Keep your house as a rental · buy a bigger home · converting your home into a rental · buy first or sell first · bank won’t count the rent · no rental history yet · 5% down · Calgary & all of Alberta
Rent out your home and buy another one: how to keep your house as a rental and still buy with 5% down
The usual answer is “you’ll have to sell first.” Often that’s wrong. And when it’s right, the reason is usually something other than the house.
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Josh Tagg is a Calgary mortgage broker who arranges “keep it and rent it” purchases across Alberta. These are homeowners converting their home into a rental: people who want to keep their current house or condo and buy the next home to live in, often after a bank has told them they have to sell first. He leads the Mortgages for Less team at INDI Mortgage, has been arranging mortgages in Alberta since 2006, took over the brokerage his father founded in 2003, and is licensed by the Real Estate Council of Alberta. The team holds a 5.0 rating from close to 300 Google reviews. The numbers on this page come from a file this office funded and from the published broker guidelines of the lenders we place with. None of them are illustrations built on an “average” home. If you’re weighing selling against keeping, send us the numbers before you list. We’ll run it both ways, at the lenders that count rent differently, and tell you what each route does to your buying power and your down payment, including when the honest answer is to sell. Book a call, apply online, or phone (403) 241-3255.
From an Alberta refinance that funded in October 2025 and a purchase that closed in June 2026, and from lenders’ published rental-income guidelines. The $1,260 is the gap between the most and least generous methods in the table further down. Rates and lender policies change, so ask for today’s.
Can you keep your house as a rental and buy another one?
Usually, yes. Nothing stops you from owning two homes, and nothing requires you to sell the first. What a lender decides is whether you pass three separate tests. Most “you have to sell” answers mean one of them failed, and it’s worth knowing which:
| The test | What the lender is checking | Where it usually goes wrong |
|---|---|---|
| 1. Can you carry both? | Your income against the new mortgage, the old mortgage, property taxes, condo fees and every other debt, with only part of the rent counted. | One large monthly payment (a vehicle loan, a line of credit, a high-rate mortgage) that eats the room the second mortgage needs. Or a lender that counts the rent stingily. |
| 2. Can you prove the rent? | Evidence the old home will actually rent for the number on the application. | No tenant and no tax return showing rent yet. That’s solvable with a lease or a market-rent appraisal (see below), but only if someone asks for it. |
| 3. Where is the down payment coming from? | At least 5% of the price plus closing costs, from a source the lender and insurer accept. | The obvious source was the sale proceeds, and you’re not selling. Equity in the old home helps only if there’s room to take it out. |
A bank branch that says “sell first” is usually reporting its own lender’s answer to test 1. That’s a real answer for that lender. It isn’t the market’s answer, because test 1 depends heavily on how the rent is counted, and lenders don’t count it the same way.
How much of the rent will a lender count?
This is the part that decides most of these files, and it’s the part almost nobody explains in dollars. Once you move out, your old home becomes what lenders call a non-subject rental, meaning a rental you own that isn’t the property being financed. There are three broad ways lenders treat its rent:
- Offset. A percentage of the rent is set against the rental’s own mortgage payment, taxes and condo fees. A positive result counts as income, and a negative one counts as a debt.
- Add-back. A percentage of the rent is added to your income, and the rental’s costs stay on the debt side.
- Rental worksheet. The lender’s own form produces a monthly surplus or shortfall, which is added to your income or to your debts.
The percentage matters as much as the method. Here’s the house from the file on this page, run through four real lender methods. The rent is $2,800 (signed lease), the mortgage payment is $1,646.52 a month, and the property tax is $370 a month. It’s a house, so there are no condo fees.
| How the lender counts it | The calculation | What it adds to your file each month |
|---|---|---|
| An Alberta prime lender, new rental with no tax history: 50% of appraised market rent, offset against payment, tax and condo fees | $1,400 − $1,646.52 − $370 | −$616.52 (a debt) |
| A big-bank worksheet for a non-owner-occupied rental: 50% of gross rent, less the mortgage’s principal and interest | $1,400 − $1,646.52 | −$246.52 (a debt) |
| 80% of the rent, offset: one alternative program’s method, and about where prime lenders’ net-rent worksheets land on most files | $2,240 − $1,646.52 − $370 | +$223.48 (income) |
| Two alternative lenders: 95% offset | $2,660 − $1,646.52 − $370 | +$643.48 (income) |
Methods from lenders’ published broker guidelines, simplified to the rent line. Real worksheets also handle heat, vacancy and the number of owners, and each lender sets its own rate and loan-to-value limits. The alternative-lender programs price above prime lenders.
