Investment Property Mortgage Rates Canada

Look, if you’re serious about building wealth through real estate in Canada, you need to understand investment property mortgage rates. Period.

Whether you’re buying your first duplex or adding to your portfolio, the rate you secure on your rental property will make or break your cash flow. And here’s the thing—most investors leave money on the table because they don’t understand how lenders actually price these mortgages.

As of December 2025, Canadian mortgage rates have stabilized after the Bank of Canada’s rate cuts. The BoC overnight rate sits at 2.25%, prime is at 4.45%, and insured mortgage rates are running around 3.55%-3.75% for primary residences. For investment properties? Add another 0.25% to 0.50% on top of that. It’s not huge, but it matters when you’re analyzing deals.

Here’s what you need to focus on: two primary factors will determine your investment property mortgage rate in Canada.

First: The number of units in your property (are we talking 1-4 units or 5+?)

Second: Whether you’ll actually live in one of those units (owner-occupied makes a massive difference)

Everything else—your credit score, down payment, cash reserves—they matter too. But these two factors are the foundation. Get them right, and you’re setting yourself up for success.

Want to make sure you’re getting competitive rates on your next rental property? Book a free strategy call with our team at LendCity. We specialize in investment mortgages across Canada and the U.S., and we know exactly how to structure your financing for maximum returns.

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How Many Units? Understanding the 1-4 vs. 5+ Split

Here’s where most new investors get confused. The number of units in your property doesn’t just affect your property management headaches—it completely changes your financing game.

1-4 Unit Properties (Residential Financing)

If you’re looking at anything from a single-family rental up to a fourplex, you’re in residential mortgage territory. This is good news because the lending rules are straightforward.

Here’s what you’re dealing with:

• Minimum 20% down payment required. No way around this for non-owner-occupied investment properties. CMHC insurance? Not available for rentals. You’re putting up real skin in the game.
• Investment property rates run 0.25%-0.50% higher than owner-occupied. It’s the lender’s way of pricing in the extra risk. You’re not living there, so statistically, you’re more likely to prioritize your primary residence if money gets tight.
• Credit score needs to be 680+ for the best rates. Can you get approved with less? Maybe. But you’ll pay for it.
• Lenders use 50%-80% of your rental income for qualification. This is huge. Even if your property breaks even in reality, it might show as cash flow negative on paper. Plan for this.
• Maximum 25-year amortization for rental properties. No 30-year options here unless you’re owner-occupied.

The math is simple: a duplex or triplex with residential financing is accessible, straightforward, and perfect for building your initial portfolio.

5+ Unit Properties (Commercial Financing)

Once you hit five units or more, you’re playing in the commercial mortgage sandbox. Different rules, different opportunities.

• Down payments range from 15-35% depending on the lender, property type, and your experience level.
• CMHC MLI Select program can be a game-changer. For qualifying multi-unit residential properties (5+ units), you can get down to 15% down with amortization periods up to 50 years. Yes, 50 years. The catch? All units must be in the same building on the same lot. CMHC tightened this up in 2025—no more bundling separate properties.
• Debt Coverage Ratio (DCR) requirements matter. The property’s cash flow needs to support the mortgage. Lenders want to see the numbers work without relying on your W-2.
• Rates are higher because you’re in commercial territory, but the financing is more flexible for experienced investors.

Here’s the bottom line: if you’re starting out, focus on 1-4 units. Build your track record. Then scale into commercial properties when you’ve got cash reserves and experience.

Owner-Occupied vs. Non-Owner-Occupied: The Down Payment Game

This is where smart investors save massive amounts of money upfront.

If you’re willing to live in one unit of your multi-family property—house hacking, as we call it—you unlock benefits that non-owner-occupied investors can only dream about.

Non-Owner-Occupied Investment Properties

You’re buying purely as an investment. You’ve already got your primary residence somewhere else.

• 20% down payment minimum. No exceptions. No CMHC insurance available.
• Higher mortgage rates (that 0.25-0.50% premium we talked about).
• Stricter qualification standards including larger cash reserves.
• 25-year maximum amortization.

For many investors, this is fine. You want the rental income, you don’t want to live in a duplex. That’s a legitimate strategy, but you need to bring more cash to the table.

Owner-Occupied Multi-Unit Properties (The House-Hacking Strategy)

Now we’re talking. This is how you get into real estate with minimal capital and maximum leverage.

For a 2-4 unit property where you’ll live in one unit:

• 5% down payment on properties under $500,000.
• 5% down on the first $500K, then 10% on the remainder for properties between $500K-$1.5M.
• CMHC insurance available (you’ll pay a premium, but it enables the low down payment).
• Up to 30-year amortization if you’re a first-time buyer (as of December 15, 2024).
• Lower interest rates because it’s your primary residence.
• Rental income from the other units helps you qualify for a bigger mortgage.

Let’s do the math: a $700,000 duplex owner-occupied requires $45,000 down (5% on first $500K + 10% on remaining $200K). The same property as a pure investment? You need $140,000. That’s a $95,000 difference!

