Starting January 15, 2025, the federal government has announced that existing homeowners will be able to refinance and borrow up to 90% of their property value through an insured mortgage, so long as the additional funds are used towards building out additional housing such as a carriage house or a secondary suite.

Insured mortgages are those where a mortgage borrower pays for an extra mortgage insurance premium, but allow borrowers to have mortgages up to 95% of the property value. They have helped many Canadians enter the housing market with less than 20% down, but up to now refinancing an insured mortgage has not been allowed without losing the insured status and forfeiting the insurance premium already paid. As well, insured mortgages have typically benefitted from lower mortgage interest rates, because the insurance reduces the loan risk.

Here are the details we know so far (the federal government will no doubt be adding more information as the program launch date approaches):

  • Available for refinances after January 15, 2025
  • Available for refinancing an existing insured mortgage (which started with less than 20% for the downpayment).
  • The borrower(s) must already own the property.
  • The borrower(s) or a close relative are currently living at the property.
  • The borrower(s) must intend to construct additional units and the additional unit(s) must be used for long-term rental (not AirBNB, etc).
  • The new units created must be legal, fully self-contained (e.g., basement suites with separate entrances, laneway homes, carriage homes) and meet municipal zoning requirements.
  • A maximum of four dwelling units including the existing unit.
  • The maximum value of the residential property (including improvements from adding the suite) must be less than $2 million.
  • The new refinanced mortgage may be up to 90 per cent of the “as improved” property value (which would include the value added by the new units).
  • The new mortgage amortization will be limited to a maximum of 30 years.
  • The new funds from refinancing must not exceed the project costs (i.e. you can’t end up with excess money after construction is complete).

While this program will be appealing to some borrowers, it remains to be seen what sort of paperwork and process the regulators will require in order to enforce the above rules. Over the next couple of months we will hopefully find out more on exactly how the program will work, including answers to questions like:

  • What paperwork will be required to support the intended project work and budget?
  • Will borrowers be required to use a 3rd party contractor or will there be flexibility to self-build and earn sweat equity?
  • What will borrowers need to do to “prove” they are renting the new units to long-term tenants?
  • How much will the extra mortgage insurance premium cost when borrowing these extra funds?
  • Will there be a maximum timeline for how quickly the renovations must be completed?
  • Will the additional funds be available in several draws as the construction proceeds or will the construction need to be all completed before the new money is advanced?

What does it mean for me?

If you purchased a property in the last 5-15 years with less than 20% for your down payment, your mortgage may still have valid mortgage insurance in place which would make you eligible for re-borrowing through this new program to add a secondary suite or carriage house to your property. These renovations not only increase the value of your property, but the rental income you earn is a great way to help pay your mortgage down faster and end up with a long-term positive investment.

To find out more about whether this might be a good option for you, please book your free, no obligation mortgage refinance consultation.

Have questions?

We are always happy to discuss your financing needs!

Please book an appointment today with one of our broker team to discuss your plans and we’ll make sure you have all the information you need to make the best financial decision and get the best mortgage to reach your goals.

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