falls apart at the numbers stage.

Scott explains that conventional bank financing for commercial multifamily properties typically limits borrowers to 25-year amortizations and 75% loan-to-value ratios, with some exceptions reaching 30 years and 80% LTV. These restrictions significantly impact how much investors can qualify for because commercial lenders calculate loan amounts based on the property's cash flow rather than personal income. When that cash flow is analyzed over a shorter amortization period, the resulting loan amount is substantially lower than what could be achieved through alternative programs.

The episode focuses on two powerful CMHC programs that transform multifamily financing possibilities. The MLI Standard program offers up to 85% loan-to-value with amortizations extending to 40 years, providing significantly better terms than conventional options. However, the MLI Select program takes these benefits even further by introducing a points-based system that rewards investors for meeting affordability, energy efficiency, and accessibility criteria.

Under MLI Select, projects earning at least 100 points can access financing at 95% loan-to-value with amortizations stretching to 50 years. This represents double the amortization period available through traditional bank channels. The program evaluates three key areas: the proportion of units with rents at or below 30% of median income, energy efficiency improvements, and the percentage of accessible units within the property. Higher scores translate to better financing terms, including reduced insurance premiums.

Scott emphasizes that the mathematical impact of these differences cannot be overstated. A property analyzed under a 40 or 50-year amortization will qualify for substantially more financing than the same property evaluated under a 25-year period. This means investors can either purchase larger properties or put less money down on their acquisitions. Current interest rates for CMHC-insured multifamily mortgages are running in the low to mid-three percent range, which compares favorably even to residential variable rates.

The trade-off involves a CMHC insurance premium that gets added to the loan amount, similar to how residential mortgage insurance works. However, the combination of lower interest rates, longer amortizations, and higher loan-to-value ratios typically makes this premium worthwhile for most multifamily investors.

A key takeaway from this episode is that most banks do not offer CMHC-insured multifamily programs. They only provide conventional financing options, which means investors who go directly to their bank may be limiting their purchasing power without realizing it. Working with a mortgage broker who specializes in commercial and multifamily financing ensures access to the full range of available programs and helps investors maximize their qualification amounts.

For realtors working with multifamily buyers, understanding these financing differences positions you to add significant value to your client relationships. Guiding investors toward the right financing solutions before they start shopping can help ensure deals actually close rather than falling apart during the qualification process.

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