Situation · Owners
My commercial mortgage is coming due and the numbers don’t work
A commercial mortgage term has an end date. At maturity the balance comes due, and the lender decides whether to renew and on what terms. Many owners start about 6 months out, which can leave time to get a value opinion and compare two or three lenders.
For: Investors · Business owners
Go deeper
Plain-English definitions with BC sources, from the encyclopedia:
- Financing a commercial property in BC through your bank (guide)
- Sale-leaseback
- Rent roll
- Appraisal
- Vendor take-back (VTB)
- Term (loan)
General information only. This page is not legal, tax, accounting or financial advice, and it isn’t an opinion on your situation. Laws, rates and figures change, and examples are illustrative. Get advice from a lawyer, accountant or other qualified professional before you act. Reading this page doesn’t create an agency or client relationship. Cam Appleton is a Commercial Real Estate Agent licensed by the BC Financial Services Authority (BCFSA RE611549) with Coldwell Banker Prestige Realty. Terms and disclaimer.
Why renewal feels different this time
Many owners locked in five-year terms when rates were lower. The building may be fine, but the payment at today’s rate isn’t. Canada’s banking regulator, the Office of the Superintendent of Financial Institutions (OSFI), says in its Annual Risk Outlook 2025-2026 that commercial borrowers face elevated debt servicing costs that can lead to refinancing challenges, and that owners of weaker office properties may need to put in more equity to refinance.
The lender takes the lower of two numbers: what the value supports and what the income supports. Both tests matter.
How a lender sizes the loan
- Value test
- Loan = the lender’s loan-to-value (LTV) × the lender’s value for the building.
- Income test
- Maximum annual payment = net operating income (NOI) ÷ the lender’s required debt coverage ratio (DCR).
Ask each lender for its current LTV and DCR for your property type. Ratios vary by lender and change over time.
Example (illustrative): NOI is $180,000 and the lender wants a DCR of 1.30, so the maximum payment is about $138,462 a year. If the old payment was $120,000 and the new rate pushes it to $150,000, the income test fails, even if the value test passes. Options people often consider include a principal paydown, a longer amortization, a second lender, or a sale.
Many Canadian fixed-rate mortgages compound semi-annually, reflecting the Interest Act, so a US calculator can be off. My commercial mortgage calculator is a quick check.
Get your renewal file ready before the lender asks
If the coverage test is going to be tight at the new rate, the best thing you can control is the NOI the lender sees. Three to six months before maturity:
- Update the rent roll and make sure it matches the leases and what is actually being collected. Renewed or new leases signed now count; verbal ones usually don’t.
- Get estoppels from your main tenants early. A lender who sees signed confirmation of rent and term has fewer reasons to haircut your income.
- Clean up the operating statement. Separate one-time capital work from ordinary running costs, so a new roof doesn’t read as an annual expense.
- Work the test both ways. Compute your NOI divided by the new yearly payment. If it falls short of what lenders ask (often around 1.2 to 1.35), work out the paydown or longer amortization that fixes it, before you’re negotiating against a deadline.
For how lenders size the loan step by step, see my financing guide.
Your four options
| Option | What it costs | Time | What the lender needs | Best fit |
|---|---|---|---|---|
| Renew with your lender | Their offered rate, maybe a paydown | Weeks | Updated rent roll and statements | The numbers still roughly work |
| Move to a new lender | Legal, appraisal and lender fees | 1 to 3 months | Full new application and appraisal | Your lender’s terms are weak |
| Bridge financing | Higher rate for a short term | Weeks | A clear exit plan | You need time to lease up or sell |
| Sell in an orderly way | Selling costs and tax on any gain | Months | Nothing, you pay it off | Holding no longer makes sense |
Costs and timing vary by lender and building. This table is general. Get quotes and advice for your building.
A 6-month plan
- Month 6: current rent roll and leases, 2 years of operating statements, property tax and insurance bills, a list of capital work.
- Month 5: an opinion of value, so you know where the value test lands.
- Months 4 to 3: quotes from 2 or 3 lenders or a mortgage broker. Aim to have a sell or refinance decision by around month 3.
- Months 2 to 0: with your lawyer, sign the renewal, close the new loan, or have the building listed.
What experienced sellers do differently
- Decide early, while you still have room
- A sale you choose a year out is a different deal from one the lender chooses for you. If selling is on the table, it often pays to decide early and commit, because a listing that gets pulled can carry a stigma.
- Seller financing can bridge a gap
- If a buyer’s lender won’t lend enough to meet the price, carrying part of it as a vendor take-back may close the gap. Many sellers set a minimum cash number and treat anything above it as the financed part, secured the way a lender would secure it.
