Buying rental properties can be an effective way to build net worth and generate positive cash flow over time.
Canada Mortgage and Housing (CMHC) recently increased the minimum down payment required for rental property purchases from 5% to 20% unless one of the units is owner occupied. If one unit will be owner occupied you can still purchase with as little as 5% down and regular mortgage insurance premiums apply.
It is also possible to buy a second home with a 5% down payment if it is to be occupied by yourself or an immediate family member. An immediate family member would include a son or daughter, parents, or grandparents.
Rental purchases usually require income confirmation and good credit, but it is possible to purchase a rental without proving income if you have at least 25% to put down.
It is also possible to purchase a rental property with, as little as, 15% down, but you will be required to pay a lender fee and a higher interest rate.
A number of lenders will allow 80% of rental income (from all rental properties) to be used in determining eligibility as long as all units are legally zoned. Rents must be verified via leases, T1 Generals, or using fair market rent as determined by an appraiser. Some lenders limit the number of income properties allowable. Others will allow you to accumulate properties, as long as your total gross income (including rents) is sufficient to support each new purchase according to debt service requirements.
Properties with more than 4 units fall outside regular residential mortgage insurance guidelines. Some lenders will finance buildings with more than 4 units, and some will allow commercial components as well. Underwriting guidelines are stricter, and sizeable down payments are required for these types of properties.
For more information on investment property financing, please contact
- Janet MacDonald at 613-561-5047 or
- Colin Birkas at 613-929-7629 or
- Jeff Dillon at 613-453-3663 or
