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An investment (rental) property mortgage finances a property the borrower does not intend to live in, which lenders and mortgage insurers generally treat as higher risk than an owner-occupied home — often requiring a larger down payment and stricter qualification.
Down payment requirements step up for most non-owner-occupied rentals: under federal rules, minimum down payment is 5% of the first $500,000 of purchase price, 10% of the portion from $500,000 to $1.5 million, and 20% at $1.5 million and above — and that 20% minimum applies to most non-owner-occupied rental properties as well. As a result, most rental purchases are financed as uninsured mortgages rather than default-insured ones.
Lenders also vary in how they treat expected rental income when assessing qualifying income and debt-service ratios — some add a portion of the rent to the borrower's income, others use it to offset the property's own carrying costs, and some limit how many financed rental properties a single borrower can hold at once.
Higher down payment threshold: most non-owner-occupied rental properties require a minimum 20% down payment, the same threshold that applies to purchases at $1.5 million and above.
Usually financed as uninsured: because of the higher down payment requirement, rental property mortgages are typically uninsured rather than default-insured.
Rental income treatment varies by lender: how much anticipated rent counts toward qualifying income, or offsets the property's own debt service, differs significantly from lender to lender.
Portfolio limits may apply: some lenders cap the number of financed investment properties a single borrower can carry at one time.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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