Lately, I have had a lot of questions about rental income properties and can the income be used to qualify for a mortgage in Ontario. I am Danielle Demerino, Toronto real estate agent, and I am here to clarify the question!
As the real estate market continues to grow, many Ontarian’s who are already invested in real estate are looking for ways to qualify for secondary mortgages. While in other parts of the country you can rely on your rental income to get a mortgage, can the same be said in Ontario? Let’s get into it!
How Do I Know if I’m Eligible for Using Rental Income to Qualify for a Mortgage in Ontario?
More than five years ago, CMHC (Canadian Mortgage and Housing Corporation) released new rules about who is eligible for using rental income to qualify for a mortgage. This new rule of mortgage qualification states that homeowners that rent out a section of their homes can use 100% of their rental income to apply for a mortgage. Nevertheless, there is a catch. According to the rule, you must live on the property yourself to qualify for a mortgage through rental income.
The Criteria for Using Rental Income for Mortgage Qualification
It is worth noting that CMHC is a Crown corporation that is regulated by the government. The rules CMHC come up with set the expected standard for applying for a mortgage in Ontario and other parts of the country. In simpler terms, most lenders will let you use your rental income to qualify for a mortgage as long as you meet the criteria outlined by the Canadian Mortgage and Housing Corporation. Consider the following:
- You must have strong credit history
- You must live on the property
- The suite must be self-contained and equipped with its own entrance
- The property can only have a maximum of two living units; good examples are duplex homes and homes with secondary suites
- The suite must meet all regulations and zoning requirements
- The rental suite has been occupied for no less than a couple of years
Do I Qualify for a Mortgage Through Rental Income if I Have Separate Rental Properties?
The short answer is no. It is not permitted to use your rental income to qualify for a mortgage in Ontario if you are a homeowner living at your primary residence without tenants. Why? Lenders want to secure their own interests. Since rental income is not guaranteed, having several properties means taking a lot of risks. Furthermore, most big bank lenders as well as more common lenders normally do not consider your rental income when going through your application for a mortgage.
It is safe to say that the real estate regulations set by CMHC favour those living in homes with rental suites more than it does for investment property owners who rent out their homes. As long as your home has a rental suite and you live there, your chances of getting a mortgage in Ontario through rental income are better.
For more information about applying for a mortgage and using your rental property as income towards your mortgage, reach out to our in-house mortgage specialist, Arlene Karram.
