Canada’s banking regulator, OSFI, has finalized updates to its Capital Adequacy Requirements (CAR 2026), setting new expectations for how federally regulated lenders treat mortgages that rely on rental income.
The key shift is about classification and capital. If a mortgage approval depends primarily on rent, say, when more than half of the qualifying income comes from the property itself, it will now be classified as Income-Producing Residential Real Estate (IPRRE). That tag matters because loans in this category require banks to hold more capital, making them costlier to keep on their books.
OSFI also clarified that income can’t be “double-counted.” In other words, rental or employment income used to support one mortgage shouldn’t be reused to qualify for another. The message is simple: every property now has to stand on its own merits.
This isn’t a sudden rule for borrowers; it’s a change to how banks manage risk internally. But as lenders adjust their models before the 2026 deadline, investors can expect some ripple effects, slightly higher pricing on rentals relative to owner-occupied, qualification tweaks, and a little less tolerance for thin cash-flow deals.
What This Means (and What It Doesn’t)
It’s not a new stress test, and OSFI isn’t banning the use of rental income. You can still use both employment and rental income to qualify. What changes is how lenders treat that income behind the scenes. Each loan must now carry its own weight rather than leaning on income already spoken for.
Think of it less as a crackdown and more as an engineering correction. The system is moving toward a cleaner, one-to-one relationship between each property’s income and its debt. It reduces risk concentration at the cost of flexibility.
For borrowers, the practical takeaway is straightforward: the math won’t necessarily change overnight, but lenders will become more selective as these capital rules filter through.
Who’s Affected (and Who Isn’t)
This change mainly affects borrowers with multiple properties, the group most likely to reuse the same income across several mortgages. If you’re buying or refinancing a rental, the rule will matter once lenders start updating their internal models.
For portfolio owners, it’s not a direct requalification trigger, but it’s still a warning. Even if you’re not actively expanding, your next refinance or switch to another lender could feel different once these guidelines are absorbed into policy. The same goes for anyone planning to buy a new primary residence while carrying rentals in the background, how those rentals are treated on paper could shift your borrowing power.
As for renewals, OSFI’s rule doesn’t force lenders to re-underwrite existing loans. That’s consistent with how renewals have always worked in Canada, renewing with your current lender doesn’t trigger a new approval test. But if you switch lenders to chase a lower rate, that’s technically a new deal, and new deals live under the new capital framework.
It’s also worth remembering that OSFI regulates only federally regulated lenders, mainly the large national banks and mortgage institutions. Provincially regulated credit unions and certain mortgage finance companies operate under their own oversight, which may give them more flexibility. That’s not a guarantee of better terms, but it does mean the market could split: some lenders following OSFI’s capital rules, others charting their own path.
My Take
This isn’t the end of real estate investing, but it is the end of easy scaling. The days of stretching the same income across a string of properties are fading, replaced by a model where every property has to stand on its own numbers.
On the surface, this is about protecting banks and the financial system. But the by-product is clear: small landlords will face more friction, and over time, the rental market will continue to tilt toward institutional ownership, developers, REITs, and pension funds that can operate within commercial-style frameworks.
That said, lenders have not yet released their specific guidelines. Until they do, the exact impact remains to be seen. How each institution interprets and applies OSFI’s framework will determine how much borrowers actually feel these changes in practice.