Financing a Rental Property in BC: Down Payment, Rates and Rental Income

A property you plan to rent out is financed differently from a home you live in: the down payment, the way lenders count the rent and the taxes all change. Here is how it works in BC, whether you are buying a home with a suite to live in or a condo to rent out.

The short version

Will you live there? It changes the down payment

• You live in one of the units. Mortgage default insurance covers owner-occupied homes with one to four units, so you can buy with less than 20% down. On one or two units, such as a house with a suite, the minimum is 5% of the first $500,000 and 10% of the rest. On three or four units, it is 10%. The price must be under $1.5 million, and the insurance premium can be added to the mortgage.
• You won't live there. Insurance that allows less than 20% down is for homes the owner lives in, or in some cases a close relative lives in rent-free, so for a rental you generally need at least 20% down. The CMHC and Sagen rental programs require 20% and don't cover a one-unit rental, such as a condo.
• Five or more rental units fall under CMHC's multi-unit programs, which follow different rules.

Take a house with a suite at an example price of $1,200,000. If you live in it, the minimum down payment is $95,000. If you rent out both units, it is $240,000.

How lenders count the rent

• A home you live in, with an insured mortgage. CMHC can add up to 100% of the gross rent to your income on a two-unit home; on three or four units, it can add up to 50% or use the property's net rental income instead. I cover suite income in Buying a Home with a Suite.
• A rental you don't live in. CMHC's Income Property program and Sagen's Investment Property program insure two- to four-unit rentals with at least 20% down, on a value under $1 million, and count up to 50% of the gross rent as income. Each lender also applies its own rules.
• Proof of rent and income. As an example, RBC asks for current leases or an opinion of market rent, your latest Notice of Assessment and Form T776, and enough income apart from the rent to carry the mortgage.

Qualifying and the stress test

For an insured mortgage from any lender, or an uninsured one from a bank, you qualify at the higher of 5.25% or your contract rate plus 2%, and other lenders may ask you to pass a stress test too. At an example contract rate of 4.5%, that is 6.5%, so a $480,000 mortgage over 25 years costs $2,656.67 a month, but you qualify as if it cost $3,215.15. Your other debts count as well, including the payments on a home you already own. CMHC limits housing costs to 39% of gross income, and housing costs plus other debt payments to 44%, and its Income Property program uses the same limits. I walk through the ratios in How Much House Can You Afford?

Rates and terms

• The same choices. Terms range from a few months to five years or more. A fixed rate stays the same for the term, a variable rate can rise and fall, and open mortgages typically have higher rates than closed ones.
• What sets your rate. The Financial Consumer Agency of Canada lists factors such as the term, the type of rate, your credit history, whether you are self-employed and the type of lender. Ask each lender how it prices a rental before you commit.
• Insured mortgages. CMHC says its insurance helps lenders offer rates comparable to those for borrowers with larger down payments. The premium is a cost, though: on CMHC's rental program it is 1.45% to 2.90% of the loan, depending on the down payment.
• Amortization. With less than 20% down, the maximum is 25 years, or 30 for a first-time buyer or a new build. With 20% or more down, the lender sets the maximum; the CMHC and Sagen rental programs allow up to 25 years.
• Renewal. You renegotiate the rate each time you renew, so test your numbers at a higher rate.

Taxes on rental income

• Report the rent. Rental income goes on Form T776, and the net amount is added to your income on your tax return.
• Current expenses. Interest on money you borrow to buy the rental, property tax, insurance, repairs and maintenance, utilities you pay, strata fees, advertising, accounting fees and property management can generally be deducted in the year you incur them. The principal part of your mortgage payments can't, and neither can the legal fees for buying the property.
• Capital expenses. The building and improvements that last are claimed over time as capital cost allowance; most buildings are in Class 1, at a rate of 4% a year. Land can't be depreciated, and capital cost allowance can't create or increase a rental loss.
• Renting part of your home. Shared expenses are split by area or by the number of rooms you rent.
• Losses. A rental loss can generally be deducted from your other income, but not if you rent to someone you know for less than you would charge a stranger.
• When you sell. Half of the capital gain is generally taxable (see BC's Home Flipping Tax for a sale within two years), and capital cost allowance you claimed can be added back to your income as recapture. The principal residence exemption doesn't apply to a home that you, your spouse and your children never lived in. An accountant can help you plan before you buy.

Rules that affect a rental

• Speculation and vacancy tax. In taxable areas, which include nearly all of Metro Vancouver, every owner declares by March 31 each year. A home rented to tenants for at least six months of the year, in tenancies of at least a month, is generally exempt, and tenants at arm's length need a written tenancy agreement. I explain the details in BC's Speculation and Vacancy Tax.
• Vancouver's Empty Homes Tax. In the City of Vancouver, owners also make a separate yearly declaration, and a home rented to an arm's-length tenant for at least six months of the year, in periods of at least 30 days, is generally exempt.
• Strata bylaws. Since November 24, 2022, a strata can't have bylaws that restrict rentals, but it can still restrict or ban short-term rentals. See Strata Bylaws in BC.
• Short-term rentals. In most of Metro Vancouver, rentals of under 90 days are limited to the host's principal residence, plus one secondary suite or accessory dwelling unit on the same property, and some cities are stricter, so plan your numbers on long-term tenants.
• Rent increases. For increases taking effect in 2026, a landlord can generally raise a sitting tenant's rent by at most 2.3%, once every 12 months, so don't count on the rent rising quickly.

Costs to budget for

• Property transfer tax. The first-time buyer and newly built home exemptions require the home to be your principal residence, so an investor generally pays the full tax: $10,000 on an example $600,000 condo.
• Other closing costs. Legal fees, an inspection and an appraisal if your lender asks for one. I list them in Closing Costs in BC.
• Insurance. Contact your insurer before you rent out a property; the Insurance Bureau of Canada warns that failing to do so can void your coverage.
• Property tax. The Home Owner Grant is only for your principal residence, so a rental pays the full bill.
• Strata fees and special levies, if it is a condo or townhouse.
• Vacancy, repairs and management. Allow for time without rent between tenants, repairs when one moves out, and a property manager's fee if you won't manage it yourself.
• A cash cushion. If the rent doesn't cover the mortgage and costs, you make up the difference every month.

Questions buyers often ask me

How much do I need to put down on a rental property in BC?

If you won't live there, generally at least 20%. If you will live in one unit of a home with up to four units, an insured mortgage can need as little as 5% on one or two units, or 10% on three or four, for a price under $1.5 million.

Can rental income help me qualify for the mortgage?

Yes. On an insured mortgage for a two-unit home you live in, CMHC can count up to 100% of the gross rent. On two- to four-unit rentals you don't live in, the CMHC and Sagen rental programs count up to 50%, and other lenders set their own rules.

Do I have to pass the stress test on a rental property?

Yes. Banks qualify you at the higher of 5.25% or your contract rate plus 2%, and your other debts, including the payments on a home you already own, count in your ratios.

Is mortgage interest on a rental property tax deductible?

Generally yes, the interest on money you borrow to buy or improve the rental. The principal part of your payments isn't deductible.

Can a strata stop me from renting out my condo?

Not long term. Since November 24, 2022, stratas can't have rental restriction bylaws, though they can still restrict or ban short-term rentals.

Planning your purchase? Read Buying a Home with a Suite and How Much House Can You Afford?, or try my mortgage calculator.

This article is general information, not financial or tax advice, and your lender makes the final decision. Rules and the lender and insurer terms quoted were current at the time of writing. For CMHC's rules on counting rent, see rental income.