Here’s my advice: start with house hacking. Live in a duplex, triplex, or fourplex for a year or two. Let your tenants cover most or all of your mortgage. Build equity. Then move into your next owner-occupied property and turn the first one into a pure rental. Rinse and repeat.

This is how you build a portfolio without needing massive capital. This is how regular people become real estate millionaires.

Pro tip: When you convert your primary residence into a rental property later, lenders typically allow more flexible use of rental income because you originally applied as owner-occupied. Use this to your advantage.

Your Financial Profile: What Lenders Are Really Looking At

Alright, let’s talk about the stuff that actually determines whether you get approved and what rate you’ll pay.

Credit Score

Your credit score is the single most important factor in your mortgage rate. Here’s how it breaks down in Canada:

• 740+: You’re getting the best rates available. Lenders love you.
• 680-739: Standard investment property rates. You’re fine.
• 620-679: Higher rates, fewer lender options. You’ll get approved, but it’ll cost more.
• Below 620: You’re probably looking at alternative (B) lenders or private financing at significantly higher rates.

Every 20-point improvement in your credit score can save you 0.25%-0.50% on your rate. Over a 25-year mortgage, that’s real money.

Debt Service Ratios (GDS and TDS)

Canadian lenders use two ratios to determine if you can afford the mortgage:

Gross Debt Service (GDS): Your housing costs divided by your gross monthly income. Should be ≤ 35% (some lenders allow up to 39%).

Total Debt Service (TDS): All your debts plus housing costs divided by gross monthly income. Should be ≤ 42% (some lenders allow up to 44%).

Here’s the critical part most investors miss: lenders typically only use 50%-80% of your rental income in these calculations. Not 100%.

So your property might break even in reality, but on paper, it shows as cash flow negative. This is why having strong personal income alongside your rental income matters. You can’t rely solely on rent to qualify for multiple properties.

The Mortgage Stress Test

Welcome to Canada, where we stress test everything.

You must qualify at the higher of:

• Your contract rate + 2%, OR
• 5.25% minimum qualifying rate

Let’s say you’re getting a 4% mortgage. You need to prove you can afford payments at 6%. This significantly reduces how much you can borrow.

The good news? As of November 2024, straight mortgage renewals with the same lender are exempt from the stress test. That’s huge for investors with existing mortgages.

Cash Reserves

Lenders want to see you can handle vacancies, repairs, and unexpected problems.

Typical requirements:

• 3-6 months of mortgage payments in liquid reserves
• Additional reserves for each investment property you own
• The more you have, the better your rate

If you own multiple rental properties, lenders want to see you can cover all of them if they’re simultaneously vacant. It happens. Be prepared.

The Income Ratio Problem

Here’s something most investors don’t know until they hit it: some Canadian lenders will decline your application if more than 50% of your income comes from rental sources.

Why? They view it as a commercial operation rather than personal investment.

Other lenders are more flexible but may charge slightly higher rates. This is where working with a mortgage broker who knows which lenders accept high rental income ratios becomes invaluable.

Current Market Conditions: December 2025

Let’s talk about what’s happening right now in the Canadian mortgage market.

Bank of Canada Update

The BoC has delivered consecutive rate cuts in 2025, bringing the overnight rate to 2.25%—the lower end of their neutral range (2.25%-3.25%). Governor Tiff Macklem has signaled a pause, basically saying “we’re good here for now.”

Next BoC meeting is December 10, 2025. Market expects them to hold steady—86% probability according to futures.

Current Rates (December 2025)

Here’s what you’re looking at today:

• Prime Rate: 4.45%
• 5-Year Fixed (Insured): 3.55%-3.75%
• 3-Year Fixed (Insured): 3.64%
• Variable Rate (Insured): 3.45%-3.75%
• Investment Property Premium: Add 0.25%-0.50%

So for investment properties, you’re looking at roughly 3.80%-4.25% depending on your profile and lender.

Market Outlook 2025-2026

Experts forecast rates staying relatively stable through 2026. The BoC is signaling they’re done cutting for now. Five-year fixed rates are expected to hit their lowest levels by mid-2025, then potentially edge up slightly.

Here’s what matters for investors: over 1.2 million Canadian homeowners are renewing mortgages in 2025—that’s over $300 billion in debt. This creates fierce competition among lenders, which means better deals for borrowers who shop around.

Housing inventory remains limited. Demand is there but constrained by affordability concerns. For investors with financing lined up, this is actually opportunity—less competition for properties.

Alternative Financing: Debt Coverage Ratio (DCR) Loans

If you’re self-employed, have complex income, or are scaling your portfolio quickly, DCR loans might be your best friend.

How DCR Loans Work in Canada

Instead of qualifying based on your personal income, DCR loans qualify you based on the property’s cash flow. Can the rental income cover the mortgage? That’s what matters.

Key features:

• Qualification based on property cash flow, not your W-2
• Stress test still applies (this is Canada, after all)
• Lenders don’t count 100% of rental income—they deduct for vacancy, repairs, management
• Mixed-use properties generally acceptable
• Requires property details: address, rental income, taxes, condo fees, insurance

Who Should Consider DCR Loans?

