Mortgage default insurance is generally not available on a property you do not live in, so a rental normally needs at least 20% down. If you will occupy one unit of a two-to-four unit building, insured options with a smaller down payment can still be on the table.
Lenders either offset your mortgage payment with a share of the rent, or add a share of the net rental income to your income. The share differs from lender to lender, which is why the same file can qualify comfortably at one and fall short at another.
Rental mortgages are typically priced a little above owner-occupied ones. The stress test still applies either way: you qualify at the greater of your contract rate plus two percentage points, or the 5.25% benchmark.
What the property earns after the mortgage and the running costs. Payments use Canadian semi-annual compounding, the way your lender calculates them.
Monthly costs means everything that is not the mortgage — property tax, insurance, condo fees, maintenance and a vacancy allowance.
Monthly cash flow
after mortgage and costs
Illustrative only. Cap rate uses net operating income before financing; return on cash invested compares the first year of cash flow to your down payment.
Yes, though not all of it. Lenders apply either a rental offset — a share of the rent reduces the mortgage payment they count against you — or an add-back, where a share of net rental income joins your income. How generous that share is varies by lender, and it is one of the biggest reasons the same application gets different answers.
Plan for at least 20% on a property you will not live in, because mortgage default insurance generally is not available on it. If you will live in one unit of a two-to-four unit building, the property can be treated as owner-occupied and insured options with a lower down payment may apply.
Usually a little, yes. Lenders treat a rental as carrying more risk than the home you live in, so rental mortgages tend to price above owner-occupied ones. The gap depends on the lender and on the strength of the rest of your application.
Rent left over after the mortgage payment and every running cost — property tax, insurance, condo fees, maintenance and an allowance for the months the unit sits empty. A calculation that leaves out vacancy and maintenance will almost always look better than the property performs.
We sign on as guarantor. If a screened tenant stops paying, we pay you for up to twelve months and recover the arrears ourselves.
Credit, income and rental history on every applicant — plus the rules on what you may and may not legally decide on.
Property managers, brokerages and realtor teams: volume pricing, multiple seats and consistent screening on every file.
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