Short answer: For a rental you won’t live in, plan on at least 20% down, and expect a rate a little above what you’d get on your own home. If you’ll live in one unit of a 1 to 4 unit property, you can put down as little as 5% (1 or 2 units) or 10% (3 or 4 units). Lenders count part of the rent toward qualifying, and how much varies a lot between lenders.
For general information only. Every lender has its own rules, rates and approval criteria.
Down payment
| Property | Minimum down payment |
|---|---|
| Rental you won’t live in | 20% |
| You live in one unit, 1 or 2 units total | 5% (insured) |
| You live in one unit, 3 or 4 units total | 10% (insured) |
The down payment can come from savings, investments, a gift in some cases, or equity in your current home.
How lenders count the rent
Lenders don’t count 100% of the rent as income. They use one of two approaches:
- Add back: a portion of the rent (often 50%, sometimes more) is added to your income.
- Offset: a portion of the rent is used to cancel out the property’s own mortgage, taxes and heat.
The same rental can qualify with one lender and not another because of this. Matching you with the right lender is a big part of what we do on rental files.
Rates
A rental you don’t live in can’t be insured, so it’s priced as an uninsured mortgage. That usually means a slightly higher rate. See insured vs uninsured mortgages.
Using your home equity
If you’ve built equity in your home, a refinance or a home equity line of credit can fund the down payment on a rental. You’ll need to qualify for both mortgages, including the stress test.
Before you buy
- Get pre-approved first, including the rental income the lender will actually count
- Check whether a suite is legal and registered with the City of Calgary, since it affects financing and insurance
- Budget for vacancy, repairs, condo fees and property management
Thinking about a rental? Book a call or call or text 403-648-1541.
Frequently asked questions
How much down payment do I need for a rental property in Alberta?
For a property you won't live in, most lenders want at least 20% down. If you live in one unit of a 1 to 4 unit property, the down payment can be lower: as little as 5% for one or two units and 10% for three or four units, with mortgage insurance.
Do lenders count rental income when I qualify?
Yes, but not all of it. Depending on the lender, they either add a portion of the rent to your income or use it to offset the property's costs. Some count 50% of the rent, others more. This is where lender choice makes a big difference.
Are rental property mortgage rates higher?
Usually a little. A rental you don't live in can't be insured, so it's priced as an uninsured mortgage. Some lenders also add a small premium for rentals.
Can I use my home equity to buy a rental?
Often, yes. A refinance or a home equity line of credit on your current home can fund the down payment on a rental. You still need to qualify for both mortgages.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed through Mortgage Connection Inc.