If you’re a Canadian homeowner hoping to expand or update your property, there’s exciting news on the horizon. The federal government has unveiled a new mortgage refinance program that allows you to borrow up to 90% of your home’s value—capped at $2 million—when adding secondary suites like basement apartments, garden suites, or additional rental units.

But what does this really mean for you? How can it help you offset mortgage costs and potentially boost your monthly cash flow? And why is the government making these changes now? In this comprehensive guide, we’ll dive deep into the details, explore the benefits, and walk you through everything you need to know about this new program. By the end, you’ll have a clear picture of whether this refinance option fits your needs—and how to take the next steps.

1. What is the New 90% Mortgage Refinance Program?

The federal government is reintroducing a mortgage program that was phased out in 2016 due to concerns about an overheated housing market. Under the new initiative, qualified homeowners can refinance their existing mortgage up to 90% of the “as improved” value of their property—meaning the appraised value after you’ve added your secondary suite or made improvements.

Here are the core takeaways:

• Loan-to-Value (LTV) up to 90%: Previously, standard refinances were capped around 80% LTV for insured mortgages. Now, you can potentially borrow more against your home’s future value.
• Property Value Cap: The total appraised value of your home can’t exceed $2 million.
• 30-Year Amortization Option: By stretching your payments over 30 years, you can manage monthly costs more comfortably.
• No Short-Term Rentals: The new units must be long-term rentals, not for short-term use like Airbnb.

This program was crafted as a win-win: it lets homeowners access more funding for property improvements while addressing Canada’s tightening rental market. The government hopes to spur the creation of secondary suites, thereby increasing the supply of affordable rental units and offering homeowners an alternative revenue stream.

2. Why This Program? Government’s Housing Strategy Explained

With a rapidly growing population, the Canadian housing market is under immense pressure. High real estate prices, limited housing starts, and urban densification have converged into a housing crunch. Here’s how the government sees this new measure helping:

• Increase Rental Stock: By encouraging homeowners to build legal basement apartments, in-law suites, or garage lofts, the government aims to expand the supply of affordable rentals quickly.
• Offset Mortgage Payments: Many homeowners are grappling with higher interest rates and cost-of-living increases. Rental income from a secondary suite can help cushion these financial pressures.
• Encourage Aging in Place: For seniors who’d like to stay in their homes, a secondary suite can be rented out, generating extra income to cover property taxes, maintenance costs, or healthcare expenses.
• Leverage Existing Infrastructure: Building “up and down” (like basement apartments or attic conversions) instead of sprawling outward can be more sustainable and cost-effective, especially in cities.

As of January 15, 2025, this program is officially active, and homeowners can start applying for default-insured mortgages at up to 90% of their post-improvement property value.

3. Who Can Benefit from a Secondary Suite?

A secondary suite isn’t just for homeowners looking to make extra cash. Here are several groups who might find it appealing:

1. First-Time Buyers
   • Adding a tenant can help cover the mortgage, making homeownership more manageable.
   • Accessing extra funds via a refinance might allow for renovations or expansions to create that separate rental unit.
2. Growing Families
   • Need space for extended family—like aging parents or adult children? A second unit can offer privacy while keeping loved ones close.
   • When family members move out, you can easily rent the unit for additional income.
3. Retirees and Downsizers
   • Looking to supplement pension or retirement income? Renting out a self-contained unit can bring in a steady monthly payment.
   • The extra funds can cover healthcare costs, property taxes, or home maintenance.
4. Real Estate Investors
   • Already own a home and want to expand your rental portfolio without buying another property? Refinancing allows you to unlock capital to build or convert existing space.

Essentially, any homeowner with adequate property value and the ability to qualify for the refinance can look into this option. The key is ensuring the numbers make sense for your financial situation.

4. Key Program Details: The Fine Print

Before you jump in, make sure you fully understand the eligibility criteria and limitations.

4.1 Loan-to-Value (LTV) Requirements

• You can refinance up to 90% of your home’s value after improvements.
• Example: If your property is worth $1,000,000 once the renovations are done, you could potentially borrow up to $900,000 total (including your existing mortgage).

