Rental Property Mortgage in Canada: Rates, Down Payment and Qualification

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A rental property mortgage works differently from a mortgage on the home you live in. Your down payment, mortgage rate, amortization and qualification requirements depend on whether you will occupy part of the property, how many units it has and how much rental income the lender is willing to use.

For properties with one to four units, financing is usually handled through residential mortgage products. Properties with five or more units are generally financed as multi-unit or commercial properties and may qualify for specialized CMHC programs.

Rental property mortgage rates and investment property mortgage rates depend on more than the mortgage term. Lenders also consider whether the property is owner-occupied, the number of units, your down payment and credit profile, the property's rental income and whether the mortgage is insured or uninsured.

A pure rental property may receive different mortgage rates from an owner-occupied home. Five-plus-unit properties are also priced differently because they are generally underwritten based on the property and its cash flow rather than only the borrower's household income.

When comparing rental property mortgage rates, also compare mortgage penalties, prepayment privileges and qualification requirements. The lowest advertised investment property mortgage rate is not necessarily the lowest-cost mortgage for an investor who expects to sell or refinance before the term ends.

CMHC homeowner rules allow for high-ratio mortgages of up to 95% loan-to-value (LTV) for eligible one-unit or two-unit homeowner properties and up to 90% LTV for three-unit or four-unit homeowner properties. LTV is the percentage of the property's value that you borrow. For example, 95% LTV means you borrow 95% and make a 5% down payment.

CMHC Income Property is a different product for non-owner-occupied properties with two to four units and allows up to 80% LTV.

For buildings with five or more units, CMHC Standard Rental Housing can provide financing of up to 85% LTV, while qualifying CMHC MLI Select projects can receive greater leverage and amortizations of up to 50 years depending on the project's affordability, accessibility or energy-efficiency commitments.

The minimum down payment depends heavily on whether you plan to live in the rental property.

If you buy a two-unit property and live in one unit, the property can qualify under homeowner mortgage insurance rules.

For an eligible purchase below $1.5 million, the minimum down payment for a one-unit or two-unit homeowner property is:

• 5% of the first $500,000
• 10% of the portion above $500,000

For example, a $700,000 duplex would require a minimum down payment of $45,000:

($500,000 × 5%) + ($200,000 × 10%) = $45,000

For an owner-occupied property with three or four units, CMHC's minimum down payment requirement is 10%.

The $1.5 million threshold applies to qualifying high-ratio homeowner mortgage insurance. It should not be confused with CMHC's separate small-rental program where the homeowner will not live in one of the units.

If you do not plan to occupy the property, a 20% down payment is generally the starting point for a conventional one-unit to four-unit rental mortgage.

CMHC also offers its Income Property mortgage insurance program for qualifying non-owner-occupied properties with two to four units. It allows up to 80% LTV, meaning at least 20% down payment, and the property's purchase price or lending value must be below $1 million. A non-owner-occupied single-unit rental is not eligible for this CMHC program.

Sagen and Canada Guaranty offer comparable rental programs for two to four units, also capped at 80% LTV and a $1 million property value.

This is an important distinction:

• Regular CMHC insurance: Owner-occupied properties, with high-ratio eligibility below $1.5 million of up to 95% LTV.
• CMHC Income Property: Non-owner-occupied 2-4 unit rental properties, maximum 80% LTV and value below $1 million.

Mortgage default insurance is not free. The premium is a one-time charge calculated as a percentage of your loan amount, and it is usually added to the mortgage.

For non-owner-occupied 2-4 unit rentals under CMHC Income Property, the premium rates are:

For owner-occupied properties with one to four units financed with a 30-year amortization under CMHC Home Start, which is available to first-time homebuyers or buyers of newly built homes with a high-ratio mortgage, the premium rates are:

A longer mortgage amortization lowers the required mortgage payment but increases the amount of interest paid over the life of the mortgage.

The normal maximum amortization for an insured homeowner mortgage is 25 years.

A 30-year insured amortization may be available when:

• the mortgage has an LTV above 80%, and
• at least one borrower qualifies as a first-time home buyer, or
• the property is a newly constructed home.

These expanded 30-year insured-amortization rules took effect on December 15, 2024.

CMHC Income Property for non-owner-occupied two-unit to four-unit rentals has a maximum amortization of 25 years.

