Refinancing a multi-unit building: steps and pitfalls

What does refinancing a multi-unit building mean?

Refinancing means paying off the current loan with a new loan on the same building. The new loan can change the rate, the term or the amortization.

It can also be larger than the current balance. The difference then pays for renovations, another purchase or other debts.

CMHC insures refinancing loans for rental buildings with five or more units.

Refinancing is not a purchase, but the lender reviews it in almost the same way. The lender wants to know what the building is worth and what it earns today.

Words matter: renewing a loan at maturity with the same lender is not the same as replacing it with another lender. The second case triggers a full new review.

Whatever the case, the question stays the same: does the building earn enough to carry the new loan? The answer decides the amount, the term and the cost.

Why refinance?

The most common reasons are practical.

• The loan is maturing and must be renewed
• Renovations have raised the value and the rents
• A longer amortization would lower the payments
• A short-term loan must be replaced by a lasting one

None of these reasons justifies refinancing on its own. The total cost must be weighed against what you gain.

Timing matters as much as the reason. Refinancing at maturity avoids the prepayment penalty, whereas doing it mid-term can trigger it.

An owner who has renovated and raised rents must prove those increases with leases. The lender retains only documented rents.

Write down your goal before you call any lender. A clear goal lets you compare offers on what matters to you, not on what is advertised.

What does the lender check?

The lender re-appraises the building as it would for a purchase. Rents, expenses and the condition of the building matter more than the price paid years ago.

• Net operating income for recent years
• Current leases and the rents actually collected
• The value of the building, set by an appraisal
• The debt service coverage ratio with the new loan

If net operating income does not support the amount requested, the lender reduces the loan.

The appraisal can come in at a different value than you hoped. It rests on income, comparable sales and the condition of the building.

Completed renovations help support the value. Keep the invoices, permits and photos to show them.

The lender may also ask for an inspection or an environmental study. That depends on the age of the building and its use.

What limits does CMHC set?

For a standard rental building insured by CMHC, the official page states a maximum loan-to-value ratio of 85%. Amortization can reach 40 years for an existing building.

CMHC also asks for a net worth of at least 25% of the loan and five years of experience managing multi-unit buildings. An experienced property manager can meet that second condition.

MLI Select commitments, such as affordability or energy efficiency, can extend amortization. You then need at least 50 points, and the commitment ties your rents for at least 10 years.

These limits are ceilings, not targets. In practice, the amount granted depends on net operating income and on the coverage the lender requires.

If the amount granted is below your need, you can lower the goal or add money of your own. You can also look for a second loan, but each route has a cost.

Also confirm whether the lender wants a reserve for repairs. Some lenders hold back part of the loan or ask for ongoing contributions.

What steps should you follow?

The order below avoids unpleasant surprises.

• Read your current loan contract: maturity, prepayment penalty, renewal terms
• Calculate net operating income and the likely value of the building
• Set the goal: rate, amortization or additional amount
• Request written offers from several lenders on the same basis
• Compare total cost: interest, appraisal fees, legal fees, penalty

The penalty depends on your contract and your current lender. It cannot be guessed: ask for it in writing before you decide.

Allow time. Loan offers, the appraisal and the signing at the notary each take part of the calendar.

The maturity of your current loan does not move. Start well before that date, because a last-minute refinancing leaves little room for comparison.

What pitfalls does refinancing hold?

Several mistakes come up again and again in multi-unit files.

• Repaying a loan before maturity without costing the penalty
• Counting on the hoped-for value rather than the appraised value
• Forgetting the fees, which reduce the intended saving
• Presenting rents that are not backed by leases
• Choosing the longest amortization without seeing the interest cost

The last pitfall is the most expensive. A longer amortization lowers the payment but raises total interest.

Another pitfall is misreading the renewal clause. Some contracts set precise conditions, which are discovered too late.

A final pitfall is comparing only the rate. Fees, future penalties and repayment flexibility change the real cost of the operation.

Ask your lender what happens if the appraisal falls short. Knowing the fallback before you apply avoids a rushed decision at maturity.

What should you do next?

First get your current contract and the written penalty. Without that figure, no comparison is honest.

Then prepare the rent roll, the expenses and the list of work done. An up-to-date application speeds up the review.

On PMECAP, the Refinancing financing family describes the options. The request form goes to a brokerage firm registered with the AMF. Terms are confirmed with the lender.

FAQ

Sources

• SCHL : Assurance prêt hypothécaire, logements locatifs ordinaires (accessed October 13, 2026)
• SCHL : APH Select (accessed October 13, 2026)
• SCHL : Assurance prêt hypothécaire pour immeubles collectifs (accessed October 13, 2026)