For many real estate investors, a multi-family property—a duplex, triplex, or fourplex—is a powerful wealth-building tool. It allows you to acquire multiple "doors" and several streams of rental income with a single purchase and a single mortgage. It’s one of the most effective ways to scale a real estate portfolio quickly.

However, financing these properties is more complex and has a different, stricter set of rules than a standard single-family home. The number of units in the building and, most importantly, whether you plan to live in one of them, dramatically changes the financing game.

This guide will provide a clear roadmap to successfully financing multi-family properties in Ontario. We will cover the unique down payment rules, explain how lenders use the rental income to help you qualify, and detail the critical dividing line between residential and commercial lending that every investor needs to understand.

The Big Advantage: "House Hacking"

One of the most popular and financially savvy strategies for first-time investors is a concept called "house hacking."

What is "House Hacking"?

House hacking is the strategy of buying a multi-family property, moving into one of the units as your primary residence, and renting out the other units to tenants. For example, you buy a triplex, live in the main floor unit, and rent out the upstairs and basement apartments.

The Powerful Financial Benefits

The financial power of house hacking is incredible. The rental income you receive from your tenants can be used to cover a large portion, or in some cases all, of your monthly mortgage payment. This allows you to live in your own home for a very low cost, or even for free, while your tenants diligently pay down your mortgage and build your equity. It’s an amazing way to reduce your personal living expenses while acquiring a valuable investment asset.

Unlocking Favourable Financing Rules

This strategy isn't just a smart way to live; it's also the key to unlocking the best possible financing terms. If you declare that you will be living in one of the units, Canadian mortgage lenders and the mortgage insurers (like CMHC) treat the purchase as an "owner-occupied" property. This means you are viewed more favourably than a pure investor and gain access to much better down payment rules.

Learn more about home equity loans in Ontario

Check your eligibility in under 60 secs.

See How Much I Qualify For

Financing an Owner-Occupied Property (2-4 Units)

If you plan to "house hack" and live in one of the units, you can take advantage of the best financing options available.

The Low Down Payment Advantage

This is a massive benefit for new investors. For a purely investment property, you need a minimum of 20% down. But for an owner-occupied multi-family property, the rules are much better:

For a duplex (2 units): You can purchase the property with as little as 5% down, just like a single-family home.

For a triplex or fourplex (3-4 units): The minimum down payment is 10%.

This program, backed by mortgage default insurance, makes it possible to get into a valuable, income-producing asset for a much smaller initial investment.

Using Rental Income to Qualify

The other major advantage is that lenders will use the rental income from the other units to help you qualify for the mortgage. The lender will get an appraisal that includes a "market rent schedule" to determine a fair rental income for the units. They will then typically add 50% of that projected rental income to your personal employment income, which can significantly boost your borrowing power.

A Broker's Strategy for Approval

Let's look at an example. A young couple in Ottawa wants to buy a $900,000 duplex and live in one unit. They have a 5% down payment ($45,000). On their own income, they might not qualify for the full $855,000 mortgage. However, the second unit can be rented for $2,000 per month. A lender will add 50% of that ($1,000/month, or $12,000/year) to their qualifying income. This extra income boost is often exactly what's needed to secure the approval. As brokers, our job is to package this application to the right lender, highlighting the strength of both your personal income and the property's rental income.

Financing as a Pure Investment (Non-Owner Occupied)

If you are buying a 1-4 unit property purely as an investment and do not plan to live in it, the rules become stricter, similar to financing a single-family rental.

The 20% Minimum Down Payment Rule

If you are not living in the property, it is considered a pure rental investment, and the absolute minimum down payment is 20%. The low down payment insured program is not available. This means you need significantly more capital to get into the deal.

The Qualification Process

The lender will still use the rental income to help you qualify, but the overall underwriting process will be more stringent. They will want to see that you have a strong personal income, excellent credit, and often some cash reserves to handle potential vacancies or repairs. They will use a "rental worksheet" to analyze the property's cash flow, and as we've discussed for other rental types, they will typically only use 50% of the gross rents or an "offset" method in their calculations.

Lender Exposure Limits

It's important to remember that as you start buying multiple properties, you may run into a single lender's internal "exposure limits." A bank that was happy to finance your first duplex might decline your application for a second one, simply because of their policies. This is why working with a broker who can place different properties with different lenders is so crucial for investors looking to scale.

The Commercial Lending Threshold (5+ Units)

There is a critical dividing line in the world of multi-family financing that every investor must know.

When It Becomes a Business Loan

Any residential property that contains five or more units is no longer eligible for a residential mortgage. At this point, you cross the threshold into the world of commercial lending.

How Commercial Mortgages are Different

Commercial lending operates under a completely different set of rules. While every deal is unique, you can generally expect:

Higher Down Payments: The minimum down payment for a commercial mortgage is often 25-35%.

Qualification Based on the Property: The lender's primary focus is on the property's financial performance, specifically its Net Operating Income (NOI), rather than your personal income.

More Complex Applications: The application process is more in-depth, requiring more documentation and taking longer to complete.

A Broker's Role in Commercial Deals

As your portfolio grows and you graduate to larger, 5+ unit buildings, your financing needs become more complex. As brokers with expertise in both residential and commercial lending, we can guide you through this transition, connecting you with the right institutional or private lenders who specialize in financing larger multi-family properties.

Investing in a Multi-Family Property in Ontario

Multi-family properties are a powerful tool for building wealth and generating cash flow. However, the financing rules are highly specific and depend entirely on the number of units and whether you plan to live in the property yourself.

Whether you're a first-time buyer looking to "house hack" a duplex or an experienced investor ready to scale up to larger buildings, a strategic broker is an essential partner. We can help you navigate these complex rules, access the right lenders, and secure the best possible financing for your investment goals.

If you're ready to explore the world of multi-family investing, contact our brokerage today. Let's structure a financing plan to help you acquire your first (or next) income-producing property.

Get Personalized Advice

with an Award-Winning Mortgage Broker

4.9 from 812 reviews

Schedule My Call