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Investment Property Mortgage in Toronto

Ready For Investment In Property In Toronto?

It is no surprise – real estate investment is becoming increasingly popular in Canada. It seems like investing in properties is a good strategy for many people to get on their way to gaining wealth. It is expected that land with time will become increasingly more valuable and investing in properties is the way to go. Rules on property investments are more stringent overall, however.

Let Professional Guide You Through It

It is important to have good guidance and assistance when you need it. Luckily, Turkin Mortgage brokers will provide you with everything that you need to know as buyer in Canada or if you are seeking < a href=””> US mortgage for Canadians . We are experts in the field and can answer any of your questions. Our priorities are always with the client and we do everything to satisfy your mortgage needs.

What is Investment Property Mortgage?

According to our mortgage broker Toronto, mortgage for a rental property in Ontario or an investment property mortgage consists of various characteristics distinguishing it from residential property loans.

So, is it harder to get a mortgage for an investment property?

One of the primary considerations is the number of units. A building with more than 4 units is a commercial property, meaning a commercial mortgage would be more appropriate. That comes with higher interests and harsher qualification requirements.

Up to four units qualify for a residential loan, meaning the mortgage acquisition process is almost the same as when taking a loan for your primary residence. Another critical component in investment property mortgages is whether you live in one of the units to make the property owner-occupied - it influences the downpayment you make.

That said, a downpayment for rental property mortgage can be less than 20% if you meet all the eligibility criteria, such as falling under residential zoning, having a purchase price of less than $1 million, and living in one unit for more than a year

Difference Between Owner-Occupied and Non-Owner-Occupied Investment Property Mortgage

An owner-occupied property is one you live in for at least one year. That makes it your primary residence, meaning the interest rates and down payments of the investment property mortgage in Toronto will be in the same range as a home – lower than what you would pay in a commercial property. You can make a downpayment ranging between 5 to 10%, giving you a loan-to-value ratio of 90% to 95%.

The property becomes non-owner-occupied if you move out and rent it out after the one-year period elapses. A property with at least 5 units or more that costs more than $1,000,000 falls in a different category.

Down Payment

Do you need 20% down for an investment property in Canada?

The down payment amount you need depends on whether or not the property is owner-occupied and the number of units available. You will need at least 20% if you do not live on the property. If you occupy one unit and meet other criteria, the down payment reduces to as low as 5% to 10%. The lower range is because you get mortgage insurance when you meet CMHC rules. The insurance also exposes you to better mortgage rates.

So, how much down payment is required for investment property in Ontario?

Properties valued from $500,000 to $1,000,000 can have at least a 10% down payment, whereas those valued at less than $500,000 will attract 5%. For instance, a property worth $800,000 can require a down payment of $55,000 – you calculate the first $500,000 at 5% and the remaining at 10%, then add.

Amortization Period

The amortization period refers to the period you take to complete paying off the mortgage. The longer the duration, the fewer payments you have to make monthly. That is one of the reasons investors prefer the extended periods – lower installments for longer means more profits.

Like the down payment, the amortization period differs according to the property type. However, most people qualify for an amortization period of 25 to 35 years for residential properties. Factors like mortgage default insurance also matter. For instance, you can get an amortization of 25 years if the insurance reduces the down payment to less than 20% – that is the maximum period. A down payment of more than 20% will give you between 30 and 35 years.

There is no correlation between living in a unit on the property and the amortization period. However, you can accrue an extension fee and higher interest rates if the mortgage is not insured. That can increase the monthly payments significantly, which can be a disadvantage because the installments are ideally supposed to be lower over a long period. You can use a mortgage payment calculator to determine the higher repayment amount.

Mortgage Default Insurance

Mortgage default insurance (CMHC insurance) is a requirement if you have a high-ratio mortgage or less than a 20% down payment. The insurance cushions the lenders if you fail to pay, but part of the requirements is that the property should have less than four units. You must also live in one unit for a year, and the property should not exceed $1,000,000.

The chances of needing mortgage default insurance are minimal when you pay a downpayment of more than 20%, but it is not impossible. Some lenders make it mandatory before giving you the best terms and interest rates. There may be other smaller fees associated with the insurance worth considering.

Understanding Investment property mortgage rates in Ontario

The mortgage acquisition process for investment properties involves terms and requirements you must meet before getting the loan. Part of the requirements is that you must have a down payment of at least 20% if not occupying one unit and the property has one or two units. A 5% downpayment will do if you live in one of the units. Three or four units in a property will require a 10% downpayment if owner-occupied and a 20% down payment if not.

Meeting the qualification criteria for an investment property mortgage is more likely when you work with a mortgage broker. They can help you find less popular lenders willing to work a deal that suits you, even though such lenders tend to charge premium fees or rates. A good broker researches all the possible options to prevent you from spending on high premiums.

Remember, a down payment of less than 20% gets you 25 years as an amortization period. Paying more can get you an extended duration whether or not you live in one of the units.

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Investment Property Mortgage Requirements

Qualifying for an investment property mortgage in Canada is significantly simple because you can use the rental income to cover some requirements. Obtaining the documentation for the mortgage requirements is simple, especially with necessities, such as proof of tenants in the units and zoning documentation readily available.

The lender uses the information you provide through the documentation and other requirements to assess your debt coverage ratio. Procure the standard required documents for property purchase in Canada before approaching a lender. Your credit score may also come in as part of the requirements, with the lender using their preferred method to calculate the debt coverage ratio.

