Getting a mortgage for a rental property in Canada is more complex than financing your primary residence. Lenders apply stricter qualifying criteria, require larger down payments, and assess rental income differently. This comprehensive guide explains exactly how rental property mortgages work, what lenders look for, and how to maximize your borrowing power.
| Feature | Primary Residence | Rental/Investment |
|---|---|---|
| Minimum Down Payment | 5% (insured) | 20% (conventional only) |
| CMHC Insurance Available | Yes | No |
| Stress Test Rate | Higher of rate+2% or 5.25% | Higher of rate+2% or 5.25% |
| Rental Income Counted | N/A | 50–80% of gross rent |
| Max Amortization | 30 years (insured: 25) | 25–30 years (lender dependent) |
| Interest Rate Premium | Base rate | +0.10–0.50% typical |
Every mortgage in Canada — including investment properties — must pass the federal mortgage stress test. You must qualify at the higher of:
For example, if you're offered a 5-year fixed rate of 5.0%, you must prove you can afford payments at 7.0%. This significantly reduces the mortgage amount you qualify for compared to just using your actual rate.
This is one of the most important and often misunderstood aspects of rental property mortgages. Different lenders use different methods:
Most major banks use a rental offset approach. They add a percentage of the monthly rent to your qualifying income. Typically:
For properties you've already owned for at least 2 years, some lenders will use the net rental income from your tax returns (Schedule T776). This can be higher or lower than the offset method depending on your claimed expenses.
Lenders use two key ratios to determine how much you can borrow:
GDS measures housing costs as a percentage of gross income. Most lenders cap GDS at 39% for investment properties.
GDS = (Monthly Mortgage P+I + Property Tax + Heat + Condo Fees) / Gross Monthly Income
TDS includes all your debt obligations. Lenders typically cap TDS at 44%.
TDS = (All Housing Costs + All Debt Payments) / Gross Monthly Income
Investment property mortgages typically carry a premium over owner-occupied rates. As of early 2026, typical rental property mortgage rates are:
| Term | Typical Rate Range (Investment) | Typical Rate Range (Primary) |
|---|---|---|
| 1-Year Fixed | 5.39–5.99% | 5.19–5.79% |
| 3-Year Fixed | 4.79–5.49% | 4.59–5.29% |
| 5-Year Fixed | 4.59–5.29% | 4.39–5.09% |
| Variable Rate | Prime + 0.50 to 1.20% | Prime + 0.00 to 0.70% |
Note: Rates change frequently. Consult a mortgage broker for current offers. Bank of Canada prime rate was approximately 4.95% in early 2026.
All major banks offer investment property mortgages. They tend to be more conservative on rental income inclusion (often 50–70%) but offer competitive rates for well-qualified borrowers. Good choice if you have a strong employment income and existing banking relationship.
Credit unions (Desjardins, Meridian, Coast Capital, etc.) often have more flexible qualifying criteria. Some will count 100% of rental income and allow higher debt ratios. They may also have more flexible policies on non-traditional income sources.
Monolines like MCAP, First National, and RMG Mortgages offer competitive rates and work exclusively through brokers. Often the best rates in the market.
For investors who don't qualify at traditional lenders due to self-employment, credit issues, or high debt ratios: B lenders like Home Trust, Equitable Bank, and CMLS Financial offer more flexible qualifying but at higher rates (typically 1–3% above A lenders).
Last resort for short-term financing. Very high rates (8–15%+) and fees. Useful for bridge financing or turnaround situations but not viable for long-term holds.
To use rental income for qualifying, lenders typically require:
For uninsured (conventional) mortgages on rental properties, lenders typically offer amortizations of 25–30 years depending on the institution. A longer amortization means:
You can refinance an investment property to access equity (for further investments) or to get a better rate. Key rules:
Related Tools:
Mortgage Calculator — Calculate payments at any rate and amortization
Land Transfer Tax Calculator — Calculate your closing costs
Every percentage point on your down payment matters. KOHO's high-interest savings account helps you grow your down payment faster with no fees and automatic savings features.
New users get $100 with referral code 45ET55JSYA
Get $100 with KOHO →Some lenders offer 30-year amortizations on uninsured investment property mortgages. This reduces monthly payments but means you pay significantly more interest over time. Most lenders cap it at 25 years for investment properties.
Yes, second mortgages are available on rental properties through private or B lenders. They are expensive (higher rates) and carry more risk. They're typically used as short-term bridge financing.
If you're using existing rental income (from properties you already own), lenders will ask for your tax returns. If you're buying your first rental, they'll use the expected market rent from a lease or appraisal.