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Investment property mortgage

Definition

A mortgage on a non-owner-occupied rental property.

Minimum 20% down (35% on 5+ unit commercial). Rental income partially offsets debt service; lenders cap how much rent can be used.

Rental properties need at least 20% down (often more for multi-unit), and the rate is typically a bit higher than an owner-occupied mortgage. Lenders let you use a portion of the projected or actual rent to help you qualify, but they 'haircut' it — commonly counting 50–80% — to allow for vacancy and costs.

How rent is treated varies a lot by lender: some add net rent to income, others subtract the full property cost from rent and apply the surplus. That difference can decide whether a file flies, which is why investors lean on brokers to place rental deals.

For portfolios, strategies like the BRRRR method and DSCR-style qualifying come into play. Run the numbers on our rental-cashflow calculator before you write the offer.

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A lender

A bank or monoline that prices its lowest rates and tightest underwriting against borrowers who fit prime credit, income, and property criteria. The big banks (RBC, TD, Scotia, BMO, CIBC, NB) and major monolines (MCAP, First National, MERIX) are A lenders.

B lender

An alternative ("alt-A") lender that prices higher than A lenders but flexes on credit history, income documentation, property condition, or self-employed earnings. Examples include the alternative-lending programs of Equitable Bank and Home Trust.

Bridge financing

Short-term loan that lets you close on a new home before the sale of your existing one funds. Priced at prime + premium, secured against both properties, typically up to 90-120 days.

Closed mortgage

A mortgage that limits how much extra you can prepay each year and charges a penalty if you break the term early. Almost all standard Canadian mortgages are closed because the rates are materially lower than open.

Collateral charge mortgage

A mortgage registered against your property for more than the actual loan amount, letting you increase the limit later without re-registering. Common at TD and Scotia. Makes inter-lender switches harder mid-term.

Conventional mortgage

A mortgage with at least 20% down. No mortgage default insurance required. Pricing is typically higher than insured because the lender carries more of the credit risk.