Lenders are not mandated to use specific calculation methods. That is why some can reject applications that others approve. You can determine the best ratio for your situation before searching for lenders willing to use the same calculation to grant you the loan. Mortgage brokers have expertise with all the popular methods and can help you through them stress-free.

A mortgage broker has the experience and know-how you need to ease the process. We can handle investment property requirements swiftly and hassle-free.

General Usage

High vs. Low

Ratio Improvement Levers

Rental Inclusion

Residential Investment Properties

Aim for lower

  • Negotiate the mortgage rate
  • Get rid of high-interest debt
  • Explore other sources of income

Debt Coverage

Commercial Investment Properties

The higher, the better

  • Lower mortgage rate
  • Lower operating expenses
  • Boost property income

Rental Offset

Residential Investment Properties

Aim for lower

  • Lower mortgage rate
  • Eliminate high-interest debt
  • Boost income

Rental Inclusion

Rental inclusion is the most popular investment property acquisition method and for a good reason. You can use it to purchase residential properties with a maximum of four units.

By showing part of the rent that goes into offsetting the debt and other expenses, the lender can foretell how well you can pay them back.

Lenders add 50% of the rental income you get yearly to your regular income to calculate the mortgage, making a lower ratio better. Mortgage payments are combined with the property tax, utility bills like heating costs, and all other bills not connected to the mortgage, then divided by the sum of your gross income and 50% of the expected rental income.

Most lenders prefer a lower rental inclusion rate – less than 32%. You can get a lower rate by avoiding high-interest debts and boosting your income.

Debt Coverage Ratio

Debt Service Coverage Ratio (DSCR) mainly applies when you need commercial mortgages as it shows the number of times profits from the rental income can cover the mortgage payments. Lenders use the method to calculate the ratio for five or more units. The higher the coverage ratio, the better for you – it shows your ability to pay the debts. That is why it should be more than 1 if you want better loan rates.

You first get the Net Operating Income (NOI), which is the income from the property after deducting expenses, then divide it by the annual mortgage payments that include the interest rate. Deductible costs include all allowances, property taxes, home insurance, and maintenance charges.

Your cash flow is vital because rental income is the primary mortgage repayment source.

Rental Offset

The rental offset method is the least popular for mortgage qualification, but it comes in handy if you do not qualify through the rental inclusion method. The idea is that some of the rental income can cover some expenses on the property, making the gross income less crucial. You only pay a few of the property costs with your regular salary.

Getting a lower ratio is more beneficial – it indicates that the majority of your income does not go into maintaining the property. Most lenders are content with approximately 50 to 70%, showing that only that percentage will repay the mortgage, utility costs, and taxes. You should never expect a 100% rental offset. Lenders consider vacancies and unpaid rent, with the most preferred ratio that does not exceed 32%.

Investment Property Mortgage in Toronto – FAQs

What are the benefits of an investment property mortgage?
The mortgage allows property ownership cost-efficiently, with an additional extended amortization that offers a flexible payment plan. The rental property mortgage is also more convenient, providing an opportunity to get the lowest interest rates.

What do I need to qualify for a rental property mortgage?
Several documents are necessary when seeking an investment property mortgage, such as a purchase and sale agreement, proof of downpayment according to the qualification criteria, and proof of income. You can also list the renters and provide zoning documentation to show whether the property is residential or commercial.

Is net worth fundamental in getting an investment property mortgage?
Net worth is essential as part of the requirements, but the amount varies with every lender. Some creditors do not impose a minimum net worth, but others have it at $100,000.

Is there a connection between rental property mortgage and traditional mortgage?
An investment property mortgage is sometimes known as traditional because of the minimum 20% down payment and the absence of mortgage default insurance. Unlike high-ratio mortgages with higher premiums, it gives borrowers more options and flexibility.

Variety Of Rates


We offer fixed, variable and other mortgages at the best rates out there. As a borrower, you can purchase, refinance or renew an investment property. By working with us you will receive plenty of payment flexibility. In addition we also give extended amortization. If you provide a minimum of a 20% down payment then you are not required to get mortgage insurance. Even when it seems like you do not qualify for something, speak with us because we may be able to find a solution that you weren’t aware of.


We have plenty of options for you if you want to invest in real estate. Get in touch with us either by phone or email and we will tell you what we can do for you. On talking with you, we will be able to assess your financial situation as well as the property of interest to give you the most fitting mortgage for your needs. Whatever your needs are, we can help.

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Was looking for a mortgage broker in Toronto. Heard about Leon and his team from a co worker and decided to give them a call. after some time on the phone talking about mortgages and what would work best for me I was VERY impressed. They were polite and most importantly they knew what they were talking about. We then scheduled an appointment and I got my mortgage with a great rate. Definitely recommend.

Gina Carroll

Got tired of sow service and mediocre rates from my bank, so I started looking for a mortgage broker. Had some family friends recommended Leon and his team, so decided to check them out. Was very impressed with Leon, he guided me through step by step, recommended a mortgage and I ended up switching to him. My rate is better and he always answers call and emails right away.

Wilton Marble

A little while back my wife and I finally decided to stop renting and get a place of our own. After some searching we found a condo we both liked and that was in our price range. The next step was a mortgage, but honestly, neither of us knew too much of what we were getting into. We found Leon and his team after a quick search on google and have had a wonderful experience. Leon and his team of mortgage brokers are VERY knowledgable, polite, work fast and just all around very professional. They answered all our questions and we got a great rate.

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Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!

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Going through with this company was my best decision. These Burlington mortgage brokers are real professionals. They helped me to save thousands of dollars, I'm not sure I'd find such a good offer myself.

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