- Lenders and buyers read the same numbers
- Both size debt to what the cash flow can carry. Clean statements help with the renewal and with a sale, so it helps to tidy them before the renewal conversation.
- Keep the structure simple
- Every extra moving part, like a second loan or a side deal, is another reason for someone to back out when time is tight.
- Put a sale-leaseback on the list
- A sale-leaseback is a recognised way to raise money next to a mortgage. If you use the building yourself, it’s worth comparing selling, refinancing and a sale-leaseback side by side.
A refinance, a vendor take-back and its security documents need a lawyer. Ask your accountant to compare the after-tax result of selling and refinancing. Mortgage advice is a licensed activity in BC, regulated by BCFSA, so talk to your lender or a licensed mortgage broker too.
Cam is a licensed real estate agent, not a lawyer or accountant, so take the legal and tax questions to them.
When selling is the better answer
If a refinance needs more cash than you want to put in, or the building only works on paper, selling on your own schedule may leave you with more choice than selling on the lender’s. Talk it through with your accountant and lawyer. See sell or hold and, if things are already tight, selling under pressure. More on loans in financing commercial property.
Common mistakes
- Starting the renewal conversation a few weeks before maturity.
- Assuming the lender will size the loan the same way it did last time.
- Not updating the rent roll and financials before you shop the loan.
- Ignoring prepayment terms on the next loan.
Debt service coverage at renewal
When a commercial mortgage matures, the lender re-underwrites. Debt service coverage ratio (DSCR)—net operating income divided by annual debt service—and loan-to-value both get a fresh look at today’s rates and the current rent roll.
Example only: if net operating income is $27,200 and debt service is $24,000, DSCR is about 1.13. Many lenders want a higher floor. Full occupancy, cleaned-up expenses, or a larger equity cheque can be what moves the ratio.
Bring a current rent roll and estoppels, not last year’s story. A short bridge loan is a tool, not a plan—know the exit into permanent debt before you sign it.
Questions people ask
What happens if my lender won’t renew my commercial mortgage?
The balance is generally due at maturity, depending on your loan documents. Options may include refinancing with another lender, use short-term bridge financing while you lease up or sell, or selling the building. Starting early can keep more options open. Ask your lawyer to review the loan terms.
How early should I start a commercial mortgage renewal?
Many owners start about 6 months before maturity. That’s a rule of thumb, not a rule, and it can leave time for a value opinion, lender quotes and a sell or hold decision.
Can I switch lenders at maturity without a penalty?
Prepayment penalties depend on your mortgage documents, so have your lawyer check them. Expect legal and appraisal costs with a new lender.
What if the building’s income no longer covers the payment?
The lender’s income test may cap the loan. Options people often consider include a paydown, a longer amortization, a second lender, raising NOI, or selling.
What is a debt service coverage ratio?
NOI divided by the annual mortgage payment. Lenders set a minimum for each property type, so ask yours for the current figure.
In practice
How I help with your mortgage renewal
This page is for you if you own commercial property in BC and your mortgage is coming up for renewal or refinance in the next year.
- Happy to help you see the property the way a lender will: income, expenses, leases and condition.
- We can prepare a clean package with the rent roll and lease summaries so lenders can review it quickly.
- I’ll work with your mortgage broker or banker to compare offers side by side on rate, amount, term, fees and guarantees.
- If refinancing doesn't work, I can lay out the other options next to each other, from bringing in a partner to selling part or all of it.
What to watch for
- Debt coverage. Lenders want income to cover the payments with room to spare, and higher rates shrink that room.
- Leases ending soon, which make lenders nervous and can lower the loan amount.
- Renewal fees, prepayment penalties and personal guarantees.
- Leaving it late. Starting six to twelve months ahead gives you choices.
The steps, in order
- Note your maturity date and start early.
- Update the rent roll, expenses and any lease renewals.
- Talk to a few lenders or a broker about terms.
- Decide between renewing, refinancing, adding a partner or selling.
Good questions to ask
- What will lenders lend at today's rates, based on this property's income?
- Which leases end before my new term does?
- What penalty would I pay to move lenders?
- If I had to sell, what would the property fetch?
Lease and property law has BC-specific wrinkles, so for anything legal, check with a BC real estate lawyer before you rely on it. This page is general information, not legal, tax or financial advice. Cam Appleton is a licensed real estate representative with Coldwell Banker Prestige Realty.
Next step
Mortgage coming due?
Get a free opinion of value before you talk to your lender. I’ll show you where the value test and the income test land.
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