Refinancing a rental property can free up equity for repairs, another purchase or paying down other debt, but it also changes the property's cash flow and, in some cases, your tax position. This checklist is for owners of one-to-four-unit rental properties in Canada who are thinking about a refinance. Owners of larger buildings (five or more units) generally use commercial or multi-unit financing, which works differently.
1. Know how much you can borrow
OSFI's Guideline B-20 says residential mortgages with loan-to-value (LTV) ratios above 80% must be insured at federally regulated lenders, while conventional mortgages are at or below 80%. B-20 also limits the revolving home equity line of credit (HELOC) part of a mortgage to an LTV of 65% or less. Most rental refinances are conventional, so the 80% figure is the practical ceiling at those lenders, and some lenders set lower limits for rentals.
Hypothetical example. A rental appraises at $600,000 and has a $300,000 mortgage. At 80% LTV, total borrowing could reach $480,000, so the maximum new money would be about $180,000 before penalties, legal fees and appraisal costs. The lender's own limits and your income will decide the actual amount.
2. Decide what the money is for, before you borrow
The purpose of the new funds affects whether the interest is deductible. The Canada Revenue Agency's rental income guide says that if you refinance a rental to get money for a business or other investments, you may be able to claim the interest; if the funds are for personal use, you cannot deduct the interest. Keep the borrowed money separate and document where it goes. An accountant can confirm how the rules apply to you.
3. Re-run the cash flow at the new payment
A larger balance or a higher rate means a larger payment. Compare rent with the new mortgage payment, property tax, insurance, maintenance and an allowance for vacancy. If the property would run a shortfall, decide whether you can cover it from other income. The rental property calculator can help.
Test the payment at a rate higher than the one you are offered as well. If the refinance uses a variable rate or a short term, a later increase at renewal would hit the property's cash flow first, and rent increases may be limited by your lease or by provincial rules on existing tenancies.
4. Price the penalty to break your current mortgage
Refinancing before your term ends usually means breaking the existing mortgage. FCAC says the prepayment penalty is usually the higher of three months' interest or an interest rate differential. Ask your lender for a written penalty quote, and compare it with waiting until renewal or using a second mortgage or HELOC instead.
5. Gather the rental income documents
B-20 tells lenders to verify income carefully, especially for loans that depend on rent from an investment property. Expect to provide leases, rent deposits, tax returns showing rental income and a current mortgage statement. The lender will also order an appraisal; rental appraisals may include a rent analysis.
6. Check whether the secondary-suite refinance applies
Since January 15, 2025, insured refinancing has been available to add self-contained secondary suites, up to four units in total, when the borrower or a close relative lives in one of the units. The 2024 announcement allowed up to 90% of the as-improved value. This option is for owner-occupied properties, not a fully rented investment property, and its limits may have changed since, so confirm current rules with a lender.
7. Line up the right professionals
- A mortgage refinance broker can compare lenders that accept rental income.
- An accountant can review interest deductibility and record-keeping.
- A lawyer or notary will register the new mortgage and discharge the old one.
For an overview of rental financing options, see our rental property mortgage page.
Sources
- Office of the Superintendent of Financial Institutions, Residential mortgage underwriting practices and procedures – Guideline B-20, 2023-03-30. Accessed 2026-11-12.
- Canada Revenue Agency, Rental Income (Guide T4036), 2026-03-27. Accessed 2026-11-12.
- Department of Finance Canada, Mortgage Insurance Rule Changes to Enable Homeowners to Add Secondary Suites, 2024-10-08. Accessed 2026-11-12.
- Financial Consumer Agency of Canada, Mortgage fees: Prepayment penalties, 2025-10-15. Accessed 2026-11-12.
This checklist is general information, not tax, legal or financial advice. Lending limits, insurance rules and tax treatment can change and depend on your circumstances. Speak with a lender, broker and tax professional before refinancing.
