If you’re buying a clinic, a plaza, or an investment property in Ontario, one of the first questions you’ll ask is: what commercial mortgage rate should I expect? The honest answer is that commercial mortgage rates in Ontario are not published on neat rate sheets the way residential rates are. Every commercial deal is priced individually, based on the property, the borrower, and the lender’s read of the risk. This guide explains what actually drives commercial mortgage rates, how lenders set them, and how to compare offers so you can negotiate from a position of strength.

How Commercial Mortgage Rates Differ From Residential Rates

A residential mortgage on your own home is a standardized product: millions of Canadians hold essentially the same loan, so lenders compete on published rates. Commercial mortgages are the opposite. The lender underwrites a business and a specific income-producing property, not just a borrower and a house. That means:

Rates are higher. Commercial loans carry more risk and more underwriting work, so lenders price in a premium over comparable residential rates.
Terms are shorter. Many commercial mortgages run 1 to 5 years, with amortization stretched to 20 or 25 years — meaning a refinancing decision comes around sooner than most borrowers expect.
Rates are quoted case by case. Two borrowers buying similar properties can be offered different rates because the lenders weighed the tenants, the cash flow, and the borrower’s experience differently.
The headline rate is only part of the cost. Commercial deals come with arrangement fees, legal costs, appraisals, and sometimes environmental assessments — all of which affect the true cost of borrowing.

Because of this, comparing commercial mortgages by the rate number alone is a common and expensive mistake. A slightly lower rate with heavy fees and a rigid term can cost you more than a slightly higher rate with flexible prepayment terms.

The Building Blocks: What Sets Your Commercial Mortgage Rate

When a lender prices a commercial mortgage, it starts from the cost of money and adds a risk premium for everything about your deal. Here are the pieces, in rough order of importance.

1. The Bank of Canada’s policy rate and bond yields

Every interest rate in Canada traces back to the Bank of Canada’s target for the overnight rate. As of October 2026, the Bank has held that rate at 2.25% since October 2025 (Bank of Canada rate announcements), which put the major banks’ prime rate at 4.45%. Variable-rate commercial mortgages move with prime, the same as residential variables do.

Fixed commercial rates, however, follow a different anchor: Government of Canada bond yields for a matching term, plus the lender’s spread. When bond markets expect rates to stay flat or rise, fixed commercial pricing reflects that immediately — sometimes before the Bank of Canada moves at all.

2. Loan-to-value (LTV) ratio

Commercial lenders are more conservative than residential lenders about how much they’ll lend against a property. While a homebuyer can get up to 80% LTV from a bank, commercial lenders often cap first-position lending at 65% to 75% of the property’s value. The lower the LTV, the safer the lender feels — and the better the rate you’ll be offered. This is also why commercial borrowers with large down payments have real negotiating power.

3. The property’s income and the debt-service coverage ratio

Residential lenders ask “can the borrower pay?” Commercial lenders ask “can the property pay?” They measure this with the debt-service coverage ratio (DSCR) — the property’s net operating income divided by its annual debt payments. A DSCR of 1.25 means the property earns 25% more than it needs to cover the mortgage. Lenders typically want to see at least 1.20 to 1.25, and a stronger DSCR earns a better rate because the lender’s risk is lower. Stable, long-term tenants (like medical or dental practices) make lenders more comfortable than vacant or speculative space.

4. Property type and location

Not all commercial property is priced equally. A well-located medical clinic or a grocery-anchored plaza is easier for a lender to understand — and to sell if things go wrong — than a single-purpose industrial building in a small market. Lenders price property types they know well more aggressively, and they charge a premium for specialized or hard-to-value assets.

5. The borrower’s experience and financial strength

Commercial lenders care deeply about track record. A borrower who already owns and manages income property is a known quantity; a first-time commercial buyer is not. Expect questions about your net worth, liquidity, and experience with the property type. A strong borrower profile can shave meaningful margin off the rate.

6. Term length and amortization

Shorter terms and shorter amortizations generally mean lower rates, because the lender is exposed to risk for less time. A 3-year term amortized over 25 years will usually price better than a 5-year term — but it also means refinancing sooner, which is its own risk and cost.

Beyond the Rate: The Fees That Change the True Cost

Commercial mortgages carry fees that rarely appear in residential lending. When you’re comparing offers, ask about every one of these:

Lender arrangement or commitment fee — often 0.5% to 1% of the loan amount, paid when the commitment is issued.
Broker fee — if you’re working with a mortgage broker, their fee is usually disclosed upfront and is often paid from the lender’s commission or the loan proceeds.
Appraisal — commercial appraisals cost more than residential ones and are almost always required.
Legal fees — commercial closings involve more documentation, and the lender’s legal costs are typically passed to you.
Environmental assessment — for many commercial properties, especially industrial or gas-station sites, a Phase I (and sometimes Phase II) environmental report is mandatory.
Prepayment penalties — commercial mortgages often have stricter prepayment terms than residential ones, including yield-maintenance clauses that can make early exit expensive. Always ask how the penalty is calculated before you sign.

A disciplined way to compare: add up the rate, the fees, and the prepayment terms over the full term you’ll actually hold the loan, not just the headline number. If you plan to refinance in three years, a five-year term with a punishing prepayment penalty is the wrong loan even at a great rate.

Fixed vs. Variable for Commercial Borrowers

The fixed-versus-variable debate works differently in commercial lending. Variable commercial rates are usually priced as prime plus a margin, and they give you flexibility if you expect to sell or refinance soon. Fixed commercial rates lock in your payments, which matters most when the property’s cash flow is tight — a rate increase you could absorb personally is a different question when the property has to absorb it.

One practical rule: match the mortgage to your business plan. If you’re buying a plaza you intend to hold for a decade, the certainty of a fixed rate is usually worth the premium. If you’re acquiring a property to reposition and refinance in two years, paying for five years of certainty makes no sense — but make sure the shorter-term loan’s exit terms are clean.

How to Compare Commercial Mortgage Offers

Because every lender structures commercial deals differently, you need a checklist. For each offer, write down:

The rate and how it’s set (prime-based? bond-yield-based? when does it adjust?)
The full fee schedule, in dollars — not just percentages
The term, amortization, and payment structure
The prepayment penalty formula and any lock-out periods
Covenants — the promises the lender requires, such as maintaining a minimum DSCR or keeping certain insurance in place
Whether the lender can call the loan or demand re-qualification mid-term

And get more than one offer. Commercial lenders’ appetites vary enormously by property type and deal size — a bank that loves owner-occupied clinics may have no interest in multi-tenant retail. A mortgage broker who works with a range of commercial lenders can save you weeks of dead-end applications. If you’re exploring financing for a commercial property in Ontario, our commercial mortgages page explains how the process works, and our mortgage calculator can help you model payments at different rates before you apply.

The Bottom Line

Commercial mortgage rates in Ontario are set deal by deal — anchored by the Bank of Canada’s policy rate and bond yields, then adjusted for your property’s value, income, type, your experience, and the term you choose. The borrowers who get the best pricing are the ones who understand these levers before they apply: strong equity, documented property income, a clean exit plan, and competing offers from lenders who actually want their deal type.

Buying, refinancing, or expanding a commercial property in Ontario? Contact Kia Pakravan — an FSRA-licensed mortgage agent (licence #13380) — to discuss your commercial mortgage options and get a clear picture of what your deal could look like.