How Canada’s New Mortgage Rules Make Adding Secondary Suites Easier

The Canadian mortgage landscape has seen a game-changing update with new mortgage rules for secondary suites (aka additional dwelling units, making it easier for homeowners to add legal rental units. These changes offer flexibility for creating income-generating spaces or accommodating family members. But what does this mean for affordability, housing supply, and your next renovation project?

What Are the New Mortgage Rules for Secondary Suites?

In January 2025, Canada will introduce updated mortgage insurance guidelines, enabling homeowners to refinance up to 90% of their property’s value when adding legal secondary suites. These changes aim to boost housing supply and create affordable rental spaces while helping homeowners manage project costs.

Eligibility Requirements

To qualify for this program, homeowners must meet the following criteria:

• The property must already be owned by the homeowner.
• The homeowner or a close relative must occupy one of the existing units.
• Additional units cannot be used as short-term rentals (e.g., Airbnb).

To qualify for this program, homeowners must meet the following criteria:
Learn more about CMHC guidelines for secondary suites.

Project Specifications

For the secondary suites to be eligible:

• New units must be fully self-contained with separate entrances, such as basement suites or laneway homes.
• The property can have a maximum of four dwelling units, including the existing unit(s).
• All new construction must comply with municipal zoning regulations.

The Financial Implications

These updated rules include specific financial guidelines:

• The “as improved” property value must not exceed $2 million.
• Homeowners can refinance up to 90% of the property’s value, including its enhanced value from the improvements.
• The maximum amortization period is 30 years.
• Additional financing must not exceed the project’s costs.

Adding a secondary suite isn’t just a quick weekend project—it’s an investment. Costs can range from $30,000 to over $100,000, depending on the extent of renovations. The good news? The new mortgage rules for secondary suites can cover much of this, potentially turning your basement into a source of steady income.

How This Impacts Housing Affordability

The policy aims to address Canada’s ongoing housing crisis by increasing rental inventory. Secondary suites can offer affordable options for tenants while generating income for homeowners. However, critics caution that increased demand for properties with suite potential could drive up home prices, offsetting the benefits.

Explore Canada’s housing policy changes.

Considerations Before Adding a Secondary Suite

Before embarking on a secondary suite project, homeowners should evaluate the following:

• Zoning and Bylaws: Confirm that your area allows secondary suites.
• Upfront Costs: Beyond construction, factor in permits, inspections, and potential utility upgrades.
• Insurance and Taxes: Understand how the suite could affect your property taxes and insurance premiums.

When Do These Rules Take Effect?

Starting January 15, 2025, lenders can submit applications for mortgage insurance under these new parameters. The rules apply to all eligible properties across Canada, provided the new units meet municipal zoning requirements.

Are you Thinking About Adding a Secondary Suite?

The updated mortgage rules provide a unique opportunity for Canadians to create livable, income-friendly spaces while addressing the housing crisis. Whether you’re thinking of building a basement suite or a laneway home, this policy could make financing your project more accessible than ever. If you’d like to chat about some of the possibilities of a property you own, or one you are looking to buy, feel free to shoot me a message using the form below

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