Daniel and Grace* had just been pre-approved to buy a bigger home in Grande Prairie. Then Daniel sent a one-line email that changed the whole plan: “How about if we rent out my house and buy another one?”
By Josh Tagg, mortgage broker · Mortgages for Less with INDI Mortgage · Calgary, serving all of Alberta
They had owned their home since 2012. They both work, they have two kids, and the house had quietly become their biggest asset. The pre-approval assumed the obvious route: sell the house, pay off the vehicle loan with the proceeds, and buy something up to about $480,000 with 5% down.
But selling meant giving up a home that would rent easily, plus a realtor’s commission. Daniel wanted to know what happened if they kept it. The honest answer that afternoon was not what he hoped to hear: with everything else as it was, keeping the house left room to buy for only about $160,000. They said they’d sell after all.
Less than a year later they did the opposite. They bought a $385,000 home with 5% down, moved in, and kept the first house, now rented out for $2,800 a month. Here is what changed in between.
Why keeping the house was only worth $160,000
When you keep your current home, lenders still count its mortgage payment against you. Only part of the future rent counts to offset it. Everything else you owe sits on top. For Daniel and Grace, one item did most of the damage: a vehicle loan of about $85,500 with a $1,417 monthly payment. Their first mortgage was also sitting at 5.79%.
Lenders measure all of this with your debt-service ratios, which is the share of your income already spoken for. A $1,417 payment eats a lot of that share. Add a second mortgage and there was almost nothing left, which is why the number came out so low. Selling fixed it by paying the loan off. So did something else.
Step one: a refinance that cleared the vehicle loan
That fall they refinanced the home. It appraised at $400,000. A new $320,000 mortgage at 3.99% fixed paid off both the 5.79% mortgage and the vehicle loan, leaving them at about 80% of the home’s value. That is the most a regular refinance allows.
| Monthly payments | Before the refinance | After the refinance |
|---|---|---|
| Mortgage | ≈ $1,504 (5.79%) | ≈ $1,647 (3.99%) |
| Vehicle loan | $1,417 | $0 |
| Total | ≈ $2,921 | ≈ $1,647 |
Bi-weekly payments shown as monthly equivalents. Student loans and small card balances were unchanged and aren’t shown.
Their mortgage payment went up by about $143 a month. But the $1,417 vehicle payment disappeared, so their monthly payments fell by about $1,274. More importantly for what came next, a lender looking at the file now saw one mortgage at a lower rate, and no large loan payment on top of it.
There was a trade-off. The refinance used up almost all of the home’s equity, so the down payment on the next home couldn’t come from the house.
Step two: buying the next home with 5% down
They looked at a $470,000 house that winter and decided it was more than they wanted to take on. In the spring they found the right one: a detached bi-level with a double garage on a big lot, for $385,000. They sold a vehicle to fund the down payment, and the money was in their account within two days.
| Item | Amount |
|---|---|
| Purchase price | $385,000 |
| Down payment (5%) | $19,250 |
| Mortgage before insurance | $365,750 |
| Default-insurance premium (4.00%, added to the mortgage) | $14,630 |
| Rate and term | 3.70% variable, 5 years |
| Total mortgage · monthly payment (25-year amortization) | $380,380 · $1,939.50 |
No lender fee. The lender also asked for proof of $25,025 in the bank, enough for the down payment plus closing costs.
With less than 20% down, the mortgage has to carry mortgage default insurance. That premium is a real cost, $14,630 here, and it’s added to the loan. In return, they didn’t need 20% down to keep the first house.
How the rent counted before the first tenant moved in
This is where most “keep it as a rental” plans stall. The house had never been rented, so there was no tax return showing rental income and no history of rent deposits. The lender would accept two pieces of evidence in their place:
A market-rent appraisal
An appraiser gave an opinion of what the house would rent for. It cost about $180 and came back the day it was ordered.
A signed lease
A one-year lease at $2,800 a month, starting two weeks after they took possession of the new home.
The rental’s paperwork
The latest mortgage statement and property-tax bill for the house they were keeping.
