New mortgage financing rules for secondary suites: Homeowners could increase the value and capacity of their property

Then deputy Prime Minister and Finance Minister Chrystia Freeland announced the new product at a press conference in mid-October, highlighting that homeowners can amortize their refinanced mortgages for up to 30 years.

This latest initiative is part of the government's broader goal of increasing housing supply through "gentle density" — a gradual increase of those living within a residential area. The goal of the new mortgage refinancing for secondary suites is to make it easier for people to add basement apartments, garden suites or laneway houses to their current property.

Requirements of the proposed refinancing for the secondary suite program

To qualify for this funding, the following requirements buyers must:

• Already own the property
• Occupy one of the current units (or have a close relative occupying it)
• Plan to build additional self-contained units
• Not use new units for short-term rentals

To qualify for funding, borrowers must adhere to the following requirements:

• Maximum of four dwelling units total, including the existing unit
• Property value (as improved) must be under $2 million
• Loan-to-value (LTV) ratio cannot exceed 90% of the updated property’s value
• Maximum amortization of 30 years
• Additional financing must not exceed the project costs
• Only mortgage insurance applications submitted on or after January 15, 2025 qualify
  
  
  

How much home can you afford?

Whether you're hunting for a new home or looking to refinance your mortgage, knowing how much your new loan might cost you is critical. Use our handy mortgage calculator to help you understand what your payments could look like.

Get Started

Don't miss

• Read how a new mortgage product from Equitable Bank announced in August can help homeowners who want to build laneway houses
• Save tens of thousands in interest costs when you compare mortgage rates
• 5 pros and 6 cons homeowners can expect with the new mortgage rules

How the secondary suite mortgage program benefits current homeowners

Given the tight constraint for housing in the Canadian marketplace, this new initiative could help ease rental supply and the demand for housing since families can start increasing the number of people legally allowed to reside on a property.

In general, there are eight benefits of the secondary suite mortgage program for current homeowners:

#1. Access to more funds

Homeowners can refinance up to 90% of their property's value, including the increased value from adding a secondary suite, giving them access to significant funds for home improvements or other needs.

#2. Longer amortization period

With up to 30 years to amortize the refinanced mortgage, homeowners can spread out their payments, making it more affordable to upgrade their homes.

#3. Increased property value

Adding a secondary suite could increase the overall value of the property, enhancing long-term wealth and equity for homeowners.

#4. Rental income potential

By adding a basement apartment, garden suite or laneway house, homeowners can generate rental income, helping offset mortgage payments or cover other expenses.

#5. Housing for family members

The program allows homeowners to build secondary suites for close relatives, providing flexible housing options for aging parents or adult children while maintaining proximity.

#6. Contributing to housing supply

Homeowners can contribute to solving the housing shortage by adding more housing units in urban areas, especially where space is limited.

#7. Potential tax benefits

Homeowners may benefit from tax breaks related to home improvements or rental properties. Still, anyone considering taking advantage of tax breaks and deductions should seek professional advice before claiming tax deductions, as certain incentives can make your home ineligible for the principal residence tax exemption.

#8. Government backing

The initiative is government-insured, giving homeowners more confidence and security in refinancing decisions.

Bottom line

These benefits make the initiative attractive for homeowners looking to increase property value, generate income, or accommodate family while benefiting from government-backed financial support; however, the benefits will need to be weighed against any potential drawbacks, such as increased debt, higher interest costs and less flexiblity for refinancing and debt consolidation.