So what should you expect? On most of these files we can get to about 80% of the rent. Several prime lenders don’t use a flat percentage at all. They run the rental through a net-rent worksheet (rent less vacancy, mortgage, tax and condo fees), and on a typical home that lands close to the 80% line. The half-the-rent methods in the table are real, and they’re what a single bank often applies to a home that has never been rented. That’s why the first answer is so often “sell first.” The 95% offsets come from alternative lenders, which charge more and generally lend at no more than 80% of value, so they aren’t a 5%-down route for the new home. The real work is matching your file to a lender whose method your numbers pass. That matching is what Josh Tagg’s team does on these files, and it can’t be done from inside one bank.
No tenant yet? How the rent counts before anyone has paid it
This is where most keep-it-and-rent-it plans stall. A lender normally proves rental income with your tax return, and your tax return has never shown rent from this house because you live in it. Lenders know that, and the ones we use have published ways around it:
- One big bank states that when a customer is converting their owner-occupied home to a rental and buying a new owner-occupied home, a lease or market rent can support the rental, because a tax return won’t be available.
- Another big bank requires a confirmation of market rent every time a property is converted from a primary residence to a rental, whether or not you have a lease.
- Another prime lender will use an appraiser’s market rent when the existing home is being converted and a signed lease isn’t available yet, but counts no more than 50% of that appraised figure, and its calculator also allows for vacancy (10% for a condo, 15% for a house).
On the file below the lender took the practical route: it accepted two of a current lease, three months of rent deposits, or an appraiser’s market-rent report, plus the rental’s mortgage statement and property-tax bill. The couple supplied a market-rent appraisal, which cost about $180 and came back the day it was ordered, and a one-year lease at $2,800 a month starting two weeks after they took possession of the new home.
The move-in rule: why 5% down only works on the home you live in
The low down payment is available because the new home is owner-occupied, with mortgage default insurance. Keeping your old home doesn’t take that away, and you don’t need 20% down on the next home just because you’re keeping the first one. The minimums are the standard insured ones:
| Price of the home you’ll live in | Minimum down payment | Example |
|---|---|---|
| Up to $500,000 | 5% | $385,000 → $19,250 |
| $500,000 to $1,500,000 | 5% of the first $500,000 + 10% of the rest | $800,000 → $55,000 |
| $1,500,000 or more | 20% (insurance isn’t available) | $1,600,000 → $320,000 |
The insured price cap rose from $1,000,000 to $1,500,000 on 15 December 2024. Below 20% down, a default-insurance premium is added to the mortgage. On the $385,000 purchase below it was 4.00%, or $14,630.
The condition attached is real. Expect to sign a declaration that you’ll live in the new home. On the file below the lender also kept the right to check occupancy within six months of funding and call the loan if the home turned out to be rented. The house you keep is the rental, and the house you buy is your home. Reverse the two, meaning you buy the new place as a rental and stay where you are, and it’s a rental purchase, which generally needs at least 20% down.
Is the house the problem, or one big payment? Sometimes you refinance first
This is the move that turned the file on this page around, and it’s the one nobody suggests, because it happens months before the purchase.
In August 2025 a Grande Prairie couple had just been pre-approved to buy up to about $480,000, on the assumption that they’d sell their house and use the proceeds to pay off a vehicle loan. Then they asked the question this page is about: what if we rent the house out and buy another one? With everything else as it was, the answer was about $160,000. They said they’d sell after all.
