Using Home Equity to Buy an Investment Property in Ontario
Want to buy a rental property but don’t have a down payment saved? You might already have it — sitting in your current home. Using home equity to buy an investment property is how many Ontario investors get started: your primary home’s equity becomes the down payment on your first rental.
How It Works
The concept is simple:
1. Your home has equity (value minus mortgage owing)
2. You access up to 80% of your home’s value through a refinance or second mortgage
3. Those funds become the down payment on an investment property
4. Rental income helps carry the new property’s costs
Example: your home is worth $750,000 and you owe $400,000. 80% of $750,000 = $600,000. Minus $400,000 = up to $200,000 available — enough for a down payment on a condo or a second home.
Financing Options for the Down Payment
Equity takeout refinance — roll everything into one new, larger mortgage on your current home. Often the lowest rate. Learn more.
Second mortgage — keep your current mortgage intact and add a separate loan for the down payment funds. Useful when your existing rate is worth protecting.
HELOC — flexible access to equity as a down payment source, drawn only when you find the right property. Compare the three.
What Lenders Look At
- Your equity — the 80% rule applies: at least 20% must stay in your current home
- Your income — you need to qualify carrying both properties
- Rental income — most lenders count a portion (typically 50–80%) of expected rent toward your income
- Down payment source — borrowed down payments are allowed by many lenders when they come from secured equity
- Your credit — requirements vary; alternative lenders offer more flexibility
Investment Property vs. Second Home
The rules differ slightly. A second home (cottage, vacation property) for personal use has more flexible down payment rules. A rental/investment property typically needs at least 20% down — which is exactly what your equity takeout can provide.
A Realistic Word on the Numbers
Investment properties need to cash-flow or at least break even after mortgage payments, property tax, insurance, maintenance, and vacancies. Before you buy, we run the numbers with you — a property that doesn’t work on paper rarely works in real life.
Frequently Asked Questions
Can I use 100% of my equity?
No — lenders cap total borrowing at 80% of your home’s value. You keep at least 20% equity in place.
Does rental income count toward my mortgage application?
Yes, most lenders include a percentage of projected rental income (often 50–80%, depending on the lender and whether you have a signed lease).
What if I’m self-employed?
Self-employed investors are common — alternative lenders have programs designed for them. See self-employed options.
Should I refinance or get a second mortgage for the down payment?
It depends on your current rate, penalty to break it, and timeline. We compare both and show you the math.
ABC Mortgages — Mortgage Broker in Pickering, Ontario. Principal Broker Lic. #M13001328.
Thinking about your first investment property? Apply now or call 647-627-8648 (direct) / 1-800-820-5188 (toll-free). Free consultation — we’ll run your numbers honestly.
Related: Equity Takeout & Second Mortgages · Second Mortgages in Ontario · Cash-Out Refinance in Ontario