Stop Assuming a Commercial Property Loan Works Like a Housing Loan
- A commercial property loan is underwritten on the income the property produces, not on your payslip. That single difference changes everything about the application.
- Philippine banks commonly finance 70 to 80 percent of appraised value, so plan for 20 to 30 percent equity plus closing costs.
- Residential rates run roughly 6 to 8.5 percent in 2026. Commercial pricing sits above that, and banks quote it case by case rather than publishing a rate card.
- Banks lend against the appraised value, not your offer price. If the appraisal comes in low, you cover the gap in cash.
- If the property yields less than your interest rate, borrowing reduces your cash flow. Run the cap rate before you run the loan application.
- Terms are shorter than housing loans. Expect 10 to 20 years rather than 25 or 30, which raises the monthly payment.
- Bring the lease contracts and actual collection records. A tenanted building with documented rent is far easier to finance than an empty one.
You financed a house once, so you assume a commercial property loan is the same process with bigger numbers. It is not. The bank stops looking at your payslip and starts looking at the building: what it earns, who is renting it, and whether that income survives if you disappear. Understanding that shift is the difference between an approval and a polite decline. This guide covers how commercial property financing actually works in the Philippines and what to prepare before you walk into a bank.
What Is a Commercial Property Loan in the Philippines? Unpacking the Myths
A commercial property loan finances income-producing real estate: an office floor, a retail unit, a warehouse, or a commercial lot you intend to develop. Unlike a housing loan, the property is expected to pay for itself. The bank underwrites the rent roll first and you second, because in a default the building is what they are left holding.
The Difference Between a Housing Loan and a Commercial Loan
A housing loan asks how much you earn and how secure your job is. A commercial loan asks what the property earns, how long the leases run, and how creditworthy the tenants are. Housing loans stretch to 25 or 30 years; commercial terms usually run 10 to 20. Housing rates are published; commercial pricing is negotiated per deal. You are not a borrower with a salary any more, you are a borrower with an asset.
What Banks Actually Look At
Four things decide your application: the appraised value, the debt service coverage ratio, the quality of the leases, and your own financial position as a backstop. The coverage ratio matters most. Banks want the net operating income to exceed the loan payment by a comfortable margin, so a building at full occupancy with signed multi-year leases borrows on far better terms than the same building sitting empty.
Common Misconceptions: The Truth Behind Commercial Financing
Three assumptions cost buyers time and deposits. Each one comes from applying housing loan logic to a different product.
Myth: The Rate Will Match a Housing Loan
Residential rates in the Philippines run roughly 6 to 8.5 percent in 2026, with BPI, BDO and Security Bank quoting indicative fixed rates between 6.25 and 7.25 percent depending on the fixing period. Commercial lending prices above that, because the bank is taking on tenant risk and vacancy risk alongside you. Treat the residential figure as a floor, not a forecast, and ask each bank to quote your specific deal.
Myth: The Bank Lends Against the Price You Agreed
It lends against its own appraisal. If you agree ₱50 million and the appraiser returns ₱45 million, an 80 percent loan is ₱36 million rather than ₱40 million, and the ₱4 million difference comes from your pocket. Before you sign anything, confirm three things:
- Whether the seller price sits near recent comparable sales in that district
- How long the bank appraisal takes, since it often runs past a short reservation period
- Whether your reservation fee is refundable if the appraisal falls short
Myth: Borrowing More Always Improves Your Return
Only when the property yields more than the loan costs. If a building produces a 5 percent cap rate and you borrow at 8 percent, every peso of debt drags your cash flow down. That is negative leverage, and it is common on prime Metro Manila assets bought for location rather than income. Run the yield first; the loan decision follows from it, not the other way round.
The Financial Impact: What the Loan Actually Costs You
Three numbers frame almost every commercial financing decision in this market:
- Loan-to-value of 70 to 80 percent, so your equity is 20 to 30 percent of appraised value plus closing costs
- A term of 10 to 20 years rather than 25 or 30, which raises the monthly payment even at the same rate
- A rate above the residential band, quoted per deal rather than published, and usually fixed for one, three, or five years before repricing
The bank is not deciding whether to trust you. It is deciding whether to trust the tenant. Bring the lease contracts.
