Down payment rules
A non-owner-occupied rental requires at least 20 percent down and there is no default insurance option at that level. Buying a duplex or triplex you live in is treated more generously, which is why owner-occupied multiplexes remain popular in the GTA.
How lenders count the rent
Some lenders add a percentage of the rent to your income, others subtract expenses from the rent and use the surplus. The two methods can produce very different approvals on the same property.
- Rental add-back at a set percentage of gross rent
- Rental offset netting expenses against income
- Debt coverage ratio testing on larger buildings
- Existing leases or a market rent appraisal as evidence
Where files usually break
Underestimated vacancy, condo fees on a small condo, and property tax on a converted house all eat the margin. Lenders also stress test rentals, so a thin cash flow at today's rate can fail at the qualifying rate.
Five units and up
Once a building has five or more units it is commercial financing, underwritten on the property's net operating income with CMHC-insured options available. That is a different application and often a better rate.
Frequently asked questions
- Can I use projected rent to qualify?
- Yes, with an appraiser's market rent opinion, though lenders discount it.
- Is the rate higher on a rental?
- Usually slightly, because the mortgage is uninsured and the risk profile differs.
- Do I need a corporation?
- Not required, and it changes financing options and rates. Speak with your accountant before deciding.
Talk to a Toronto private mortgage specialist
We arrange equity-based financing across Toronto and the GTA, whether you need a first position from a private lender or a second mortgage behind the bank you already have.