Financing for rental, multi-unit and commercial property

Rental and investment mortgages

For properties of one to four units, financing follows broadly familiar rules with some important differences:

• The down payment is typically 20% or more, and mortgage default insurance is not generally available
• Rental income can often be used to help you qualify, either added to your income or offset against the property's costs, depending on the lender
• The property can usually be held personally or through a corporation, which affects both the lending and the tax position

Which lender suits you depends heavily on how they treat rental income. The difference between two lenders' approaches can change what you qualify for substantially.

Common strategies we finance

• Buy and hold

  A single rental held for income and long-term appreciation, the usual starting point.

• Secondary suite conversions

  Adding a legal second unit, which changes both the income and how the property is financed.

• Equity release to expand

  Using the equity in one property to fund the down payment on the next.

The four numbers that decide a commercial file

Commercial lending has its own vocabulary. These four do most of the work, and it is worth knowing them before your first conversation with a lender:

• Net operating income (NOI): what the property earns after operating costs, before financing
• Debt service coverage ratio (DSCR): how comfortably that income covers the loan payments
• Capitalisation rate: the return the property produces relative to its value
• Loan-to-value (LTV): how much is borrowed against what the property is worth