Now you may be covering the mortgage, property taxes, condo fees, insurance, utilities and legal expenses yourself while the bank is reviewing the property for renewal.
For Ontario landlords, this can quickly become more than a tenant problem. It can become a mortgage qualification problem.
If the lender reduces or excludes rental income during its underwriting review, refinancing or replacing the mortgage may become more difficult — especially if your personal income cannot support the property on its own.
If your rental property mortgage renewal was denied in Ontario, available property equity may provide another option.
Why Unpaid Rent Can Create Problems at Mortgage Renewal
Traditional mortgage lenders generally assess both the borrower and the rental property when considering financing.
Depending on the lender and mortgage program, they may want documentation supporting the rental income being used to qualify.
If rent has stopped, the tenancy is in dispute or there is uncertainty surrounding the property's current income, the lender may not give you the same rental-income credit you expected.
That can become particularly serious when the existing mortgage is approaching maturity.
If your bank has already refused the renewal, review Lendworth's Mortgage Renewal Denied Ontario options before the maturity date passes.
The Tenant Problem May Not Be Resolved Before Your Mortgage Matures
Ontario landlords cannot simply remove a residential tenant because rent has stopped.
Tribunals Ontario states that when rent is not paid in full when due, a landlord can serve an N4 Notice to End a Tenancy Early for Non-payment of Rent. If the required rent is not paid and the applicable process is followed, the landlord may then file an L1 application with the Landlord and Tenant Board.
That legal process and your mortgage maturity date operate independently.
Your lender may still expect the mortgage to be paid out or refinanced even while the tenancy matter remains unresolved.
That is where the timing problem begins.
Can You Refinance a Rental Property With Rent Arrears?
Potentially, yes.
A private mortgage can be structured differently from traditional bank financing and may place greater emphasis on:
- Property value
- Available equity
- Existing mortgage balance
- Property location and condition
- Total loan-to-value
- The borrower's repayment or exit strategy
This can make private financing useful for landlords whose property remains valuable but whose temporary rental-income problem prevents conventional refinancing.
Lendworth provides investment property mortgage financing in Ontario for qualifying rental and investment properties.
You can also read our guide to getting a private mortgage on a rental property in Ontario.
A Private Mortgage Can Create Time to Fix the Problem
The goal of short-term private financing should not simply be to replace one mortgage with another.
It should provide enough time to reach a defined exit.
For a landlord dealing with unpaid rent, that exit could include:
Resolving the tenancy.
Once the rental situation is stabilized and documented income resumes, refinancing with another lender may become possible.
Securing a new tenant.
If the existing tenancy legally ends, a new lease and established rental income may strengthen a future conventional mortgage application.
Selling the property.
A short-term mortgage may provide additional time to sell rather than being forced to deal with a mortgage maturity deadline at the same time as the tenant dispute.
Rebuilding conventional qualification.
A landlord may use the private term to improve cash flow, reduce other obligations or establish the documentation required by another lender.
Private mortgages are generally more expensive than conventional bank mortgages and can include higher interest rates and additional lender, brokerage, appraisal and legal costs. FSRA advises Ontario borrowers to understand the total borrowing cost and risks before entering private financing.
For that reason, a realistic exit strategy is critical.
Don't Wait Until the Mortgage Maturity Date
If your tenant has stopped paying rent and your renewal is approaching, start reviewing financing before the existing lender's deadline.
Waiting until the final few days can reduce your options and increase the pressure to accept whatever financing is available.
Have the following information ready:
- Current property value
- Existing mortgage balance
- Mortgage maturity date
- Current monthly rent
- Amount of unpaid rent
- Property taxes and condo fees, if applicable
- Current lease or tenancy information
- Details of any LTB proceeding
- Your planned exit strategy
If substantial equity remains in the property, Lendworth can assess whether a private mortgage in Ontario may provide enough time to resolve the underlying problem.
Rental Property Renewal Denied? Your Equity May Give You Options
A tenant who stops paying rent can create two problems at once: immediate negative cash flow and difficulty qualifying for the property's upcoming mortgage renewal.
The important thing is not to allow the mortgage maturity date to become another emergency.
If unpaid rent caused your rental property mortgage renewal or refinance to be declined, Lendworth can review the property's value, existing mortgage balance, available equity and your plan for resolving the tenancy.
Short-term private financing may provide the bridge you need while you resolve the tenant issue, establish new rental income, refinance elsewhere or sell the property.
Mortgage deadline approaching? Contact Lendworth to review your rental-property financing options before maturity.