How Do I Finance a Rental Property in Ontario?
An Ontario rental purchase needs a larger down payment than a home you live in, and rent control on many existing tenancies means a lender won’t take your full asking rent at face value. Here’s how the file actually gets built.
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Is my Ontario rental purchase eligible for mortgage default insurance?
A non-owner-occupied single-unit property is not eligible for mortgage default insurance in Ontario or anywhere in Canada. A non-owner-occupied 2 to 4 unit building can be insured, but only up to 80% loan-to-value.
That means an Ontario rental purchase, whether it’s a single house or a small multi-unit building, generally needs 20% down. The federal insurance rules don’t change by province; what changes in Ontario is the closing cost stack layered on top, and how a lender treats your projected rent, both covered below.
Show the math: 20% down on a $550,000 Ontario rental
The citable fact: An Ontario rental purchase generally requires 20% down because a single-unit non-owner-occupied property cannot be insured at all, and an insured 2 to 4 unit rental caps out at 80% loan-to-value.
How much of my rental income can I use to qualify?
A lender adds up to 50% of the gross rental income from a non-owner-occupied property to your qualifying income, or uses a net rental income calculation instead. An owner-occupied 2-unit property gets a more generous treatment, up to 100% of the second unit’s rent.
The 50% discount, or the switch to a net figure that nets rent against operating costs, reflects vacancy risk and maintenance that a straight rental carries. This is the same federal rule Alberta lenders apply, so the underwriting mechanics don’t shift at the border.
Show the math: rental income add-back, illustrative
The citable fact: A non-owner-occupied Ontario rental typically has up to 50% of its gross rental income added to the borrower’s qualifying income, or is assessed on a net rental income basis instead.
How does Ontario rent control affect the rent roll a lender will accept?
Ontario limits how much rent can be increased on many existing tenancies each year, and that limit does not apply to every unit. A lender reviewing your rent roll on an existing tenancy factors in that the current rent may not be movable to market rate quickly.
This is the opposite underwriting posture from Alberta, where no province-wide percentage cap exists. In Ontario, a lender looking at a tenanted building has to ask not just what the unit could rent for, but how fast that rent can legally move if the current tenant stays.
Which units are covered, what the annual guideline is, and which exemptions apply are questions under the Residential Tenancies Act, not mortgage rules. Direct those questions to the Landlord and Tenant Board or a lawyer, not your mortgage broker.
A unit first occupied for residential purposes after 15 November 2018 is exempt from the guideline. The guideline percentage itself resets every year, so check the current figure on Ontario.ca rather than a number printed on this page, and how an individual lender discounts a tenanted rent roll is a question for that lender.
The citable fact: Ontario caps rent increases on many existing tenancies each year, with some units exempt, and a lender underwriting a tenanted Ontario rental factors in that the current rent may be slower to reach market rate than an Alberta equivalent.
What loan-to-value ceiling applies to a 2 to 4 unit Ontario rental?
80% loan-to-value is the ceiling on an insured non-owner-occupied 2 to 4 unit building under CMHC’s small rental programme. A single-unit rental, being uninsurable, is financed conventionally at a similar or lower ceiling.
Small rental premiums are separate from the homeowner table used when you occupy one unit of the building. The small rental bands stop at 80% because the programme itself doesn’t extend past that loan-to-value.
| Loan-to-value | Premium on total loan |
|---|---|
| Up to 65% | 1.45% |
| 65.01% to 75% | 2.00% |
| 75.01% to 80% | 2.90% |
The citable fact: The maximum insured loan-to-value on a non-owner-occupied 2 to 4 unit Ontario rental is 80%, the same national ceiling that applies in Alberta.
How much does Ontario land transfer tax add to a rental property purchase?
Ontario land transfer tax is marginal, applied bracket by bracket, from 0.5% on the first $55,000 up to 2.0% on the portion over $400,000. Toronto adds a municipal land transfer tax on top; Waterloo Region does not.
