Editor's note, October 6, 2026: this article was reviewed and rewritten in our accuracy check. An earlier version contained rate premiums, rental-income percentages and a list of 'best markets' that we could not trace to a source; they have been removed or replaced with figures from the sources listed at the end of the article.
Financing a rental property is different from financing the home you live in. The down payment is higher, the lender treats rental income cautiously, and the stress test still applies. Here's how it works in Ontario.
Down payment
- Rental you won't live in: at least 20% down. Mortgage default insurance isn't available for non-owner-occupied rentals.
- You'll live in one unit of a 2-unit home: CMHC can insure it with the standard minimum (5% of the first $500,000 and 10% of the rest), under $1.5 million.
- You'll live in one unit of a 3- or 4-unit home: CMHC's minimum is 10%.
- At $1.5 million or more, 20% is the minimum for any purchase.
Rental income and qualifying
Lenders count only part of the expected rent, or offset it against the property's costs, using their own policies; the approach differs between lenders and between owner-occupied and pure rental properties. Expect to be asked for the lease (or a market rent appraisal), the rent roll for a multi-unit, property tax and insurance figures, and for existing rentals, your tax returns showing rental income. You must still qualify at the stress-test rate: the greater of 5.25% or your contract rate plus 2 points.
Rates and terms
Lenders often price rental mortgages differently from owner-occupied ones, and some limit amortization or how many rental properties they'll finance. Ask each lender for its rental policy in writing.
Running the numbers
- Income: realistic market rent, minus an allowance for vacancy.
- Costs: mortgage payment, property tax, insurance, condo fees, utilities you pay, repairs and maintenance, property management, and accounting.
- Rent rules: rent increases for units first occupied before November 16, 2018 are capped by the provincial guideline; newer units are exempt from the cap but not from the notice rules.
- Taxes: rental income is taxable, and a gain on sale is a capital gain (or business income if you flip). Talk to an accountant before you buy.
Non-resident investors
Foreign nationals pay Ontario's 25% Non-Resident Speculation Tax on residential purchases, plus Toronto's 10% municipal tax in the city, and the federal ban on non-Canadian buyers runs to January 1, 2027. See our NRST guide.
Before you buy
- Check zoning and whether existing units are legal; lenders and insurers ask.
- For a condo, read the declaration and rules on leasing.
- If tenants are in place, review the lease and rent history; the tenancy continues after you buy.
Frequently asked questions
Can rent from a basement unit help me qualify?
Often, yes, if you live in the other unit: lenders and insurers have policies for counting part of the rent from an owner-occupied two-to-four-unit home. Ask the lender how it treats rental income, and make sure the unit is legal; lenders may not count rent from a unit that isn't permitted.
Do I pay tax when I sell a rental property?
Generally yes. The principal residence exemption only covers a home you designate as your principal residence, so a gain on a rental is usually a capital gain (half of it taxable) or, if you held it briefly or bought to flip, business income. Housing held for less than 365 days is generally caught by the federal flipping rule.
Is there HST on a resale rental?
Generally no; HST applies to new and substantially renovated homes. Buying a new home to rent out means paying HST without the owner-occupier rebates, though the CRA has a separate rebate for new residential rental property.
Looking at a rental? Book a call with a licensed Summitly agent, browse our rental investing guide, or ask Zara, Summitly's AI virtual agent.
