Investment Property Mortgages in Canada: The 20% Down Rule and the Rest

By Jordan Ellis · Published August 21, 2026 · Reviewed September 14, 2026

Quick Answer

Non-owner-occupied rental properties in Canada require a minimum 20% down payment — mortgage default insurance isn't available — and most lenders add a 0.25–0.75% rate premium. Lenders count 50–100% of market rent toward qualification (a 'rental offset'), and the stress test still applies. On a $500,000 rental, expect $100,000 down plus ~$10,000 closing costs and a payment around $2,200/month at ~5.25% over 30 years.

The fantasy: tenants pay your mortgage while the property doubles. The reality: a second down payment, a rate premium, and a spreadsheet that decides whether you’re an investor or a subsidized landlord.

The entry rules

20% down minimum on a non-owner-occupied property — no CMHC insurance available, no exceptions
Rate premium of ~0.25–0.75% over owner-occupied pricing
Stress test applies — qualify at the higher of contract + 2% or 5.25%, with rental income counted per the lender’s method
Closing costs like any purchase: land transfer tax, legal, appraisal — and no first-time-buyer rebates

The rental-income puzzle

Lenders count rent differently, and it changes your qualification by six figures. Some use a 50% add-back (half the rent added to your income); investor-friendly lenders use an 80–100% offset (rent cancels the property’s costs directly). Same file, wildly different answers — which is why the broker channel matters more for rentals than for principal residences.

A realistic first-rental snapshot ($500,000 condo)

Down payment (20%): $100,000
Closing costs: ~$10,000
Mortgage payment on $400,000 at 5.25%, 30-yr: **$2,200/month** — exact numbers
Plus property tax, condo fees, insurance, maintenance reserve, vacancy allowance

If market rent is $2,600, the headline “cash flow” is $400/month before tax, insurance, fees, and the roof that needs replacing in year seven. Honest pro formas include 4–6% of rent for maintenance and 2–4 weeks/year of vacancy.

The tax side

Deductible: mortgage interest, property tax, insurance, repairs, management, advertising — profit is taxed at your marginal rate
CCA (depreciation): allowed, recaptured at sale — most small landlords skip it
On sale: the gain is a capital gain — 50% included in income; no principal residence exemption for years it was rented
HELOC funding: many investors pull the down payment from their home equity — check your borrowing room, and know that the interest stays deductible only while it’s invested

The stress tests that matter more than the government’s

Before buying, run the property at: rates +2% at renewal, two months of vacancy, one $8,000 special assessment, and rent 10% below your assumption. A deal that survives all four is an investment; one that doesn’t is a speculation with a mortgage attached.

The one-line answer

The barriers are real — 20% down, rate premium, strict ratios — but the filter works both ways: investors who survive the math face less competition from those who never ran it.

Official sources

Rules and dollar limits change. Confirm current amounts with the official pages below before you act · Last reviewed September 14, 2026.

Capital gains (Guide T4037) (Canada Revenue Agency)
Rental income (Guide T4036) (Canada Revenue Agency)

Frequently Asked Questions

How much down payment do I need for a rental property in Canada?

20% minimum for a pure rental — insured mortgages (5–10% down) are only for owner-occupied homes. The workaround: buy a duplex/fourplex and live in one unit, which allows as little as 5% down on the whole building. Second homes for family use can qualify at 5–10% too, but expect lenders to scrutinize intent.

How do lenders count rental income when qualifying me?

Two methods: a rental offset (50–80% of market rent subtracted from the property's costs before they hit your ratios) or rental add-back (50–100% added to your income). The method varies by lender and changes your maximum dramatically — this is why investors shop brokers who know rental-friendly lenders.

Are rental property mortgage rates higher?

Usually 0.25–0.75% above owner-occupied rates at A-lenders, more at B-lenders. The stress test still applies: the higher of contract + 2% or 5.25%. Some lenders also cap how many rental properties one borrower can hold.

What rental property expenses are tax deductible in Canada?

Mortgage interest (not principal), property tax, insurance, utilities you pay, management fees, repairs, and advertising. Depreciation (CCA) is allowed but recaptured on sale — most small landlords skip it. Rental profit is taxed at your marginal rate; losses deduct against other income if there's a reasonable expectation of profit.

Is a rental property a good investment in 2026?

Depends on the city and the math, not the myth. Many Canadian markets are cash-flow negative at 20% down and current rates — the bet is appreciation plus principal paydown. Stress-test the deal at +2% rates and 2 months/year vacancy before calling it an investment; the rent-vs-buy math article shows the framework.