A commercial purchase often looks straightforward until the lender asks for the equity piece. That is usually the point where borrowers stop asking about rates and start asking the real question: how much deposit do you need for a commercial mortgage?
The short answer is that most borrowers should expect to contribute at least 20% to 35% of the purchase price, and sometimes more. But commercial lending is not built around a single rule. The required deposit depends on the property, the strength of the business or tenant income, the borrower profile, and which lending channel actually fits the file.
How much deposit do you need for a commercial mortgage in practice?
For many standard commercial files, lenders are comfortable in the 65% to 80% loan-to-value range. That means your deposit is often 20% to 35%. If the property is owner-occupied, in good condition, and supported by strong income, the lower end of that range may be possible. If the property is specialized, vacant, or tied to a weaker file, the equity requirement usually moves up.
This is why two buyers looking at similarly priced buildings can receive very different financing terms. One may secure 75% or 80% financing through a conventional lender. Another may be limited to 65% or 70% through an alternative or private lender because the file carries more risk.
In practical terms, a $1,000,000 commercial purchase may require a deposit of $200,000 to $350,000, plus closing costs. If the lender also wants stronger liquidity after closing, the cash needed can be higher than the down payment alone.
Why commercial mortgage deposits vary so much
Commercial lending is fundamentally risk-based. Residential mortgage rules are often more standardized. Commercial lending is more file-specific. Lenders are not only asking whether the borrower qualifies. They are also asking whether the property itself can carry the loan and whether it would remain marketable if they had to enforce.
Property type matters immediately. A mixed-use building with stable tenants is viewed differently from a single-purpose property like a gas station, daycare facility, or restaurant. Specialized properties tend to attract lower leverage because the buyer pool is narrower and resale is less predictable.
Vacancy also matters. A fully leased property with strong tenants and clean rent rolls is easier to finance at a higher loan-to-value than a partially vacant building or one with short-term leases. If cash flow is uncertain, the lender usually wants the borrower to contribute more capital.
Then there is the borrower. An experienced investor with a strong net worth, clear financial reporting, and liquidity in reserve presents a different file than a first-time commercial buyer with limited cash and complicated income. Even if the property is acceptable, weaker borrower strength can increase the required deposit.
Property type can change the deposit requirement
The question of how much deposit do you need for a commercial mortgage often comes down to what you are buying.
Office, retail, industrial, and multi-unit residential properties with established income are generally easier to finance than niche assets. Owner-occupied commercial properties can also perform well with lenders if the operating business is stable and the financials support the debt.
On the other hand, raw land, construction projects, hospitality properties, churches, automotive uses, and heavily specialized assets usually require larger deposits. Some lenders will cap leverage aggressively on these files because the exit risk is higher.
Mixed-use properties sit somewhere in the middle. If the residential component is strong and the commercial portion is modest and well leased, financing can be favorable. If the commercial use dominates or the tenant profile is weak, the deposit expectation may increase.
The lender will look beyond the down payment
Borrowers sometimes assume that if they have 25% down, the deal should work. In commercial lending, the deposit is only one part of the picture.
Lenders also review debt service coverage, net operating income, lease quality, business financials where relevant, credit history, and available reserves. They want to see that the property generates enough income to support the mortgage payments, usually with a cushion. If income coverage is tight, the lender may reduce the loan amount even if the borrower was hoping for a higher leverage position.
This is one reason why some buyers with a decent deposit still need to bring in additional cash. The limiting factor is not always loan-to-value. Sometimes it is debt service coverage. If the property income does not support the requested loan, the lender solves the risk by lowering the mortgage amount.
Conventional, alternative, and private lenders do not view deposits the same way
A conventional lender may offer the strongest leverage, but only if the file is clean enough to fit policy. That usually means a stronger borrower profile, acceptable property type, solid income coverage, and a marketable asset.
Alternative lenders may step in where the file is sound but does not fit a bank’s underwriting box. This can happen with self-employed borrowers, properties with short operating history, or transitional situations. In those cases, the required deposit may be slightly higher, but the flexibility can make the transaction possible.
Private lenders typically focus more on equity and exit strategy. If the deal is urgent, the property is unusual, or the income story is not bankable today, private financing may be the workable route. But that flexibility often comes with lower loan-to-value limits, which means a larger deposit. For some borrowers, this is still the right move if it solves a timing issue and creates room to refinance later.
A brokerage approach matters here because the same file can be viewed very differently across lending channels. Matching the deal to the right lender can affect both the approval path and the amount of cash the borrower needs to close.
Do closing costs count as part of the deposit?
Usually, no. The deposit or down payment is your equity contribution toward the purchase price. Closing costs sit on top of that.
Commercial closing costs may include legal fees, appraisal costs, lender fees, environmental reports, broker fees in some cases, title costs, and land transfer tax where applicable. If the property requires repairs or lease-up work after closing, that is another capital requirement borrowers need to plan for.
This is where buyers get caught short. They calculate the minimum down payment but do not leave room for the rest of the transaction. A lender may approve the mortgage, but the file can still stall if the borrower cannot show enough liquidity to complete closing and maintain a reasonable cash buffer afterward.
Can you use borrowed funds for the deposit?
Sometimes, but it depends on the lender and the structure. Many commercial lenders want the deposit to come from the borrower’s own resources, retained earnings, partner equity, or a clearly acceptable source. If part of the equity is borrowed, the lender will want full disclosure and may count that obligation against the file.
The issue is not just where the money comes from. It is whether the overall debt load still makes sense. If the borrower is layering too much leverage into the transaction, the deal may become unstable from the lender’s perspective.
In some commercial structures, investor capital or corporate shareholder funds can form part of the equity stack. That can work, but the file has to be presented clearly. Commercial lenders expect to see the full capital structure, not just the mortgage request.
How to estimate your likely deposit before you apply
A realistic starting point is 25% to 35% of the purchase price, plus closing costs and some post-closing liquidity. That range is not universal, but it is a practical planning number for many commercial acquisitions.
If the property is stabilized, easy to understand, and supported by strong borrower and income fundamentals, you may land near the lower end. If the property is vacant, specialized, or tied to a more complex file, assume the lender may want more equity.
Before making an offer, it helps to review the property income, lease structure, borrower financials, and intended use. A proper file review can often tell you whether your expected deposit is realistic or whether the deal needs a different lender strategy.
For borrowers in Ontario, Alberta, or Manitoba, this matters even more when timing is tight or the property does not fit a standard bank profile. LeSolace reviews the full file first, because the right answer is rarely based on the purchase price alone.
The right deposit is the one that gets the deal done sensibly
The best way to think about a commercial mortgage deposit is not as a fixed percentage to memorize, but as part of the lender’s risk calculation. More equity can strengthen the file, improve lender options, and sometimes lead to better pricing. Too little equity can push an otherwise workable deal into a more expensive lending channel.
If you are planning a purchase, build your numbers with room for lender caution, not just best-case leverage. A commercial deal usually moves more smoothly when the deposit, the property, and the financing strategy all make sense together.