An investment property mortgage is for a home you will rent out or resell, not live in. It needs a bigger down payment and usually costs a bit more than a regular mortgage. Here is how lenders look at rentals.
How is it different from a regular mortgage?
Lenders see a rental as more risky than the home you live in. So you can expect:
- A down payment of at least 20%, often more
- A slightly higher rate in some cases
- Closer review of your credit and debts
How do I qualify?
Lenders look at your credit score, your total debts compared with your income, and your down payment. Many will also count part of the expected rent from the property. How much rent they count depends on the lender.
The Canada Mortgage and Housing Corporation (CMHC) and the Financial Consumer Agency of Canada both publish plain guides on what lenders check.
What are the benefits and risks?
Benefits: rental income, growth in the property’s value, and expenses you can deduct against the rent.
Risks: prices can drop, repairs cost money, and the unit can sit empty. Plan for all three before you buy.
What are my financing options?
- A regular mortgage on the rental
- A HELOC on your own home for the down payment
- A private loan for short-term or hard-to-place deals
Small rate differences add up over years of holding a rental. It pays to compare mortgage rates in St. Catharines before you choose.
Fixed or variable on a rental?
Rentals are often sold or refinanced partway through a term, so this choice matters more for investors.
- Penalty. Breaking a variable usually costs three months of interest. Breaking a fixed can cost much more.
- Switching. Most lenders let you lock a variable into a fixed at any time without a penalty.
- Cash flow. When prime falls, an adjustable payment falls too.
- Risk. When prime rises, your cost goes up, and rents rarely rise as fast.
A fixed rate gives you certainty. A variable gives you room to exit. The right pick depends on how long you plan to hold the property.
What about tax and legal rules?
Rental income is taxable, and you take on duties as a landlord. Check the rules with your accountant and the Government of Canada website. Mortgage brokers in Ontario are licensed by FSRA.
Talk to us
Want to run the numbers on a rental? Book a call or phone 289-723-2126.
Common questions
How much down payment do I need for a rental property in Canada?
At least 20% for a property you will not live in. Some lenders want more depending on the property and your file.
Does rental income count toward qualifying?
Usually part of it does. Each lender has its own method, so the same rental can qualify you for different amounts at different lenders.
Should I choose fixed or variable for a rental?
A variable usually has a smaller penalty if you sell or refinance early, and you can lock it in later. A fixed gives you a set payment for the term.