Investment Property Mortgages

When you start shopping around for an investment property, the first thing you need to consider is the number of units your property will have. Most lenders consider a property with 1-4 units as residential, meaning the qualification criteria and financing options are only slightly more difficult than that of a principal mortgage. However, if you start looking at buildings with 5 or more units, most lenders will require that you take out a commercial mortgage. With a commercial mortgage, the qualification criteria is even tougher to meet and interest rates are often much higher.

The second thing you will need to consider is whether or not you, the owner, will be living on the property. If you will be living on the property, it would be considered owner-occupied. If all of the units will be rented out, your property would be considered non-owner occupied. The major difference between the two is how much of a down payment you need to have.

Since April 19th, 2010, Canadians have been required to make at least a 20% down payment on non-owner occupied investment properties. Use the following chart to see the minimum down payment both owner and non-owner occupied investment properties require.

Units Owner-Occupied? Down Payment Max Loan-to-Value
1-2 Yes 5% 95%
1-2 No 20% 80%
3-4 Yes 10% 90%
3-4 No 20% 80%

As you can see, non-owner occupied investment properties require at least a 20% down payment. However, if you plan on living in one of the units, you can put down as little as 5-10%, depending on the total number of units in your property.

If you put down anything less than 20% on an investment property, your maximum amortization period will be 25 years. However, if you put down 20% or more, you may qualify for a 30 or 35-year amortization period. This is one aspect of an investment property mortgage where it does not matter if the property will be owner-occupied or not.

Investment properties with 1-4 units are eligible for very competitive mortgage rates, as the Canadian Mortgage and Housing Corporation (CMHC) has mortgage default insurance to minimize the risk to lenders.

Owner-Occupied Investment Property CMHC Insurance Rates

If your investment property will be owner-occupied, your CMHC insurance premium rates will be as follows:

Amortization Down Payment
5-9.99% 10-14.99% 15-19.99% 20-24.99%2 25-29.99%2 30-35%2
25 Years 2.75% 2.00% 1.75% 1.00% 0.65% 0.50%
30 Years1 N/A N/A N/A 1.20% 0.85% 0.70%
35 Years1 N/A N/A N/A 1.40% 1.05% 0.90%

Non-Owner Occupied Investment Property CMHC Insurance Rates

If your investment property will not be owner-occupied, your CMHC insurance premium rates will be as follows:

Amortization Down Payment
20% 20.01-25%1 25.01-35%
25 Years 2.50% 1.75% 1.25%
30 Years2 2.70% 1.95% 1.45%
35 Years 2.90% 2.15% 1.65%

References and Notes

  1. Note that you may not need to purchase CMHC insurance, if you put down 20% or more. However, if you barely meet the qualification criteria, a bank will require that you pay these premiums to access their best mortgage rates and terms.
  2. If you put down 20% or more, you may qualify for up to a 35-year amortization period. However, for every 5 years of amortization you add to 25 years, you must pay an additional 0.20% premium