Zac Lofeudo and his team examine whether changing the financing could help a landlord keep a rental property they are considering selling.
The appeal of selling a rental is easy to understand when the owner has been topping up its bank account for months. The tenant pays on time, the property stays occupied, and the bills still exceed the rent. A mortgage renewal or a repair can make the decision feel overdue.
Zac Lofeudo, a Mortgage Agent Level 2 with Vine Group Mortgage Brokerage who leads MortgageFree Canada, argues that the monthly shortfall deserves a closer look before the property goes on the market. His concern is what owners count as a loss, and whether they have compared selling with changing the financing around a property they already own.
"If you are putting money in every month, of course you are going to question it," Zac says. "I would want to know where that money is going before deciding the property has to go."
Rental conditions have given owners more reason to examine those numbers. CMHC's 2025 Rental Market Report put the national vacancy rate for purpose-built rentals at 3.1%, up from 2.2% in 2024. Operators in some markets were lowering asking rents or offering incentives to attract tenants. For owners with little room in the budget, an empty unit puts pressure on the household paying the bills.
What the monthly shortfall includes
A rental can show a monthly shortfall because the mortgage requires substantial principal repayment. Zac checks how much of the owner’s contribution pays running costs and how much reduces the loan. He would examine a lower required mortgage payment before treating the shortfall as a reason to sell.
Consider a hypothetical rental collecting C$2,700 against C$3,000 in monthly payments and bills, including C$800 of mortgage principal. The owner supplies C$300 while reducing the debt by C$800. If a longer amortization reduced the required payment by C$300, the property would cover those bills before tax, assuming other costs stayed unchanged. This assumed reduction is illustrative, depends on the actual balance, rate and lender terms, and excludes refinancing costs. Principal repayment builds equity through debt reduction, but a decline in the property’s value can offset that gain.
Zac says the amount of debt repaid belongs in the assessment of the investment. He also separates a temporary setback from a recurring shortfall. Replacing an appliance, losing a tenant and paying higher insurance premiums have different consequences for the following year's budget.
"You can have debt coming down and still be uncomfortable with what the property costs you," Zac says. "The money has to come from somewhere. That part needs an honest answer."
Zac also considers cash reserves and income stability: access to more borrowing does not necessarily make a property affordable to keep.
The primary home mortgage belongs in the decision
For owners still carrying a primary home mortgage, Zac says his team may assess returning the rental to a 30-year amortization where the lender permits it and the borrower qualifies. A longer amortization can reduce required payments, but generally increases total interest and slows principal repayment if the rate and other terms remain unchanged. Qualifying rental interest may be deductible, while additional principal payments reduce leverage and increase the owner’s equity through debt reduction.
“Keep the rental payment low and put the extra toward your primary home mortgage,” Zac says. “I do not want you making additional rental payments while you still have that personal debt.”
One option his team assesses is rental cash damming, which uses rental income and properly documented borrowing for eligible rental expenses to help reduce personal mortgage debt. Zac says a monthly cash surplus is not necessarily a prerequisite for assessing it. The owner still has to cover the shortfall, qualify for the borrowing and account for its cost. Under CRA guidance, interest deductibility depends on the use and tracing of borrowed funds and other applicable tax conditions, not simply on a rental property securing the borrowing. Directing rent toward a personal mortgage does not itself make that mortgage’s interest deductible.
The rental does not have to reach break-even first. Rent can be directed toward the primary home mortgage while separate borrowing pays eligible rental expenses. The owner still funds the monthly shortfall, but part of the rent now reduces personal mortgage debt. Reducing the primary home mortgage while borrowing to pay rental expenses does not necessarily reduce total household debt: the rental-expense credit-line balance may grow. Variable borrowing rates, available credit and repayment obligations can affect affordability and the overall outcome.
"I would not rule someone out just because the rental is a few hundred dollars short," Zac says. "We would have to run their numbers. If keeping it stretches them too far, changing the accounts will not fix that."
He says a comparison needs to include the primary home mortgage and any accompanying credit-line balance over time. The aim is to establish whether the proposed changes improve the household's position after borrowing costs, taxes and fees. Selling remains an option if the benefit is too small or the ongoing commitment is too much.
For owners who proceed, MortgageFree Canada helps set up the accounts and reviews how the plan is working after implementation. Zac says that support becomes especially relevant when an owner has decided to keep the property and needs the payments and expense records to follow the agreed plan.
Paying off the rental mortgage also changes the position for future borrowing. Drawing that equity out later to pay down the owner’s home does not restore the rental-interest deduction. New borrowing must qualify through its own use, such as financing another income-producing investment.
What selling would leave behind
Selling brings its own arithmetic. The Financial Consumer Agency of Canada notes that paying off a mortgage before the term ends can trigger a prepayment penalty. Commissions, legal fees and any tax also affect the amount the owner ultimately receives.
Zac says that net amount belongs beside the projected cost of keeping the rental. So does its intended use. Paying down a primary home mortgage, funding a move and holding cash for retirement lead to different comparisons. An owner considering another rental would also be taking on another purchase and another set of ongoing obligations.
He sees room for landlords to improve the properties they already own before expanding. A workable change to financing may allow an owner to keep an investment they understand, without adding tenants or another building to manage. For someone who wants to leave the landlord business, the value of selling includes that freedom.
"If you want to sell because you are done being a landlord, that is a real reason," Zac says. "If you want to sell because the numbers look wrong, let us see what is making them look wrong first."
This article provides general information, not personalised mortgage or tax advice. Borrowers should obtain advice on their financing eligibility and tax circumstances.
