Investment Properties in Canada
Buying an investment property is a popular option for Canadians looking at different ways to invest their money. However, unlike the mortgage you took out on your principal residence, financing an investment property is a little more complex. The number of units in the building and whether or not you’ll be occupying one of the units are the two major components that control what your financing will look like. Let’s take a look at how investment property mortgages work in Canada.
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 building will have. Most buildings with 1-4 units are zoned residential, so the qualification criteria and financing options from lenders are only slightly more difficult than that of a mortgage similar to what you have on your principal residence. However, buildings with 5 or more units are zoned commercial, so a lender would require that you take out a commercial mortgage on it. With a commercial mortgage, the qualification criteria is even tougher to meet and interest rates are often much higher.
If it’s a multi-unit property, the second thing to consider is if you, the owner, will be living in one of the units or not. If you will be occupying one of the units, the property 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 make.
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.
Investment Property Mortgage Rates
So long as you meet the qualification criteria and can make at least the minimum down payment on your investment property, you should qualify for the same mortgage rates and terms as you see on my site – these include fixed, variable and adjustable rate mortgages.
It’s important to note, however, that some smaller lenders don’t offer investment property mortgages at all – that is, unless you are going to occupy one of the units. If you can find a smaller lender to work with, be prepared for them to add a small premium to the mortgage rate, such as +0.30 per cent.
Reposted from RateHub