Updated: May 17, 2021

Enjoy this post sponsored by Streetwise Mortgages.

As mortgage brokers specializing in income property financing, we receive hundreds of questions

from investors across the country in regards to various aspects relating to financing income


In this initial series, we answer the common questions we come across:


What are the key differences between financing commercial and

multi residential properties (5 units or more); and residential properties with

1 – 4 units?

The key difference between commercial and residential financing is who qualifies for the

mortgage. If you are buying a dwelling with 1, 2, 3 or 4 units, the lenders require you to personally

qualify for the mortgage based on your income, debt load and credit.

When purchasing a dwelling that has a commercial component or is all residential with 5 units or

more, it is the property that qualifies for the mortgage based on its Net Operating Income, not

you personally, which means that you can purchase a commercial / multi residential property

even if you do not currently work or report any income at the personal level!

Having said that, there are a few caveats:

5 and 6 units multi residential fall in the “grey” zone for a few lenders, where they can be

financed under the residential guidelines offering clients better financing terms than those

offered under the commercial rules, such as 20% down, 30-year amortization option, low rates

and low cost of acquisition (i. e. no need for environmental or commercial appraisals).

Also some lenders offer the option to finance a purely residential property (1 – 4 units) under the