Why owner-occupancy changes the mortgage
Mortgage default insurance, which lets a buyer put down less than the standard minimum for an uninsured mortgage, generally requires the property to be owner-occupied, meaning you or a close family member will live in it. An investment property bought purely to rent out typically does not qualify for that insurance, which is why lenders usually require a larger down payment on a straightforward rental purchase.
A property with a mix of owner-occupied and rented units, such as a duplex where you live in one unit, is often treated differently again; ask the specific lender how it classifies the property.
Using rental income to qualify
Lenders will generally count a portion of a property's rental income toward qualifying for the mortgage, though the exact percentage used and how existing or projected rent is documented varies by lender. An existing lease and rent roll supports using current rental income; a vacant property or a new purchase without tenants may rely instead on a market rent estimate from an appraisal.
None of this changes the property's other carrying costs, taxes, insurance, condominium fees where they apply, which the lender also weighs against total debt.
Buying a property with an existing tenant
If the investment property already has a tenant, the Residential Tenancies Act, 2006 provides that the tenancy continues under the new owner on the same terms; buying the property does not end it or let you set new terms unilaterally. The existing lease, the rent being charged, and any notices already given or received all transfer with the sale.
Review the lease and any Landlord and Tenant Board history for the unit before closing, since a problem tenancy does not improve by changing ownership.
The tax side, briefly
Interest on money borrowed to earn rental income is generally deductible under the Income Tax Act, a different treatment from a mortgage on a home you live in, which is not deductible. This affects the overall economics of the purchase, though the specific calculation depends on your own tax situation and is a question for an accountant, not for a real estate lawyer.
We handle the closing and the mortgage registration; we do not provide tax advice on the investment itself.
Your steps
Who's involved
Explains how much of the rental income can be used to qualify and what down payment the specific lender requires.
Advises on interest deductibility and the overall tax treatment of rental income and the property.
Reviews any existing tenancy, prepares the closing, and registers the mortgage the same way as on an owner-occupied purchase.
Documents you will need
Tools for this stage
Questions people ask
Can I get an insured mortgage on a rental property?
Generally not, if the property is purely a rental with no owner-occupancy. Mortgage default insurance is typically limited to properties the borrower or a close family member will live in, which is why most rental purchases need a larger down payment.
Do I have to keep an existing tenant when I buy the property?
Yes, in most cases. The Residential Tenancies Act, 2006 provides that a residential tenancy continues under a new owner on its existing terms; buying the property does not by itself end the tenancy.
How much rental income will a lender actually count?
It varies by lender, and typically only a portion of gross rent is counted toward qualifying rather than the full amount, to account for vacancy and expenses. Ask the specific lender for its policy before relying on a figure.
Is mortgage interest on a rental property tax deductible?
Generally yes, under the Income Tax Act's rules for money borrowed to earn income, unlike interest on a mortgage for a home you live in. The details depend on your situation, and an accountant should confirm how it applies to you.
What if the property has more than one unit and I plan to live in one?
Lenders often treat an owner-occupied multi-unit property differently from a pure rental for insurance and down payment purposes. Confirm with the specific lender how it classifies the property before relying on a particular down payment figure.
Also in this centre
Read more
Related centres
Other Learning Centres for the same transaction.
What happens between deciding to buy and settling into an Ontario home: budget and pre-approval, the search, the offer and its conditions, financing and inspection, closing day and the first year, with the legal layer explained at every step.
Related centreThe Selling a Home CentreEverything between deciding to sell an Ontario home and the money reaching your account: preparing, pricing, offers, the buyer's conditions, closing and tax, plus the situations that change the rules: tenants, estates and separation.
Sources
- CMHC: general requirements to qualify for homeowner mortgage loan insurance
- Residential Tenancies Act, 2006
- Income Tax Act, s. 20(1)(c) (interest deductibility)
General information about Ontario law as of 5 September 2026, not legal advice. It does not create a lawyer–client relationship.
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