How Much Down Payment Do You Need for an Investment Property in Canada?

In Canada, you need at least 20% down to buy a 1–4 unit rental property you will not live in. If you live in one of the units, you can put down as little as 5–10%. Buildings with five or more units follow commercial rules, where the minimum depends on the lender, the building’s income and whether the loan is CMHC-insured.

These are minimums. As the rest of this guide shows, the building’s income often forces a bigger down payment, and closing costs always come on top.

A house, duplex, triplex or fourplex bought purely as a rental needs at least 20% down, whatever the price. Federally regulated lenders must insure any home mortgage with less than 20% down, and since April 19, 2010, government-backed mortgage insurance on non-owner-occupied properties has required a minimum 20% down payment. Without insurance available below that level, practically every lender sets 20% as the floor.

For a $900,000 duplex, that is $180,000. Some lenders ask for more, for example 25–35%, if you already own several rentals, are self-employed, or are buying in a small market.

At 20% down there is no insurance premium to pay, but the deal still has to qualify. Lenders count part of the rent toward your income and test your total debt, so a second or third rental can be limited by your personal debt ratios even when the building itself cash flows. Check the property’s cash flow at 20% down before you assume more leverage will help.

If you live in one unit, a 2–4 unit property can be bought with an insured mortgage and a down payment of 5–10%, as long as the price is below $1.5 million. CMHC requires 5% of the first $500,000 and 10% of the remainder for 1–2 units, and 10% of the price for 3–4 units. The $1.5 million limit took effect on December 15, 2024, up from $1 million.

Compared with the $180,000 needed on the same duplex as a pure rental, living in it cuts the down payment by $115,000. The trade-off is a mortgage insurance premium, which is added to the loan; the Financial Consumer Agency of Canada puts premiums between 0.6% and 4.5% of the mortgage, falling as your down payment rises. You must intend to live in the property, and in some provinces, including Ontario and Quebec, sales tax on the premium is due in cash at closing.

For buildings with five or more units, conventional (uninsured) lenders usually lend 65–75% of value, so expect to put down 25–35%. These are commercial mortgages: the lender looks first at the building’s net operating income and second at you.

Three things set the final amount:

• Loan-to-value: the lender’s maximum, often 75% for a stabilized apartment building with a strong borrower and lower for older or smaller-market properties.
• DSCR: most banks and credit unions want 1.20–1.30, measured on their own version of NOI. This is often the binding limit, as the example below shows.
• Your covenant: net worth, liquidity and experience operating rental buildings. Many lenders ask for a personal guarantee.

Conventional loans usually have shorter amortizations, often 25 to 30 years, which raises the payment and makes the DSCR test harder to pass than on insured loans.

CMHC-insured multi-unit mortgages allow up to 85% loan-to-value on a purchase, a 15% down payment, and MLI Select can go up to 95%. In exchange, you pay an insurance premium and meet CMHC’s borrower rules.

• Standard multi-unit insurance: up to 85% of the purchase price or CMHC’s lending value, whichever is less, with amortizations of up to 40 years. Minimum DCR is 1.10 on a 5–6 unit purchase and 1.20 to 1.30 on 7+ units, depending on the term.
• MLI Select: points for commitments on affordability, energy efficiency or accessibility. On existing buildings, 50 points allows up to 85% loan-to-value and 70 or more allows up to 95%, with amortizations of up to 50 years at 100 points.
• Borrower rules: net worth of at least 25% of the loan (minimum $100,000), and five years of experience managing similar buildings or a professional property manager.

The points come with real obligations, such as keeping a share of units at affordable rents for at least 10 years. See CMHC MLI Select explained for how the scoring works.

Lenders lend the lower of their loan-to-value limit and the largest loan the building’s income can support at their minimum DSCR, so your down payment is whatever is left.

Down payment = Price − lower of (LTV loan, DSCR loan)

Here is an 8-unit building at $1,950,000 with $107,040 of NOI, using the same illustrative 4.9% rate for each option:

In every case DSCR, not loan-to-value, sets the loan. The conventional buyer needs $171,800 more than a 25% down payment. The insured rows leave out the CMHC premium: it is usually added to the loan, and the total must still pass the coverage test, so financing it raises the down payment (to about $209,000 at 100 MLI Select points). Affordability commitments can also lower rents and shrink the loan further. Our DSCR guide shows the calculation step by step.

Closing costs are paid in cash on top of your down payment, and on a Canadian rental they are often 2–4% of the price. Lenders will not fold them into the mortgage, so budget for them from day one.

• Land transfer tax, usually the largest item. Ontario’s provincial tax on the $1,950,000 building is $35,475, and buyers in Toronto pay a municipal land transfer tax as well.
• Legal fees and title insurance.
• Appraisal, building inspection and, for larger buildings, an environmental report.
• Lender, broker and CMHC application fees, plus sales tax on the insurance premium in some provinces.

For the 8-unit building, closing costs of about $45,000 bring the conventional buyer’s total cash to roughly $704,000. Add money for upfront repairs and a cash reserve, and your cash-on-cash return should be measured against that full amount, as explained in cap rate vs. cash-on-cash return.

PropStack lets you save scenarios for the same property with different down payments, rates and amortizations, and compare their cash flow, cash-on-cash return and DSCR side by side. DSCR is checked for every year of a 10-year projection, and the “price that works” figure solves for the purchase price that reaches a 1.20 DSCR, a useful anchor when the down payment the lender needs is more than you planned.

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