Welcome back to the Close More Deals podcast. I'm your host, Scott Dillingham. Today, I'm gonna be talking to you about financing commercial properties and the best way to finance them. Now, commercial, there's so many different property types. So today I'll be speaking specifically about multifamily.
Scott Dillingham:So what I see in the market is a lot of multifamily investors, they don't really understand nor do the the realtors how to run the numbers and qualify a multifamily residential property. So there's two main programs that I'll discuss here today, and I'll show you kinda how we do it. But the two programs are CMHC, MLI Standard, and MLI Select. So you can go conventional, which is through the banks, which has quite a bit of negatives, or you can go insured. And to give you the difference between them is if you go with a conventional at the bank, you are stuck with a twenty five year amortization.
Scott Dillingham:A few banks can do an exception and go to thirty years as an amortization for these rental properties. And generally speaking, you're at 75% loan to value. Some might go to 80 on exception. Okay. When I say multifamily, I'm speaking of five units or above.
Scott Dillingham:Now with the CMHC standard and MLI select program, these are insured. So you're getting just like when somebody buys their primary residence. Ultimately, the CMHC is reviewing and, they're approving the multifamily properties. So what they do is they analyze the numbers using a cash flow calculator. But the massive benefit to going with CMHC is the amortizations in the loan to value.
Scott Dillingham:So under the standard program, they'll actually go to up to 85% loan to value, and then they'll finance they'll finance this over up to a forty year period, which is fantastic. Now the MLI Select program, this is a little more in-depth. This program is easier to qualify for on new properties that are vacant, so you can set it up properly because ultimately, they're looking for an affordability component. They're looking for an energy friendly component, and they're looking for an an an accessible component. And depending how affordable your rents are across your units or how energy friendly it is, you get points.
Scott Dillingham:And the more points you get, the better the terms are. So if we were to get at least a 100 points on a transaction under the MLI Select, you can actually finance 95% of the purchase price with a fifty year amortization, which is absolutely crazy. That's double what the banks are offering. So the thing for you that I think is important to know is just going to the bank is not the answer. Most banks don't have, the insured program.
Scott Dillingham:They only offer the conventional. So think about it. The banks on the commercial side, they lend based on the property's cash flow. Well, if they're only going to analyze this and review it over a twenty five year period, you're going to be heavily restricted on your loan amount compared to if you were being reviewed under a forty year amortization period. You see what I mean?
Scott Dillingham:Now the one downside, and I will call this out, but the one downside to the CMHC program is there is a fee for this. Just like regular homes that CMHC finances, they charge a fee and they add the fee into the loan. So the borrower does end up paying a fee to access this, but you are getting lower rates. We're seeing some low to mid threes, which is fantastic. I'm recording this at the start of of January twenty twenty six.
Scott Dillingham:So we're seeing low to mid threes. Again, you can't get that on residential. You could get maybe mid threes, but that's your primary home, and that's you getting a variable rate as of today. So the rates are better, amortization is longer and the LTV is higher. So it's just every investor's dream.
Scott Dillingham:So anyways, I hope this helps and shed some light on some of the programs out there. Don't let your client go to the bank when they're buying multifamily. The amount that they're going to qualify for is going to be drastically less. And I mean drastically like this is such a big, big difference. It's just it's not even fathomable how how big of a difference this is.
Scott Dillingham:So let us know. Reach out. The contact details will be in the show notes below. We'd love to help you and your clients along this journey to maximize what they can qualify for the rental properties. Thank you.
Scott Dillingham:Have a great day. And again, if this added value, please share with your friends and other realtors.