Their house wasn’t the problem. A $1,417-a-month vehicle loan was. Every dollar of that payment counts against your debt ratios, and keeping the house added a second mortgage on top. So that fall they refinanced the house instead. It appraised at $400,000, and a new $320,000 mortgage at 3.99% fixed paid off both their 5.79% mortgage and the vehicle loan.
| 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. Other small debts were unchanged and aren’t shown.
Their monthly payments fell by about $1,274. A lender looking at the file now saw one mortgage at a lower rate and no large loan payment on top of it. The trade-off was equity: a refinance in Canada is limited to 80% of the home’s value, and this one used almost all of it, so the down payment for the next home couldn’t come from the house. They sold a vehicle instead.
A refinance isn’t free. Breaking a mortgage early can carry a prepayment penalty, and spreading a vehicle loan over a mortgage amortization can mean more interest over time. Price both first. Our pages on refinancing in Calgary and what breaking your mortgage will cost go through each in dollars.
Sell it, keep it, or refinance and keep it? The same couple, three answers
| Route | What they could buy | Down payment from | What they gave up |
|---|---|---|---|
| Sell the house (Aug 2025) | Up to about $480,000, with 5% down | Sale proceeds | The house, and a realtor’s commission on it |
| Keep it, change nothing (Aug 2025) | About $160,000 | $25,000 of savings | Any realistic chance of the home they wanted |
| Refinance, then keep it (Jun 2026) | A $385,000 home, 5% down, 3.70% variable, no lender fee | Selling a vehicle | Most of the old home’s equity, now working as a rental |
They looked at a $470,000 house that winter and decided it was more than they wanted to take on. The purchase they made closed at the end of June 2026 and the tenant moved in mid-July. The house they kept carries a 3.99% fixed mortgage until 2028 and a $2,800-a-month lease, which covers its mortgage and property tax with about $783 a month left for insurance, repairs and vacancy.
The whole file is written up as a case study, including how the rent was proven with no tenant and the occupancy condition: how a Grande Prairie couple kept their first home as a rental and bought the next one with 5% down.
What happens, step by step
| Stage | What happens | Roughly how long |
|---|---|---|
| Run it both ways | Your income, debts, the old home’s mortgage, tax and expected rent. We show what selling buys, what keeping buys, and whether one payment is the thing in the way. | Same day |
| Refinance first, only if it pays | If a large payment is what’s shrinking your numbers, clear it against the old home before you shop, and price the penalty before you decide. | About 6 weeks on the file above |
| Pre-approval that assumes you keep it | Written around the lender whose rental method your numbers survive, not the first one that answers. | 1–3 days |
| Offer, with a financing condition | On the new home. Keep the financing condition long enough to prove the rent. | Your timeline |
| Prove the rent | A market-rent appraisal on the home you’re keeping, a signed lease if you have a tenant, and the rental’s mortgage statement and tax bill. | The appraisal came back same day |
| Conditions, declaration, closing | Commitment signed, owner-occupancy declaration, lawyer instructed, funds advanced. You move in, and the tenant moves into the old home. | About 4 weeks from commitment |
What changes once your home becomes a rental
- Your old mortgage. Nothing happens to it the day the tenant moves in, but read its terms. At renewal or a switch it will be treated as a rental, and rental rates can be priced slightly higher (one prime lender adds 0.10% when it takes over a home converted to a rental).
- Insurance. A homeowner policy isn’t a landlord policy. Change it before the tenant moves in, not after the first claim.
- Tax. Changing a home from your residence to a rental has income-tax consequences, including for the principal residence exemption. Josh Tagg is a mortgage broker, not an accountant, so speak to one before the lease starts, not at tax time.
- Being a landlord. Two mortgages means two sets of risks. An empty month, a new furnace or a difficult tenant is paid for by you, not the lender.
- Condos. Lenders count some or all of a rented condo’s fees against you, anywhere from 50% to 100% at the lenders we use. The fees can decide a condo file on their own.
When we tell people to sell instead
Keeping the house is more achievable than most people are told. It’s still the wrong answer often enough that Josh Tagg says so on the first call when it is:
- The rent doesn’t come close to the mortgage, tax and condo fees. You’d be subsidising a tenant out of your own pay every month, and one vacancy away from real trouble.
