Short answer
Financing a rental property in Canada requires at least 20% down, and lenders use a portion of the rental income — or a rental offset — when calculating your debt ratios. Rates are typically slightly higher than on an owner-occupied home, and some lenders limit how many financed properties you can hold. Properties with more than four units are financed as commercial.
Jump to Section
Rental Property Mortgage Overview
Many homeowners invest in a property with the goal of renting it out to tenants — whether it's converting a current home into a rental or purchasing a dedicated investment property. Rental property mortgages differ from standard residential mortgages, and understanding the unique requirements is essential for success.
As a licensed mortgage broker with access to 100+ lenders, I can help you find the right financing solution for your investment goals and negotiate terms that maximize the return on your investment.
Tips for Approval on a Rental Property Mortgage
Mortgages aren't handed out freely — you need to prove to a lender that you are reliable and can afford your mortgage. Key factors lenders evaluate when considering a rental property mortgage:
If you're concerned about qualifying, connecting with a licensed mortgage broker can help you get pre-approved before you start your rental property search. A broker can also leverage strong lender relationships to secure rates you may not receive on your own.
Using Your Existing Home as a Rental Property
Depending on your situation, you may be eligible to use your current home as a rental property. However, there are some criteria that may limit your ability to do so:
Always verify with a realtor or your local government about any restrictions before renting out your property.
Benefits and Risks of Owning a Rental Property
Once you become a landlord, you're responsible for overseeing your property and resolving any tenant issues. Here are important considerations:
Benefits:
Risks:
Short-Term vs. Long-Term Rentals
Your rental strategy significantly impacts your income and responsibilities:
Your mortgage agreement has one of the largest impacts on how profitable your rental property will be. Staying on top of refinancing or renewing your mortgage with the help of a licensed mortgage broker ensures you're maximizing your investment returns.
Frequently Asked Questions
What down payment do I need for a rental property?
Most lenders require a minimum 20% down payment for investment properties in Canada. A larger down payment can help you secure better rates and terms.
Can I use rental income to qualify for the mortgage?
Yes, most lenders will consider a portion (typically 50-80%) of the expected rental income when qualifying you for the mortgage.
Are interest rates higher for rental properties?
Interest rates for rental property mortgages may be slightly higher than owner-occupied properties due to the additional risk lenders associate with investment properties.
Can I convert my current home into a rental property?
In many cases yes, but you should check for any rental restrictions from your strata, municipality, or property covenants before proceeding.
