For 1–4 unit properties, lenders qualify you based on your personal income and debts. For 5+ unit multifamily buildings, qualification is based on the building’s Net Operating Income, meaning the property itself must generate enough income to support the mortgage. The lender still wants to see your net worth and experience, but the loan amount is driven by the building’s performance.
The DCR measures whether a building’s Net Operating Income can cover its annual mortgage payments. Conventional lenders typically require a DCR of 1.25, while CMHC’s MLI Select program allows 1.1. If the building’s DCR falls short, the lender will reduce the loan amount, which directly increases the down payment you need to bring.
You should include property taxes, insurance premiums, utilities, rental equipment, and property management fees. Lenders also typically deduct a 5 percent vacancy allowance, 5 percent for bad debt collection, and a 1 percent admin reserve from your effective gross rental income. CMHC may also deduct reserves for appliances and superintendent salaries.
Bridge financing is useful when you need to close quickly and cannot wait for slower CMHC approval, or when you are repositioning a building with below-market rents or high expenses. It is typically an interest-only, short-term loan that allows you to acquire and renovate the property before refinancing into long-term primary financing.
The regular Multifamily Rental Housing program offers up to 85 percent loan-to-value with amortizations up to 40 years and typically requires a 1.25 to 1.3 DCR. The MLI Select program supports affordable housing creation with up to 95 percent LTV, amortizations up to 50 years, and a reduced 1.1 DCR requirement.