- Keeping it only works at the maximum. If the numbers pass only with every dollar stretched, a rate rise at renewal or one bad year breaks them.
- The equity is the down payment. If the only way to fund 5% down is to strip the old home to its limit, you end up with two highly leveraged homes and no cushion.
- You don’t want to be a landlord. It’s a job. If you’d resent it, the numbers don’t matter.
- You’re really buying an investment, not moving. If you plan to stay where you are and rent the new place, that’s a rental purchase with different rules and a larger down payment.
Who this page is for
- You own a home or condo in Alberta and want to keep it as a rental and buy a bigger home to live in.
- A bank has told you that you’d have to sell first, or is counting the whole mortgage payment on your current home against you.
- You don’t have a tenant or any rental history yet and want to know how the rent can count.
- You were pre-approved on the assumption you’d sell and want to know what keeping it would change.
- A vehicle loan, line of credit or high-rate mortgage may be what’s actually shrinking your numbers.
- You want to use equity in your current home toward the next one and need to know whether there’s room.
Where we work
Mortgages for Less with INDI Mortgage is a Calgary brokerage licensed by the Real Estate Council of Alberta. Our office is in Kensington, and we arrange these files across the province: Calgary, Edmonton, Airdrie, Cochrane, Okotoks, Chestermere, Red Deer, Lethbridge, Medicine Hat, Fort McMurray and Grande Prairie, where the file on this page closed. Most of the work is done remotely. If you’re buying with a suite rather than keeping a second home, read how suite income helps you qualify. For buying a rental outright, see rental mortgages in Alberta. This page sits alongside the rest of our mortgage services.
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Common questions about keeping your home as a rental and buying another
Can I keep my house as a rental and buy another home with 5% down?
Yes, if you will live in the new home. The 5% minimum applies to an owner-occupied home with mortgage default insurance: 5% on the first $500,000 and 10% on the portion up to $1,500,000. Keeping your current home doesn’t change that, but you have to qualify with both mortgages counted and only part of the rent credited. On a file this office arranged, an Alberta couple bought a $385,000 home with $19,250 down and kept their first home, rented at $2,800 a month.
How much of the rent from my old home will a lender count?
It depends on the lender, and the difference is large. On most files we can get to about 80% of the rent, often through a prime lender’s net-rent worksheet rather than a flat percentage. Some lenders count only about half the rent for a home that has never been rented, and some alternative lenders offset as much as 95%. On a house renting for $2,800 with a $1,646.52 mortgage payment and $370 of property tax, those methods produce anything from a $616.52 monthly debt to $643.48 of monthly income, a swing of about $1,260 a month on the same lease.
What is the difference between a rental offset and a rental add-back?
An offset sets a percentage of the rent against the rental’s own costs (mortgage payment, property tax, condo fees) and counts only the result, positive as income or negative as a debt. An add-back adds a percentage of the rent to your income and leaves the rental’s costs on the debt side. The same percentage can qualify you for noticeably different amounts depending on which method the lender uses, so ask to see the actual calculation rather than just the percentage.
What if I don’t have a tenant or any rental history yet?
You can still qualify. Lenders know a home you live in has no rental income on your tax return, so they accept other evidence: a signed lease, an appraiser’s market-rent report, or both. One big bank states that a lease or market rent can support a home being converted to a rental; another requires a market-rent confirmation on every conversion; another will use appraised market rent when no lease is signed yet but counts only half of it. On our file the market-rent appraisal cost about $180 and came back the same day.
Do I have to move into the new home?
Yes. The low down payment exists because the new home is owner-occupied. Expect to sign a declaration that you will live there. On the file described on this page, the lender also kept the right to check occupancy within six months and call the loan if the home was rented. If you would rather stay where you are and rent out the new place, that is a rental purchase, which generally needs at least 20% down.
Why did my bank tell me I have to sell first?
Usually because, at that bank, your numbers don’t pass with both mortgages counted. That is one lender’s rental-income method applied to your file. Another lender may count the rent more generously, and sometimes the real obstacle is a separate payment, such as a vehicle loan or line of credit, that a refinance can clear. On our file, keeping the house was worth about $160,000 of buying power until a refinance removed a $1,417-a-month vehicle payment; the same couple then bought a $385,000 home.
