Buying a rental property uses a different set of mortgage rules than buying a home you’ll live in. Down payment minimums are higher, rates are often a little higher, and how lenders count rental income can make or break your approval. If you understand these rules before you shop, you can target properties and lenders that actually fit.
Down payment: owner-occupied vs. pure rental
The biggest difference is whether you’ll live in the property. If you live in one unit and rent out the others, you can often use insured financing with a smaller down payment. If you won’t live there, mortgage insurance isn’t available on a typical one-to-four-unit rental, so you need at least 20% down.
Minimum down payment by property type
| Property | You live there? | Minimum down payment |
|---|---|---|
| House with a basement suite, or a duplex | Yes | 5% on the first $500,000, 10% above (insured) |
| Triplex or fourplex | Yes | 10% (insured) |
| Any 1–4 unit rental | No | 20% (uninsured) |
| 5 or more units | Either | Commercial financing; different rules |
How lenders count rental income
Lenders won’t count 100% of the rent, because vacancies, repairs and management eat into it. Instead they use one of two methods, and the choice can change your maximum significantly:
Two methods lenders use
Rental add-back
- A percentage of rent (often 50%) is added to your income
- The full mortgage payment, tax and heat count as debt
- More conservative
Rental offset
- A percentage of rent (often up to 80%) is subtracted from the property’s costs
- Only the shortfall, if any, counts as debt
- Usually lets you qualify for more
Here’s a simple example: a $600,000 rental with 20% down, a $2,735 monthly payment at an illustrative 4.79% rate, $350 of property tax and $120 of heat, rented for $3,300 a month.
Rent vs. monthly carrying costs
How each method treats this property
| Method | How it’s calculated | Effect on your ratios |
|---|---|---|
| Add-back at 50% | $1,650 added to monthly income; $3,205 of costs added to debts | Costs count in full, so your TDS ratio rises noticeably |
| Offset at 80% | $2,640 of rent offsets $3,205 of costs | Only the $565 shortfall counts as debt |
Rates and qualifying
- Rental mortgages are often priced slightly higher than owner-occupied ones, and uninsured pricing applies at 20% down.
- The stress test still applies: you qualify at the higher of 5.25% or your rate plus 2%.
- Lenders look at your whole portfolio, including your own home’s costs and every other property.
- Many lenders want to see a lease or an appraiser’s market-rent estimate.
Before you buy: a quick cash-flow check
Run the numbers
Estimate realistic rent
Use current listings and the appraiser’s estimate, not the best case.
List every cost
Mortgage, property tax, insurance, heat and utilities you cover, condo fees, maintenance (often 5% to 10% of rent) and vacancy.
Check the cash flow
Rent minus all costs. Negative cash flow means you’re subsidizing the property every month.
Check your ratios
Ask a lender or broker how the property affects your qualifying room for future purchases.
Plan for rate changes
Model what happens at renewal if rates are 1% higher.
Examples use illustrative rates and Canadian semi-annual compounding, and are rounded. They are not rate quotes or advice. Last reviewed September 2026.