January 2026 - New Mortgage Rules Coming for Investment Properties
Starting January 2026, OSFI (Office of the Superintendent of Financial Institutions) is enforcing policy changes for new mortgage rules which will restrict how rental income is used to qualify for investment property mortgages. This will make it harder for investors to expand portfolios using leveraged rental income.
Here’s a breakdown of what’s changing and how it affects buyers:
These changes apply to how banks assess risk and qualify borrowers for mortgages on income-producing residential real estate.
Key changes include:
No Double-Counting Rental Income: If rental income is used to qualify for one mortgage, it cannot be reused to qualify for another. This prevents investors from leveraging the same income stream across multiple properties.
Stricter Classification of Income-Producing Properties: Properties where repayment depends heavily on rental or leasing income will be classified differently, requiring banks to hold more capital against those loans.
Higher Capital Requirements for Lenders: Banks will need to set aside more capital for mortgages on income-producing properties, which could lead to tighter lending standards or higher interest rates.
What Rental Income Will Be Considered?
The banks and lenders are still working through their individual policies on how they will operate within the changes, OSFI has clarified that:
Only net rental income (after expenses) may be considered, and only for the specific property being financed.
Rental income from other properties cannot be reused unless it's demonstrably separate and not already pledged for another mortgage.
Employment income must also be carefully allocated. If it’s used for one mortgage, it can’t be counted again for another.
How Does This Affect Buyers and Investors?
For real estate investors:
Portfolio growth will be harder. Investors can’t rely on the same rental income to qualify for multiple properties.
More documentation required. Banks will scrutinize income sources more closely.
Potential for reduced borrowing power. Especially for those with highly leveraged portfolios.
For first-time buyers or single-property owners:
Minimal impact unless the property is income-generating.
Could benefit from reduced competition from investors in certain markets
Stay tuned for more information to come as we learn more about how the banks and lenders will adjust their policies for investment property purchasing.