Should I refinance my current home before I buy?
Only if a large monthly payment is what is holding your numbers down, and only after pricing it. A refinance can clear high-interest or high-payment debt against your home’s equity, up to 80% of its appraised value. It can also carry a prepayment penalty and legal costs, and it uses equity you might otherwise have put toward the down payment. Run your numbers both ways before you decide.
Can I use the equity in my current home as the down payment?
Sometimes. It depends on how much equity you have, the lender and the mortgage insurer, and any money you borrow against the old home also becomes a payment the lender counts. On our file the refinance had already used most of the home’s equity, so the down payment came from selling a vehicle instead. Whatever the source, expect to prove it with statements.
My bank is counting the whole condo payment against me. Is that normal?
It is one lender’s method, not a rule. Lenders count rent from a condo you are converting in different ways, and some count condo fees at 50% while others count 100%. If your current lender is giving you little or no credit for the rent, the fix is usually to run the file through lenders that use a rental offset or add-back your numbers pass, not to sell the condo.
Do I need to tell my current lender I’m renting my home out?
Read your mortgage terms and ask, because it varies. What is consistent is that the home will be treated as a rental from then on: when the mortgage renews or you switch lenders, it is priced and underwritten as a rental, and some lenders add a small rate premium for rentals. Change your home insurance to a landlord policy before the tenant moves in.
Are there tax consequences to turning my home into a rental?
Yes. Changing a property from your residence to a rental affects how it is treated for income tax, including the principal residence exemption. Josh Tagg is a mortgage broker, not an accountant, so speak to an accountant before the lease starts.
Do OSFI’s rental-income rules stop me from converting my home into a rental and buying another?
No. OSFI’s November 2025 clarification is about how lenders classify mortgages for their own capital requirements, not about whether you can qualify. It states that borrowers can continue using rental and non-rental income to qualify for new mortgages, and that income from other residential properties should not be considered when classifying a mortgage as general residential real estate. The mortgage on the home you move into is still a mortgage on your home.
Do you help outside Calgary?
Yes. The file on this page closed in Grande Prairie. Mortgages for Less with INDI Mortgage arranges mortgages across Alberta, including Edmonton, Red Deer, Lethbridge, Medicine Hat and Fort McMurray, and the rental-income rules are the same wherever the home is.
Do I pay you a fee?
On a typical insured purchase or prime refinance the lender pays the brokerage and you pay us nothing. Broker fees apply on some alternative and private files where the lender does not pay compensation, and if one applies we tell you before you apply. You pay your own costs such as the appraisal, the market-rent report and your lawyer.
Thinking of keeping your home and buying the next one? Send Josh Tagg the numbers before you list.
We’ll run it both ways, selling and keeping, at lenders that count rent differently. You’ll see what each route does to your buying power, your down payment and your monthly payments, in dollars, before anyone pulls your credit.
Apply online Book a discovery call
Or call (403) 241-3255. Josh Tagg, Mortgages for Less with INDI Mortgage, licensed by the Real Estate Council of Alberta.
The file figures on this page come from one Alberta client file arranged by this office: a refinance that funded in October 2025 and a purchase that closed in June 2026. Client details have been changed, and bi-weekly payments are shown as monthly equivalents. The rental-income calculations apply methods from lenders’ published broker guidelines to that file’s rent, mortgage payment and property tax. They are simplified illustrations, not any lender’s actual worksheet or decision. Rental-income methods, percentages, rates, loan-to-value limits, insurance premiums and down-payment rules change and vary by lender, insurer, borrower and property, and all financing is subject to lender and insurer approval. The monthly rental cash flow leaves out insurance, maintenance, utilities and vacancy. Refinances in Canada are generally limited to 80% of a home’s appraised value. This page is general information, not financial, mortgage, tax or legal advice. Please speak with a licensed mortgage professional, and with an accountant about the tax effect of renting out your home. Mortgages for Less with INDI Mortgage, licensed by the Real Estate Council of Alberta.