With at least 20% down, conventional residential lenders may offer longer amortizations. A 30-year amortization is commonly available, while availability beyond 30 years depends on the lender and mortgage product.

Different rules apply to multi-unit properties. CMHC Standard Rental Housing may allow amortization of up to 40 years for an existing property and up to 50 years for new construction. MLI Select can allow amortizations of up to 50 years for qualifying projects.

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If you already own and live in your home, you can refinance an insured mortgage to fund the construction of additional rental units. CMHC introduced this option on January 15, 2025.

What CMHC Refinance allows:

• Up to 90% of the property's as-improved value, meaning its value after the units are built
• Up to four units in total, including existing ones
• As-improved value below $2 million
• Amortization up to 30 years, with a 0.20% premium surcharge beyond 25 years

What you must meet:

• You or a close relative occupies one of the existing units
• New units are self-contained and meet municipal zoning requirements
• New units are not used as short-term rentals
• Funds go toward construction only. Equity take-out is not permitted

One advantage of buying a rental property is that some of the property's rent can be considered when your lender calculates how much mortgage you can afford.

The treatment of rental income varies by lender and mortgage program.

Under CMHC's current rental-income approach:

With the net-rental-income method, operating expenses are deducted from gross rent and the resulting income or loss is incorporated into the mortgage qualification calculation.

Net Rent = Gross Rent - Property Operating Expenses

Conventional lenders can use their own rental-income formulas, so two lenders may approve different mortgage amounts for the same borrower and property.

Lenders look at both you and the property when approving a rental property mortgage.

Important factors can include:

There is no single minimum credit score that applies to every rental mortgage in Canada.

For CMHC homeowner and CMHC Income Property insurance, at least one borrower or guarantor must generally have a credit score of at least 600. Individual lenders can impose stricter requirements.

CMHC currently uses maximum Gross Debt Service and Total Debt Service ratios of 39% and 44%, respectively, for its homeowner and Income Property programs.

For the CMHC programs discussed above, borrowers are stress-test qualified using the greater of:

• the contract mortgage rate plus 2%, or
• 5.25%.

Existing leases can help establish the rent being generated by a property. Where units are vacant or the rent is being projected, the lender may request an appraisal or opinion of market rent.

Having the property's financial information ready can make the underwriting process easier.

Be prepared to provide:

• Existing leases or a current rent roll
• An appraisal or opinion of market rent when projected rental income is being used
• Recent personal or corporate tax returns and Notices of Assessment when requested
• Property expense information, including property taxes, insurance, utilities, condo fees and other operating expenses
• Proof of your down payment and the source of the funds
• Current mortgage statements for rental properties you already own
• Standard income, employment and identification documents requested by your lender

Properties with five or more units usually require more extensive property-level underwriting, including detailed income and expense information and, depending on the transaction, additional appraisal, environmental or building documentation.

Once a property has at least five residential units, financing generally moves outside the standard residential rental-mortgage process.

CMHC Standard Rental Housing is available for qualifying projects with at least five units. For purchases, it can provide financing of up to 85% of the purchase price or CMHC lending value, whichever is lower. CMHC also applies debt-coverage requirements based on the property income.

MLI Select is another CMHC multi-unit program. It rewards qualifying affordability, accessibility and energy-efficiency commitments with financing flexibilities. Depending on the number of points earned, eligible projects can receive up to 95% LTV and amortizations of up to 50 years.

Because these mortgages are based heavily on the economics of the building, lenders will look closely at rents, operating expenses, vacancy, debt coverage, property condition and the borrower's experience.

There is no single mortgage term that is best for every real estate investor.

A fixed-rate mortgage can make it easier to forecast monthly cash flow because your rate and required payment are predictable during the term.

A variable or shorter-term mortgage can provide more flexibility for an investor who expects to refinance, renovate or sell sooner.

When comparing options, consider the rate together with:

• Prepayment penalties
• Prepayment privileges
• Portability
• Refinancing plans
• Cash-flow sensitivity to changing interest rates

For a rental property, the cost of breaking the mortgage early can sometimes matter as much as the initial interest rate.

Mortgage principal payments are not a rental expense. Mortgage interest, however, can generally be deductible when the borrowed money was used to buy or improve a property that earns rental income.

CRA reports rental interest and bank charges on line 8710 of Form T776, Statement of Real Estate Rentals.

