What is the best way to refinance to buy a rental?

If you have enough equity in your primary residence and you’re interested in buying a rental, you may be in luck!

If you are purchasing a primary residence or a second home (like a cottage), you can put as little as 5% down. If you are purchasing a rental, you need at least 20% down.

Let’s say that you own a $500K home with a $200K mortgage on it. You might be able to increase that mortgage up to 80% of the value of your home (80% of $500K is $400K). That means you could take the balance of the refinance ~$200K and put it towards the purchase of the rental.

Let’s say you’re buying the rental for $500K. That means you have 40% down. More than enough!

When the bank qualifies you for the mortgage, they will look at the rental income it is generating, or has the potential to generate, and adds it to your income.