• Self-employed investors with strong cash flow but complex tax returns
• Experienced investors scaling quickly (3+ properties per year)
• Properties with strong rental income relative to mortgage payments
• Anyone who’s maxed out traditional lending based on personal income

The catch? DCR loans come with fees. These are essentially commercial-style loans. The fees vary based on loan size, complexity, and timeline. Factor these into your investment analysis.

But for many investors, especially those building serious portfolios, DCR loans are the difference between being stuck at 2-3 properties and scaling to 10+.

Canada vs. United States: Cross-Border Investing

Many Canadian investors ask about buying rental properties in the United States. Lower prices, more favorable landlord laws in certain states, better cash flow in some markets—there are legitimate reasons to look south of the border.

Here are the key differences:

Mortgage Rates

• Canada: Investment property rates around 3.80%-4.25% (adding 0.25-0.50% to owner-occupied)
• United States: Investment property rates around 6.7%-8.5% (adding 0.5-1.5% to primary residence rates of ~6.2%)

Yes, U.S. rates are significantly higher right now. But don’t let that scare you off—cash flow and appreciation can still make the numbers work.

Down Payment Requirements

• Canada: 20% minimum for non-owner-occupied; 5% for owner-occupied 2-4 units
• United States: 15-25% typical; some programs allow less with owner-occupancy

Qualification Differences

• Canada: Stress test required; 50-80% of rental income counted
• United States: No stress test; different rental income treatment; DSCR loans widely available

DSCR vs. DCR

• Canada (DCR): Stress test applied; rental income reduced for expenses; mixed-use accepted
• United States (DSCR): No stress test; may use 100% rental income; interest-only options available; rates 7.75%-9.5%

Why Consider U.S. Properties?

• Lower property prices in many markets (you can buy cash-flowing properties for $150K-$250K in certain markets)
• More favorable landlord-tenant laws in landlord-friendly states
• Portfolio diversification across currencies and markets
• Potentially higher cash-on-cash returns
• Different tax treatment (requires cross-border tax planning)

At LendCity, we help Canadian investors navigate both markets. We understand the unique challenges of cross-border investing and can structure your financing accordingly.

Your Action Plan: Getting the Best Rate

Alright, let’s bring this home with a clear action plan.

Before You Apply

1. Get your credit score to 740+. This is non-negotiable if you want the best rates.
2. Build cash reserves covering 3-6 months per property. If you own multiple properties, reserves for all of them.
3. Reduce your TDS ratio below 42%, ideally closer to 36%.
4. Save 20% down payment for non-owner-occupied, or prepare for 5% down if you’re house-hacking.
5. Understand that lenders use 50-80% of rental income. Your property needs stronger cash flow than you think.

Choosing Your Strategy

If you’re starting out: House-hack with a 2-4 unit owner-occupied property. Put down 5%, get favorable rates, let tenants cover your mortgage. Build equity for 1-2 years, then move into your next property.

If you’re converting a primary residence: Take advantage of better rental income treatment. This is one of the easiest ways to add to your portfolio.

If you’re self-employed or scaling fast: Explore DCR loans. The flexibility is worth the fees if you’re serious about growth.

If you’re choosing loan terms: Consider a 3-year fixed to bridge today’s rates with expected 2026 conditions. It’s roughly 0.25% lower than variable and slightly lower than 5-year fixed.

Always shop multiple lenders. Rates vary significantly. A mortgage broker can help you navigate which lenders accept high rental income ratios, which ones have the best rates for your profile, and which programs match your strategy.

2025 Market Timing

• Take advantage of stable rates following BoC cuts
• Limited inventory means less competition—be ready to act fast
• New CMHC rules (December 2024) expand opportunities for first-time buyers
• Focus on strong rental markets with low vacancy rates
• Calculate total returns: mortgage costs + cash flow + potential appreciation

Take Action Today

Investment property mortgage rates in Canada are a complex mix of property characteristics, personal finances, and economic conditions. You can’t control the Bank of Canada or housing market trends. But you absolutely can control your credit score, down payment, cash reserves, and investment strategy.

Here’s what matters:

• Unit count and occupancy status dramatically affect your down payment and rates
• Owner-occupied multi-unit properties are the smartest entry point (5% down, lower rates, rental income helps you qualify)
• Strong credit (740+), low TDS, and substantial reserves get you the best rates
• Lenders only count 50-80% of rental income—plan for this in your analysis
• DCR loans provide flexibility for self-employed and scaling investors
• Shopping multiple lenders can save you thousands over your mortgage term
• December 2025 rates are favorable—this is a good time to invest

Ready to secure competitive financing for your Canadian investment property?

 Book a free strategy call with LendCity today.

Our team specializes in investment property mortgages across Canada and the United States. We help real estate investors navigate complex financing scenarios and secure optimal rates. Whether you’re buying your first duplex or expanding a multi-property portfolio, we have the expertise and lender relationships to help you succeed.

Don’t leave money on the table. Let’s structure your financing right and build the rental portfolio you deserve.

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