Other rental expenses that may be deductible include:

• Property insurance
• Property taxes
• Advertising
• Repairs and maintenance
• Property management and administration fees
• Professional fees
• Utilities that you pay as the landlord
• Certain eligible travel or vehicle expenses

If you live in part of the property yourself, only the rental-use portion of shared expenses can be claimed. CRA allows reasonable allocation methods such as the relative floor area or number of rooms, depending on the circumstances.

No. A T5013 is a Statement of Partnership Income used to report amounts allocated to members of a partnership. It is not a mortgage-interest slip issued to a regular rental-property owner by their mortgage lender.

Rental-property owners should keep their mortgage statements and other financial records to support the interest expense being claimed on Form T776.

The mortgage rate is only one part of the investment.

Before purchasing, estimate:

• Expected rental income
• Mortgage payments
• Property taxes
• Insurance
• Utilities
• Maintenance and repairs
• Property management costs
• Vacancy allowance
• Condo or strata fees, if applicable

You can use WOWA's Rental Property Calculator to estimate your rental cash flow and return on investment and the Mortgage Payment Calculator to compare different rates and amortizations.

A property with a lower mortgage rate is not automatically the better investment if its expenses, vacancy risk or purchase price result in weaker cash flow.

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There is no universal minimum for every lender. CMHC currently requires at least one borrower or guarantor to have a credit score of 600 for its insured homeowner and Income Property programs. Individual lenders can require stronger credit, particularly for their most competitive mortgage products.

Yes. Rental income can be considered when qualifying, although the amount depends on the lender and property.

Under CMHC rules, an owner-occupied two-unit property can use up to 100% of gross rental income in the applicable calculation. Owner-occupied three- to four-unit properties and non-owner-occupied two- to four-unit properties can generally use up to 50% of gross rent or an eligible net-rental-income approach.

If leases are not already in place, your lender may request an appraisal or market-rent estimate.

Yes. A 20% down payment is the normal starting point for many conventional non-owner-occupied residential rental mortgages.

For qualifying non-owner-occupied properties with two to four units, CMHC Income Property also permits financing up to 80% LTV. Its purchase price or lending value must be below $1 million.

Potentially, if you will occupy the property and it qualifies under homeowner mortgage insurance rules.

An eligible owner-occupied two-unit property can have up to 95% LTV, while an owner-occupied three-unit or four-unit property can have up to 90% LTV. High-ratio homeowner insurance is available for qualifying purchases below $1.5 million.

A pure non-owner-occupied rental does not receive the same low-down-payment homeowner treatment.

CMHC's current published homeowner requirements require intended homeowner occupancy but do not specify a universal 12-month minimum occupancy period. Your lender's mortgage terms may differ.

It can be possible for a qualifying owner-occupied property. A 30-year insured amortization is available when the LTV is above 80% and the borrower is either an eligible first-time home buyer or is purchasing a newly constructed home.

CMHC Income Property for a non-owner-occupied two-unit to four-unit property remains limited to a 25-year amortization.

Properties with five or more units are generally financed as multi-unit or commercial properties rather than through a standard residential rental mortgage.

CMHC Standard Rental Housing begins at five units and can provide up to 85% LTV for qualifying purchases. MLI Select can provide additional leverage and amortization flexibility, including up to 95% LTV and up to 50-year amortization for qualifying projects that meet program requirements.

CRA permits reasonable expenses incurred to earn rental income. Depending on your circumstances, these can include mortgage interest, insurance, property taxes, advertising, management fees, repairs and maintenance, professional fees and utilities.

Mortgage principal is not deductible. Capital expenses and some financing costs also have different tax treatment from ordinary operating expenses.

The right rental property mortgage depends first on the type of property you are buying.

An owner-occupied duplex, a non-owner-occupied condo, a four-unit rental building and a 20-unit apartment property all have very different down payment, qualification, insurance and amortization rules.

For one-unit to four-unit properties, pay particular attention to owner occupancy, down payment and how your lender treats rental income. For five or more units, property cash flow and multi-unit financing programs become much more important.

Comparing lenders is useful, but compare the entire mortgage rather than the rate alone. Qualification rules, amortization, penalties and the amount of rental income a lender recognizes can materially affect both how much you can borrow and the property's monthly cash flow.