Difference between a commercial and a residential mortgage

Hi, posting a query on behalf of somebody else so don't know all the specific details but just wondering if somebody can tell me the difference between a residential and a commercial mortgage. My friend says she has a commercial mortgage on her residential property. I didn't think you could have this. Is she better off changing to a residential one. One are the advantages and disadvantages of each - can you get tax relief etc.. She's trying to decide whether to change or not.

Generally:
- residential mortgage is under Consumer Credit Act;
- interest deduction is restricted and relief by way of TRS;
- your home is at risk etc.

Commercial:
- no CCA;
- usually higher rate;
- if for commercial purposes interest is a deductible expense.

She might be charged a commercial rate, but on the limited facts, does not sound like a commercial mortgage

If she borrowed money to buy her home, it's a residential mortgage or housing loan under the Consumer Credit Act. There are a few protections for people in arrears and they cannot charge an early repayment penalty on it if it's a variable rate mortgage.

If she borrowed money for a business or to buy a commercial property, but secured it on her home, it's a grey area. The banks regard this as a commercial mortgage. But I think that the last Central Bank Act redefined loans secured on homes as covered by the Consumer Credit Act.

You really would want more details.

You can't simply ask your bank to change the status of the loan. The original purpose of the loan dictates its status.

Brendan

Thanks for the advise. Will pass it on to my friend.