You must find a company that walks you through all the steps if you want to invest in a mixed-use property. Lenders offer mixed-use mortgages to investors wishing to buy or refinance buildings with a mix of residential and commercial space. Here are some things you need to know about mixed-use mortgages.
What is a Mixed-Use Property?
A mixed-use property is a building or complex that combines residential and commercial spaces. Examples of mixed-use properties include apartment buildings with ground-floor retail shops, live/work spaces, and buildings with office space above residential units.
Down Payment Requirements
When it comes to mixed-use properties, where both residential and commercial elements are combined, down payment requirements typically fall within the range of 20% to 35%. This means that borrowers would need to provide a down payment of at least 20% to secure a mortgage for such properties. The specific percentage within this range may vary based on factors such as the lender’s policies, the borrower’s financial situation, and the nature of the property.
On the other hand, for pure commercial properties, where the primary purpose is commercial use without any residential component, down payment requirements are generally higher. In these cases, it is common for lenders to require a down payment closer to 50% of the purchase price. The higher down payment requirement for commercial properties reflects the perceived higher risk associated with these types of investments.
Qualifying for a Mixed-Use Mortgage
To qualify for a mixed-use mortgage in Canada, you need to meet certain criteria. Lenders will assess your financial stability by looking at your income, employment history, and creditworthiness. They will evaluate the property’s potential for both residential and commercial use, considering factors such as location, condition, and income-generating potential. Additionally, a higher down payment of the purchase price is typically required. Providing a comprehensive business plan and supporting documentation may be necessary if you plan to operate a business within the property. Lenders will analyze the debt service coverage ratio (DSCR), which measures the property’s ability to generate enough income to cover its mortgage payments and other expenses.
Benefits of Mixed-Use Real Estate
Mixed-use real estate offers several benefits for borrowers in Canada. They provide an opportunity to combine living and business spaces, allowing for convenience and potential cost savings. With both residential and commercial units in the same building, investors can benefit from multiple income streams, potentially increasing overall cash flow.
At Enrich Mortgage Group, we provide a selection of mixed-use mortgage products to support your investing objectives. Our knowledgeable staff can aid you through the procedure and assist you in locating the ideal mortgage for your requirements. To find out more, call us right away!