Dana* owned her condo in Edmonton and two rentals. She wanted a third. She refinanced the rental townhouse she owns east of Calgary to $184,000, about 54% of its value. That paid off the old mortgage, cleared $13,374 of credit cards and a loan, and covered most of a 20% down payment on a $147,500 condo to rent out. Her bank sent both applications back. A second lender approved them, and both mortgages funded in June 2025.
Can you use the equity in one rental to buy another?
Yes. You refinance the rental you already own for more than you owe on it, and the extra becomes the down payment on the next one. On a rental purchase, that down payment is usually 20%.
Dana’s townhouse appraised at $339,000. She owed about $140,500 on it. We took out as much as she could qualify for while staying with a prime lender: a new $184,000 mortgage. That still left plenty of equity in the property, and it paid for three things at once.
| Use | Amount |
|---|---|
| The old mortgage on the townhouse | about $140,500 |
| A personal loan and four credit cards, paid to zero | $13,374 |
| Down payment on the new condo | $24,500 |
The other $5,000 of the $29,500 down payment was the deposit she paid when her offer was accepted.
The condo was a one-bedroom-and-den in the same building as a unit she already rented out. It cost $147,500, and she took an $118,000 mortgage on it at 80% of the price. It rents for $1,450 a month.
Why did her bank send the applications back?
Because a refinance and a purchase that depend on each other get counted together.
The down payment for the condo only existed once the refinance funded. So the bank assessed both files as one. Each application had to carry the other’s new mortgage and the new condo’s costs. Her total debt ratio came out at 48.3%. When the bank added its rental calculation, it rose to 54.6%, and the underwriter warned it could go higher. The bank also told us a third rental meant the file needed a head-office exception.
Josh asked whether doing the refinance first and the purchase afterwards would help. On May 13, 2025, the bank returned both files as a soft decline: a no to the file as it stood, not to her. Her credit score was 835.
How do lenders count rent when you own several rentals?
Not dollar for dollar. Most lenders we work with count around 80% of the rent. Then each lender has its own way of setting that against the property’s mortgage, condo fees and taxes. Some add the rent to your income. Others subtract it from the property’s costs and only count what’s left over.
That’s why the same three rentals can produce a comfortable ratio at one lender and a decline at another. With one rental the difference is small. With three, it adds up.
How did the second lender say yes?
The day after the bank sent the files back, we sent both to a second lender. It approved the refinance and the purchase together on May 22. Then three things had to be sorted out before funding.
First, the rent on her existing condo came in a little low because a property manager takes a cut. That pushed her debt ratio just over the lender’s limit. The underwriter approved an exception and trimmed the refinance from $185,000 to $184,000 to bring the ratio back under.
Second, the appraisals. The townhouse came in at $339,000, lower than the $350,000 she’d estimated. “Bummed he didn’t value [it] higher,” she told us. “No plans to sell, so doesn’t really matter.” The condo appraised at exactly its $147,500 price. Waiting on the appraisals moved her possession date to June 9.
Third, the plumbing. The townhouse was built in 1997 and has Poly-B plumbing. The lender wouldn’t fund until her insurer confirmed in writing that it was covered. She got the confirmation two days later.
Both mortgages were 4.59%, fixed for five years, over a 30-year amortization. Both funded in June 2025.
What does she pay now?
| Each month | Before | After |
|---|---|---|
| Mortgage on the townhouse | $1,089.47 | $937.42 |
| Personal loan and credit cards | $557.73 | $0 |
| Mortgage on the new condo | — | $601.17 |
| Total | $1,647.20 | $1,538.59 |
The old mortgage was $502.83 every two weeks, shown here as a monthly amount. Card payments are shown the way lenders count them, at 3% of each balance. The new condo’s rent of $1,450 a month is not in this table.
She added a third rental, and these payments went down by about $109 a month.
Be clear about why. The townhouse payment dropped mainly because its amortization went from about 15 years 8 months left to a new 30 years. A lower payment over a longer period means more interest in total. She traded that for the cash flow to buy the condo, and she did it on purpose.
The new condo should carry itself. Its mortgage, condo fee and property tax come to about $1,050 a month against $1,450 of rent. That’s before insurance, repairs and any empty months.
When doesn’t this work?
If the refinance would take you past 80% of the property’s value, it won’t work. That’s the limit on a conventional refinance. Dana stayed at 54%.
It also doesn’t work if the rentals can’t carry their own costs. The new property, the refinanced one and every property you already own all go into the same debt ratio. One weak rental can sink the whole file.
And plan for the deposit. You pay it when your offer is accepted, weeks before the refinance funds. Dana used her line of credit.
Who to call if this sounds like you. Josh Tagg is a Calgary mortgage broker who has been arranging mortgages across Alberta since 2006. He leads the Mortgages for Less team at INDI Mortgage, took over the brokerage his father founded in 2003, and is licensed by the Real Estate Council of Alberta. The lesson of this file: the equity in a rental you already own can be the down payment on the next one, but every property you own gets counted together. If one lender’s rental maths says no, another lender’s may say yes. Read how a mortgage refinance in Calgary works. Call (403) 241-3255, book a call, or apply online. It’s free, there’s no credit check to start, and there’s no obligation.
Frequently asked questions
Can I use equity in my rental property as a down payment on another rental?
Yes. You refinance the rental you own for more than you owe and use the extra as the down payment. In this case a $184,000 refinance of a $339,000 townhouse paid off the old mortgage and $13,374 of other debt, and provided $24,500 toward a 20% down payment on a $147,500 condo.
How much equity can I take out of a rental property?
A conventional refinance can go up to 80% of the property’s value. This refinance was 54% of the appraised value.
How do lenders count rental income when I own several properties?
Most lenders we work with count around 80% of the rent, then set it against each property’s mortgage, condo fees and taxes. Each lender does that calculation its own way, so the same properties can qualify at one lender and not at another.
Why would a bank decline a refinance and a rental purchase done together?
Because the two files are counted as one. Each carries the other’s new mortgage and costs. Here the bank’s calculation put the borrower’s total debt ratio at 54.6%, and owning a third rental needed a head-office exception. It returned both files as a soft decline. A second lender approved both.
Does refinancing to a 30-year amortization cost more?
Yes. It lowers the payment but adds interest over the life of the mortgage. In this case the rental’s payment fell from about $1,089 to $937 a month, mainly because the amortization went from about 15 years 8 months left to 30 years.
What is Poly-B plumbing, and can it hold up a mortgage?
Poly-B is a plastic plumbing pipe found in some older Alberta homes. A lender can require proof that your home insurance covers it before it funds. Here, funding waited on the insurer’s written confirmation, which took two days.
Thinking about using one property’s equity to buy the next? Find out what every lender’s rental maths says before you make an offer.
*Names and some details have been changed to protect the client’s privacy. Figures come from the client’s file and illustrate one case. Your own approval depends on your income, credit, properties and lender. This is commentary, not advice. Rates and figures as of June 2025.
