The minimum down payment on an investment property in Ontario is 20 percent of the purchase price, because mortgage default insurance is not available on a property you will not live in. That 20 percent is a floor, not a promise. Buildings with five or more units, rural or unusual properties, and files with thinner credit can all be asked for 25 to 35 percent instead, and the money has to be traceable to a source your lender is comfortable with.
So the honest answer is that there is no single down payment number for a rental. There is a starting point and then a handful of things that move it. Let me walk you through what actually moves it, because knowing this before you start shopping saves a lot of heartache later.
Why 20 percent is the floor
On the home you live in, you can put down as little as 5 percent. That works because an insurer steps in behind the lender and covers the risk. Insurance like that is simply not offered on a property you are not living in.
Take the insurance away and the lender is carrying the whole risk themselves. Their answer is to ask you to carry more of it too, which is where 20 percent comes from. No lender in Ontario is going to go below it on a true rental purchase, so there is no point hunting for the one who will.
What pushes the number above 20
Here is where people get caught out. They budget for 20 percent, find a property, and then hear a bigger number at the worst possible moment.
The number of units. One to four units usually sits at the 20 percent minimum. Once you hit five units or more, you have moved into commercial lending territory, and the down payment expectation typically climbs, often to 25 percent or higher, with different rules and a different kind of appraisal.
The property itself. A standard house or townhouse in Barrie is straightforward. A property on a private road, with a shared well, on leased land, or in a very small town is harder to finance, and a lender may protect itself by asking for more down. Anything needing real work can do the same.
Your credit and income picture. Stronger files get the minimum. A bruised credit history, self-employed income that takes explaining, or a stack of existing rentals can all move a lender to ask for a bigger cushion.
The lender you land on. Two lenders can look at the same property and land on different numbers. This is genuinely one of the best reasons to have someone shopping the file rather than accepting the first answer you hear.
The rule that surprises almost everyone
A rental and a second home are not the same thing to a lender, and the down payment rules are not the same either.
If you are buying a cottage you will actually use as a family, in some cases you may qualify for far less than 20 percent down. Say a place you head to on weekends and never rent out. That can be treated as a second home rather than an investment, and the rules loosen considerably.
The moment the plan is to rent it out, the 20 percent floor comes back. So how you tell your lender you will use the property is not a small detail, and it has to be the truth. Saying one thing on an application and doing another is mortgage fraud, which is a much bigger problem than a larger down payment.
Where the down payment can come from
This is the part that turns a maybe into a yes for most of my clients, because the money is very often already there.
Your existing home equity. If you have owned for a while, some of your down payment is likely sitting in your walls. You can reach it with a refinance, where you replace your mortgage with a larger one and take the difference in cash, or with a home equity line of credit. A HELOC is a revolving credit that works like a credit card secured against your house. You get a limit, you draw only what you need, and you can pay it back any time.
Savings and investments. Straightforward, as long as you can document where it came from. Most lenders want to see roughly 90 days of history on the funds, so money that appeared last Tuesday from nowhere creates questions.
A gift. Gifted down payments are common on a home someone will live in. On a rental, lenders are much more cautious, and many will not allow it at all. Ask before you count on it.
A loan or another credit line. Some lenders allow borrowed down payment funds and some absolutely do not, and the borrowed payment gets counted against you when they run your ratios either way.
Whichever route you take, tell your lender the real source. Borrowed funds you tried to make look like savings is the fastest way to lose an approval.
A quick walk through the real cost
Say a couple in Simcoe County is looking at a rental priced around $500,000. These figures are illustrative, so treat them as shape rather than gospel.
Twenty percent of that is $100,000. That is the headline number, and it is the only one most people budget for. Then come land transfer tax, legal fees, a home inspection, an appraisal, and the small pile of costs that show up on closing. Add a reserve so an empty month or a broken furnace is an inconvenience instead of an emergency.
So the real question is never just “can I come up with the down payment.” It is “can I come up with the down payment, the closing costs, and a cushion, and still sleep.” Working that number out honestly at the start is one of the smartest financial decisions you can make here.
What to do before you start shopping
Find out what your home is actually worth today, and what you still owe. The gap between those two numbers is your equity, and it tells you what is possible.
Then get a straight answer on how much of that equity you can access and what a realistic down payment looks like for the kind of property you have in mind. Knowing whether you are working with 20 percent or 25 before you make an offer changes which listings you even open.
Frequently asked questions
Can I put 5 percent down on a rental property in Ontario?
No. Default insurance is not available on a property you will not occupy, so 20 percent is the minimum on a true rental. Low down payment options only exist for a home you are going to live in.
Can I use my home equity as the down payment on a rental?
Yes, and most people do. A refinance or a HELOC on your existing home are the two usual routes. Your lender will ask where the funds came from, and borrowed funds get factored into your qualifying numbers, so disclose it up front.
Do I need more than 20 percent down for a multi-unit property?
Often yes. One to four units generally sits at the 20 percent minimum. Five units or more moves into commercial territory, where down payment expectations are typically higher and the rules are different.
Is a cottage an investment property?
It depends entirely on how it is used. A cottage you use as a family and never rent out may be treated as a second home, which can mean a smaller down payment. Renting it out puts it in investment territory with the 20 percent floor.
How long do my down payment funds need to be in my account?
Most lenders want to see roughly 90 days of history so they can confirm where the money came from. Plan ahead if you are moving funds between accounts.
About the author
Lora Fenn, Mortgage Agent L1, DLC Yellow Brick Mortgages (Brokerage Licence #13854), a Barrie mortgage agent who helps Ontario homeowners and buyers find another path when the bank says no, serving Barrie, Simcoe County and all of Ontario.
Let’s look at your numbers
If a rental property has been sitting in the back of your mind, I would love to walk through what your equity could actually cover. Book a free 15-minute equity-and-rate chat and we will get you a real number instead of a guess. You can also grab my free guide for Ontario homeowners at lorafenn.ca/free-home-equity-guide-for-ontario-homeowners.
This page is general education, not financial advice. Any figures are illustrative only and subject to lender approval (O.A.C.). Lora Fenn, Mortgage Agent Level 1, Lic. #M25003153, DLC Yellow Brick Mortgages (Brokerage Licence #13854).
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