The 20% Down Payment Requirement
Unlike owner-occupied properties, investment (rental) properties require a minimum 20% down payment — no exceptions. CMHC mortgage insurance is not available for non-owner-occupied properties.
Important: On a $750,000 investment property, you need at least $150,000 for the down payment plus closing costs (~$12,000–$25,000). Total cash needed: roughly $162,000–$175,000. Plan accordingly.
Some investors use the equity in their primary home to fund the down payment through a refinance or HELOC — see the "Using Home Equity" section below.
How Rental Income Is Used for Qualification
Lenders treat rental income differently depending on whether the property is currently tenanted and the lender's specific policy:
| Method | How It Works | Typical Use |
|---|---|---|
| Rental offset (50–80%) | 50–80% of gross rent reduces housing costs | Most A-lenders for single units |
| Add to income | Full rental income added to borrower's income | Some lenders with existing rental history |
| DSCR (Debt Service Coverage Ratio) | Property's rent covers its own mortgage + expenses | Commercial/portfolio lenders |
Analyzing Investment Property Cash Flow
Before buying, model your cash flow carefully. Many Ontario properties have negative cash flow at current price levels — understanding whether this is acceptable for your strategy is critical.
Example: $800K condo, 20% down ($160K), 25yr @ 5.09%
Monthly rental income: $2,800
Mortgage payment: -$2,940
Property tax + maintenance + insurance: -$600
Vacancy allowance (5%): -$140
Monthly cash flow: -$880 (negative)
Many Toronto-area investors accept short-term negative cash flow for long-term appreciation. Know your strategy.
Investment Property Calculator
Model cash flow, cap rate, and return on investment for your target property.
Lender Options for Investment Properties
Using Your Primary Home's Equity
Many Ontario investors build their portfolio by leveraging equity in their primary home. Two common approaches:
- Refinance: Increase your mortgage to 80% LTV, use the released equity as the investment property down payment. The interest on investment-purpose borrowing is typically tax-deductible.
- HELOC: Set up a home equity line of credit on your primary home. Draw from it as needed for down payments or renovations. Flexible but variable rate.
Consult a tax advisor about the Smith Manoeuvre — a strategy that converts non-deductible mortgage interest into tax-deductible investment interest using a readvanceable mortgage.
Why Investors Use a Mortgage Broker
Investment property financing is more complex than owner-occupied mortgages. A broker navigates:
Lender selection
Some lenders are far more investor-friendly than others. A broker knows which lenders allow more properties, higher LTVs, and better rental income treatment.
Portfolio structuring
As your portfolio grows, lender rules around total indebtedness matter. A broker helps you structure for scalability.
Rate shopping
Investment rate premiums vary significantly. A broker finds the lender charging the lowest premium for your risk profile.
No cost to you
Brokers are paid by the lender. Your free consultation includes a full investment analysis.