Rental & Investment Property Mortgages

Financing a rental turns on one question that almost nobody asks early enough: how much of the rent will the lender actually let you count? The answer differs so much between lenders that the same borrower, the same property and the same rent can be a comfortable approval at one and a decline at another.

How much you need down

• A property you will not live in: at least 20%, and mortgage insurance is not available. This is the straightforward case.
• A two-to-four unit property you will live in: considerably less. Insured programmes exist for owner-occupied small multi-unit buildings, subject to price caps and conditions, and they are the most under-used route into property investing in Canada. Terms here have changed more than once recently, so confirm the current position rather than relying on a figure you read somewhere.
• Five units or more: no longer a residential mortgage. That is commercial lending, with different underwriting entirely.

The middle case is worth repeating: living in one unit of a duplex, triplex or fourplex is financed quite differently from buying the same building to rent out whole. If you are open to living in it, say so at the start — it can change the down payment requirement substantially.

The part that decides your approval: rental income

Lenders use one of two methods, and which one you get is frequently the whole ball game.

• Rental add-back. A percentage of the gross rent — often somewhere between half and most of it — is added to your income. Simple, and generous where the rent is strong.
• Rental offset. A percentage of the rent is subtracted from the property's costs, and only the shortfall counts against you. This usually qualifies a borrower for more.

The same file can pass under one method and fail under the other. A broker's useful work on a rental file is largely this: knowing which lenders use which, and placing the application accordingly rather than finding out by being declined.

What you will need to evidence it

• Signed leases for an existing tenanted property
• T776 — the statement of real estate rentals — from your returns, if you already own rentals
• An appraisal with a market rent opinion, where the property is vacant or you plan to rent it
• Property tax bills, condo fees and heating costs, all of which count in the ratios

Short-term rental income is treated cautiously by most lenders, and by some not at all. If the plan depends on nightly rates rather than a lease, raise it at the start.

What else is different

• Rates are usually slightly higher on a rental than on a home you live in.
• The stress test still applies, on the full balance.
• Your existing mortgages count. Each additional property adds its payment, taxes and heat to your ratios, which is why the fourth rental is harder than the first — and why some lenders cap how many they will finance for one borrower.
• Interest is generally deductible against rental income, which changes the real cost of the borrowing considerably. That is an accountant's question, and it is worth asking before you structure the purchase rather than at tax time.

Using the equity you already have

Most second properties in Canada are bought with equity from the first. A refinance or a secured line of credit on your own home can produce the down payment, often at a better rate than the rental mortgage itself — and how that borrowing is structured affects what is deductible. See refinancing, or second mortgages where a full refinance would trigger a large penalty.

Common questions

Can I put less than 20% down on a rental?

Not on a property you will not live in. On a two-to-four unit building you will live in, yes — insured programmes allow considerably less, subject to conditions and price limits.

Does the rent count if the property is empty?

Often yes, using a market rent opinion from the appraiser rather than a signed lease. Lenders vary on how much of it they will use.

How many rentals can I finance?

There is no universal limit, but lenders begin to cap exposure to one borrower, and the qualifying arithmetic gets harder with each property. Portfolio borrowers usually end up spreading across several lenders, which is a reason to plan the sequence rather than take each deal as it comes.

Can I use projected Airbnb income?

Usually not, or only heavily discounted. Most lenders want a lease.

I want to buy a duplex and live in half. Which rules apply?

The owner-occupied ones, which are much friendlier. Tell us that on the first call — it is the single most valuable fact on a file like yours.

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This page is general information, not tax, legal or financial advice. Down payment minimums, insured programme terms and lender rental-income policies vary and change; the position described is as at October 2026 and should be confirmed. Speak to a qualified accountant about deductibility and structure. Pegasus Mortgage Lending Center Inc., Brokerage, FSRA Licence #11479.