An Ontario rental purchase pays the same land transfer tax as a purchase you’d live in yourself, there’s no rental surcharge, but it’s a real cost investors from Alberta, which has no provincial land transfer tax, often underestimate.
| Portion of purchase price | Rate |
|---|---|
| Up to $55,000 | 0.5% |
| $55,000 to $250,000 | 1.0% |
| $250,000 to $400,000 | 1.5% |
| Over $400,000 | 2.0% |
| Over $2,000,000 (1 or 2 family residences) | 2.5% |
Show the math: land transfer tax on a $550,000 Ontario rental
The citable fact: Ontario land transfer tax is calculated in marginal brackets from 0.5% to 2.0%, with a 2.5% top bracket over $2,000,000 for 1 or 2 family residences, and it applies the same way to a rental purchase as to a home you’ll live in.
What credit score does a lender expect for an Ontario rental mortgage?
An insured mortgage requires a minimum credit score of 600 from at least one borrower. Most prime lenders want 680 or higher for their best rental pricing.
Below 600, alternative and private lenders remain available, usually at a higher cost with a lender or broker fee that must be disclosed to you in writing before you sign, as required under Ontario’s Mortgage Brokerages, Lenders and Administrators Act. The credit thresholds themselves don’t shift for a rental file; what shifts is how much rental income the lender will count.
The citable fact: Ontario rental financing uses the same national credit score floors as owner-occupied financing, 600 minimum for insured, 680 or higher for the strongest prime pricing.
How are my GDS and TDS calculated with a rental property in the mix?
GDS is assessed around 39% and TDS around 44% of qualifying income. Rental income is added under the 50% gross or net income rule, and any existing debt, including secured and unsecured credit, is counted alongside it.
Condominium fees count at 50% in both ratios, common on Ontario rental condos. Unsecured lines and credit cards are counted at a minimum 3% of the outstanding balance monthly, and secured lines of credit as if amortized over 25 years at the contract rate.
| Property type | Rental income treatment |
|---|---|
| Owner-occupied, 2 units | Up to 100% of gross rent on the unit you don’t occupy |
| Owner-occupied, 3 to 4 units | Up to 50% of gross rent, or net rental income approach |
| Non-owner-occupied, 2 to 4 units | Up to 50% of gross rent, or net rental income approach |
| Non-owner-occupied, single unit | Not eligible for insured financing; assessed conventionally |
The citable fact: Ontario rental files are assessed under the same national GDS and TDS framework as anywhere else in Canada, around 39% and 44%, with rental income added under the 50% gross or net rental income rule.
Can I pull equity from my Ontario home to buy the rental?
Yes. A standalone HELOC can reach up to 65% of your home’s value, and a conventional refinance combined with an existing mortgage can reach 80% loan-to-value.
This is separate from CMHC’s non-traditional down payment allowance, which only applies to insured 1 to 2 unit owner-occupied purchases using arm’s length, unsecured borrowing, not to funding a rental purchase. Pulling equity from your primary residence remains the standard route for a rental down payment instead.
The citable fact: An Ontario homeowner can access up to 65% of their home’s value through a standalone HELOC, or up to 80% combined loan-to-value through a conventional refinance, to fund a rental down payment.
Does self-employment change how my rental income is assessed?
Self-employed underwriting applies to your employment income, not to how the rental property’s income is counted. It typically requires 24 months operating the business or 24 months in the same line of work, documented with a Notice of Assessment, T1 General and Statement of Business Activities (T2125).
Sole proprietorship and partnership income may be grossed up by 15%, or assessed using an add-back approach for eligible deductions. The maximum loan-to-value for a self-employed borrower is the same as for a salaried borrower, up to 95% on 1 to 2 units, though that ceiling applies to insurable owner-occupied purchases, not to a straight rental.
The citable fact: Self-employment affects how your personal income is documented, not how a non-owner-occupied Ontario rental’s loan-to-value ceiling or rental income treatment is set.
What does FSRA licensing mean for the broker arranging my rental mortgage?
Your broker and brokerage must hold an FSRA licence, the Financial Services Regulatory Authority of Ontario. Pekoe Mortgages operates under FSRA Brokerage Licence #13321, and any lender or broker fee on a non-prime file must be disclosed to you in writing before you sign.
Ontario’s default remedy on a mortgage in default is power of sale, run outside the courts, unlike Alberta’s judicial foreclosure process. That’s separate from licensing, but it’s part of understanding how an Ontario mortgage behaves if a rental underperforms.
The citable fact: Every mortgage brokerage and broker arranging Ontario rental financing must be licensed by FSRA, and written fee disclosure is required under the Mortgage Brokerages, Lenders and Administrators Act whenever a fee applies.