Your Next Move
Do these three before you approach a lender:
- Run the cap rate on the property and compare it against the rate you expect to pay. Every CommRey listing includes a calculator for this
- Gather two years of financial statements, your income tax returns, and the property lease contracts with actual collection records
- Approach two or three banks in parallel, since commercial pricing is negotiated and a second quote is your only leverage
Applying and Closing: What You Need to Know
Say the numbers work and you are ready to apply. The process is slower and more document-heavy than a housing loan, so plan the timeline into your offer.
Get the Right People Involved
Bring in a lawyer and an accountant before you submit. A lawyer confirms the title is clean and that existing leases transfer with the sale, which is exactly what the bank will check. An accountant presents your financials in the form banks expect, which shortens the review. A broker who knows the district can also tell you whether the asking price will survive an appraisal.
Red Flags to Watch For
- A seller who will not release lease contracts or collection records before you commit
- Unpaid real property tax or association dues attached to the title
- A reservation period shorter than the bank appraisal timeline
- An asking price far above recent comparable sales, which the appraisal will not support
- Pressure to pay a large non-refundable deposit before loan approval
Protect Your Position
- Make your offer conditional on loan approval and a satisfactory appraisal
- Confirm the repricing mechanism in writing, not just the introductory fixed rate
- Ask what prepayment penalty applies if you settle early or refinance
- Budget for closing taxes, registration, appraisal, and insurance on top of the down payment
- Keep a cash reserve for vacancy, because the loan payment continues whether or not the tenant does
Frequently asked questions
What is a commercial property loan in the Philippines?+
It is financing for income-producing real estate such as an office, retail unit, warehouse, or commercial lot. Unlike a housing loan, the bank underwrites the property income and lease quality first and your personal finances second. Expect a more document-heavy process and a shorter term.
How much can I borrow for a commercial property?+
Philippine banks commonly finance 70 to 80 percent of appraised value, so prepare 20 to 30 percent equity plus closing costs. Remember the loan is based on the appraisal rather than your agreed price, so a low appraisal increases the cash you need.
What is the interest rate on a commercial property loan?+
Banks price commercial deals individually rather than publishing a rate card. Residential rates run roughly 6 to 8.5 percent in 2026 and commercial sits above that band, since the lender is also carrying tenant and vacancy risk. Get quotes from two or three banks, because the pricing is negotiable.
How long is the term on a commercial property loan?+
Usually 10 to 20 years, shorter than the 25 or 30 years common on housing loans. A shorter term raises the monthly payment at the same rate, so model the payment before you assume the property will cover it.
What documents do banks ask for?+
Expect two years of financial statements, income tax returns, the transfer certificate of title, tax declarations, real property tax clearance, and the existing lease contracts with collection records. A tenanted building with documented rent is far easier to finance than a vacant one.
Can I get a loan for a vacant commercial building?+
Yes, but on tighter terms. With no rent roll the bank leans entirely on your personal or corporate financials and the appraised value, which usually means a lower loan-to-value and a higher rate. If you plan to lease it after purchase, prepare a realistic leasing plan to present.
Should I borrow if the cap rate is below the interest rate?+
Only with your eyes open. When the yield sits below the borrowing cost, debt reduces your cash flow rather than improving it, which is normal on prime assets bought for location and long-term value. Raise the down payment, lengthen the term, or negotiate the price to close the gap.
Can a foreigner get a commercial property loan in the Philippines?+
Financing options are limited because foreigners cannot own land here, though they can own buildings and condominium units within legal limits. Lenders assess these structures individually. Read our guide on foreign ownership and the 99-year lease, then take the specifics to a Philippine bank and lawyer.
Browse verified listings across Metro Manila and beyond.
Browse properties