Lenders don’t count every dollar of rent. They take a portion, often 80%, to allow for vacancy and upkeep, and each lender does the maths a little differently. That’s why the same file can qualify at one lender and not another.
| Item | Monthly |
|---|---|
| Rent (signed one-year lease) | $2,800 |
| Mortgage payment (3.99% fixed) | ≈ −$1,647 |
| Property tax | ≈ −$370 |
| Left for insurance, repairs and vacancy | ≈ $783 |
An illustration of the cash flow, not a lender calculation. Insurance, maintenance, any utilities the landlord pays, and empty months all come out of that ≈ $783.
The one rule you can’t bend: you have to move in
5% down is available only because the new home is where you live. As a condition of the mortgage, Daniel and Grace signed a declaration that they would live in the new home, and the lender kept the right to check occupancy within the first six months and call the loan if the home turned out to be rented. The house you keep is the rental. The house you buy is your home. Reverse the two and this doesn’t work.
“They didn’t have to choose between the house they had and the house they wanted. They had to clear one payment first.”
Where they landed
The purchase closed at the end of June, and the tenant moved into the first house in mid-July. Daniel and Grace now live in a larger home with a 3.70% variable-rate mortgage and no lender fee. The first house has a 3.99% fixed rate for two more years and a tenant paying $2,800 a month, which covers its mortgage and property tax. And they still own the house they bought in 2012.
When our team called a month after closing to check in, Daniel rated his experience “Five. It’s more than five.”
Could this work for you?
Keeping your current home and buying the next one is more achievable than most people assume. It’s worth a proper look if:
- You own a home in Alberta that would rent for enough to cover most of its mortgage, tax and upkeep
- You plan to move into the new home yourself
- You have at least 5% of the new price plus closing costs from your own savings or a sale, or equity you can access
- A large monthly payment (a vehicle, a line of credit, a high-rate mortgage) might be what’s shrinking your numbers
- You’re ready to be a landlord: a lease, a tenant, insurance and the occasional repair
It isn’t right for everyone. Two mortgages means two sets of risks. If the rental sits empty or needs a new furnace, you pay for it. The honest way to decide is to run your own numbers both ways, selling and keeping, before you list anything.
Thinking of keeping your home and buying the next one?
We’ll run it both ways, selling and keeping, and show you what each one does to your buying power, your monthly payments and your down payment. It takes minutes to start.
Start your application → Serving Grande Prairie, Calgary, Edmonton & all of Alberta · Mortgages for Less with INDI Mortgage★ 5.0 · 293+ Google reviews
What Alberta homeowners say
Really good experience with the Mortages for Less Team. Tamar was very attentive to our needs.
Tamar was great to deal with. Efficiently got me everything I needed... And more. Thanks Tamar
Josh provided me with good advice and did not waste my time.
Easy to approach.understanding and very professional.
Didn’t end up getting a mortgage through him but Josh was incredibly helpful and provided objective advice.
Tamar is truly amazing and so patient. She helped us through the entire process (which was quite confusing to be honest). Highly recommend.
I recently used their service, Tamar was my broker and she did a great job. She solved all our doubts and gave us the best service.
Tamar was super helpful throughout the process of helping us renew our mortgage. We changed mortgage providers, but Tamar made the process smooth.
Keeping your home as a rental and buying another: common questions
Can I buy a new home with 5% down and keep my current home as a rental?
Does the rent from my old home count when I qualify?
What if I don’t have a tenant or rental history yet?
Do I really have to move into the new home?
Should I refinance my current home before I buy?
Can I use the equity in my current home as the down payment?
What does mortgage default insurance cost with 5% down?
Do you help outside Calgary and Edmonton?
*Names and identifying details have been changed to protect client privacy. This case study is based on a real Alberta client file: a refinance that funded in October 2025 and a purchase that closed in June 2026. The dollar figures are that file’s own, with bi-weekly payments converted to monthly equivalents, and are provided for illustration only. The monthly rental figures are an illustration, not a lender calculation, and leave out insurance, maintenance, utilities and vacancy. Every mortgage situation is different: rates, qualification, down-payment rules, rental-income treatment, insurance premiums and results vary by individual and by lender, and are subject to change and to lender and insurer approval. Refinances in Canada are generally limited to 80% of a home’s appraised value. This article is general information, not financial, mortgage, tax or legal advice. Please speak with a licensed mortgage professional about your specific circumstances. Mortgages for Less with INDI Mortgage.