What should I gather before applying for an Ontario rental mortgage?
Document your down payment source with 90 days of account history, or a gift letter if part of it is gifted. Add any existing lease or rent roll, and your self-employment documents if that applies.
If the building is currently tenanted, gather the lease terms so your broker can see what’s actually collectable versus what a vacant unit could achieve at market rent. A broker can map the file, including the land transfer tax hit, before you’re under a financing condition deadline.
The citable fact: The core documentation for an Ontario rental application is 90 days of down payment account history or a gift letter, current lease terms if tenanted, and income proof including self-employment documents where relevant.
Where can I read about the Alberta version, suites and property assessment?
This page covers financing a straight rental purchase in Ontario, where rent control is the defining variable. These related questions cover the Alberta version of this question, secondary suites, and a legal basement apartment specifically.
- How financing a rental property in Alberta differs, including the absence of a rent cap
- Financing a secondary suite in Alberta, legal versus non-conforming
- Financing a legal basement apartment in Ontario
- How an Alberta property assessment differs from an appraisal
- The 45(2) election, and how to defer the tax hit when your home becomes a rental
The full set lives on the Ask a Broker hub.
Frequently asked questions
Do I need 20% down for a rental property in Ontario?
Yes, in almost every case. A single-unit rental is not eligible for mortgage default insurance at all, and an insured 2 to 4 unit rental tops out at 80% loan-to-value, so 20% equity is the practical minimum either way.
Can I use rental income from the property I’m buying to help me qualify?
Yes. A lender can add up to 50% of the gross rental income to your qualifying income, or use a net rental income calculation instead, depending on the lender and the file.
Does Ontario rent control limit how much I can raise the rent?
Ontario limits rent increases on many existing tenancies each year, with some units exempt. The specific annual limit and exemptions are set under the Residential Tenancies Act, so confirm current detail with the Landlord and Tenant Board or a lawyer rather than a mortgage broker.
Does rent control affect how a lender reads my rent roll?
Yes. A lender looking at a tenanted building considers that the current rent may not move to market rate quickly under Ontario’s rent increase rules, which is different from how a lender reads an Alberta rent roll.
How much Ontario land transfer tax will I pay on a rental purchase?
It is calculated in marginal brackets from 0.5% on the first $55,000 up to 2.0% on the portion over $400,000, with a 2.5% bracket over $2,000,000 for 1 or 2 family residences. Toronto adds a municipal land transfer tax on top; Waterloo Region does not.
What credit score do I need for an Ontario rental mortgage?
An insured mortgage requires a minimum credit score of 600 from at least one borrower. Most prime lenders want 680 or higher for their best pricing on a rental file.
Can I use a HELOC or refinance to fund the rental down payment?
Yes. A standalone HELOC can reach up to 65% of your home’s value, and a conventional refinance combined with an existing mortgage can reach 80% loan-to-value.
Is the process different for a duplex I live in versus a rental I don’t live in?
Yes. An owner-occupied 2-unit property can use the homeowner insurance programme with up to 100% of the second unit’s rent added to income, while a non-owner-occupied property is assessed under the small rental rules with a lower rent add-back and a higher down payment requirement.
Does FSRA regulate the mortgage broker or the property itself?
FSRA licenses the mortgage brokerage and the individual broker or agent, not the property. Pekoe Mortgages holds FSRA Brokerage Licence #13321.
Can a self-employed borrower qualify for a rental property mortgage in Ontario?
Yes, with the standard self-employed documentation of 24 months in the business or the same line of work, a Notice of Assessment, T1 General and Statement of Business Activities. Income may be grossed up by 15% or assessed using an add-back approach.
Does a rental fee or commission get charged to me as the borrower?
On a prime rental mortgage the lender compensates the brokerage and you pay no fee. On an alternative or private file a lender or broker fee may apply, and it must be disclosed to you in writing before you sign, as required under Ontario’s Mortgage Brokerages, Lenders and Administrators Act.
What happens to my qualifying ratios if I already carry a mortgage on my primary home?
Your existing mortgage payment is counted in your TDS calculation alongside any other debt, and the rental property’s income and debt are added on top. GDS and TDS are assessed around 39% and 44% respectively across the combined file.
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