Why do rental properties need 20% down?

Mortgage insurance is generally available on homes you live in rather than on pure investment properties, so without insurance the lender carries the risk directly and wants a larger equity cushion. Lenders also assess investment property knowing that when finances get difficult, borrowers tend to prioritise their own home.

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How much down payment do I need for a rental property?

Q: How much down payment do I need for a rental property in Ontario?

For a property that will be completely rented out and not occupied by you, plan for at least 20% down. Depending on the property, the number of units, the location and the lender you may need more. Eligible rental income may help you qualify, and every lender has different criteria for how it is counted.

Q: Is the down payment lower if I live in one unit?

It can be. If you will occupy one unit of a multi-unit property, it may be treated as owner-occupied rather than as an investment, which can mean a considerably smaller down payment. For a first-time investor that distinction is often the difference between buying now and buying years later.

Answered by Rajiv Verma, Mortgage Broker · Reviewed 18 August 2026 · About a 3 minute read

The direct answer

For a property that will be completely rented out and not occupied by you, plan for at least 20% down. Depending on the property, the number of units, the location and the lender, you may need more. The good news is that eligible rental income may help you qualify — and every lender has different criteria for that.

THE SHORT VERSION

20% minimum on a property you won’t live in
More may be required depending on property type, units, location and lender
Rental income may help you qualify — how much depends on the lender
Budget closing costs and land transfer tax separately
If you’ll live in one unit, the rules are different

Why 20% and not 5%

Mortgage insurance is generally available on homes you live in, not on pure investment properties. Without insurance, the lender carries the risk directly — so they want a larger equity cushion.

There’s also a behavioural reason lenders are open about: when finances get difficult, people prioritise the roof over their own head. Investment property is assessed with that in mind.

When more than 20% is required

More units. A triplex or fourplex is assessed differently to a single rental, and requirements often step up.
Smaller markets. Fewer comparable sales and fewer buyers mean more lender caution.
Rural, or well and septic. Same reasoning — harder to sell if anything goes wrong.
Unusual property types. Mixed use, very small units, anything with a narrow buyer pool.
A portfolio already in place. Some lenders tighten as the number of properties rises.

The case where the rules change entirely

If you’ll live in one unit of a multi-unit property, it may be treated as owner-occupied rather than as an investment — which can mean a considerably smaller down payment. For a first-time investor, that single distinction is often the difference between buying this year and buying in four. Worth asking about before you assume 20%.

What else to budget for

Closing costs — legal, title insurance, adjustments
Land transfer tax — Ontario, plus a second one in Toronto
An appraisal, typically $300–$500 and usually payable upfront on a conventional file
Reserves. Some lenders want to see money left after closing — and a vacancy or a furnace will find you otherwise.

When it’s the wrong move

When 20% empties everything. Rental property produces surprises. Buying with nothing behind you turns a manageable repair into a crisis.

When it only works fully rented, at today’s rent. Test it against a vacancy and against a renewal at a different rate.

When the property is hard to finance and hard to sell. The features that narrow the lender list narrow the buyer list too.

What to do next

Send me the property, the expected rent and your current position. Before you make an offer I’ll review your personal finances and the property’s rental numbers together — because the complete picture is what actually decides it.

Talk it through →

Related questions

Answered by Rajiv Verma, Mortgage Broker · Mortgage Architects — FSRA Brokerage Licence #12728 · Licensed in Ontario · Office 289.505.0631 · Direct 647.291.7116

General information about Ontario mortgages — not financial, legal, tax or investment advice. Lender requirements for rental properties vary significantly and change. Every file is reviewed individually.