4.2 Property Value Cap

• The updated property value can’t exceed $2 million. That means if your home’s appraised “as improved” value is $2.2 million, you might not qualify for the full 90%.

4.3 Amortization Limits

• The maximum amortization under this program is 30 years, which helps lower monthly payments but results in higher total interest over the life of the loan.

4.4 Number of Units

• You can add up to four units on your property, including the main one you already occupy.
• Each secondary suite must be self-contained (e.g., private entrance, kitchen, and bathroom).

4.5 Long-Term Rentals Only

• Your new units must be used for long-term rentals, not short-term stays like Airbnb. This ensures the units address the real rental shortage rather than fuel the short-term rental market.

4.6 Other Mortgage Rule Changes to Note

• A 30-year amortization on insured mortgages has returned for certain refinances, reversing earlier restrictions aimed at cooling the market.
• Canada’s banking regulator (OSFI) has hinted at removing stress tests for uninsured mortgage switches, making it easier for homeowners to switch lenders without re-qualifying at a higher rate.

5. Calculating Your Potential Cash Flow

One of the biggest draws of building a secondary suite is the possibility of generating rental income to offset mortgage costs. Let’s take a closer look at how you might calculate this.

1. Determine Your Monthly Mortgage Payment
   • If you borrow $100,000 at a hypothetical interest rate of 5% with a 30-year amortization, your monthly payment is about $536.
   • If you also factor in mortgage default insurance premiums, property taxes, and other minor costs, a round figure of about $650 total monthly expenses for that $100,000 is often cited.
2. Estimate Your Rental Income
   • In Toronto, a basement apartment can rent for around $2,000 per month.
   • If the newly built suite is above ground or offers more amenities, you could potentially charge more.
3. Cash Flow
   • Gross Rental Income: $2,000
   • Monthly Refinance Cost: $650
   • Potential Cash Flow: $1,350 (not even factoring in additional utility splits or other minor expenses).

If you want a more conservative estimate, let’s subtract $150 monthly to cover things like utilities, insurance differences, or occasional maintenance. Your net monthly income might still be $1,200.

6. Example Scenario: Building a Basement Suite

Let’s paint a clear picture of how this program might work in real life:

Scenario:

• Current home value: $800,000
• Outstanding mortgage: $400,000
• Planned basement suite renovation cost: $150,000
• Post-renovation “as improved” value: $900,000

With a 90% LTV refinance based on the new $900,000 value, you could borrow $810,000 in total. Subtract the existing $400,000 mortgage, and you’ve got $410,000 in newly refinanced funds. You only need $150,000 for the renovation, so that leaves you with additional capital—perhaps you decide to keep some funds in a renovation contingency fund or consolidate other debts.

Monthly Mortgage Impact:

• Interest Rate (hypothetical): 5.00%
• Amortization: 30 years
• Principal + Interest Payment: roughly $4,344 per month on $810,000.

Originally, your monthly mortgage on $400,000 (assume it was a 25-year amortization) might have been around $2,325 at the same interest rate. You’ll be paying more monthly overall, but you now also have a basement suite that could fetch $1,800–$2,000/month.

Even after the jump in your mortgage payment, you could offset a significant portion of your total housing costs, effectively lowering your out-of-pocket mortgage expense. This is especially valuable in higher interest rate environments.

7. Costs to Consider Before You Refinance

While the promise of rental income can be enticing, it’s critical to understand all the expenses you might encounter:

1. Appraisal and Inspection Fees
   • Your lender will likely require a professional appraisal to confirm the “as improved” value of your home. Expect fees in the $300–$500 range.
2. Insurance Premiums
   • If your LTV is over 80%, you’ll need default mortgage insurance (e.g., CMHC). This can add 2–4% to the total mortgage amount, though it can be rolled into the loan.
3. Legal and Closing Costs
   • Budget for lawyer fees, title insurance, and administrative charges. This can range from $1,500–$3,000, depending on your province and lender.
4. Construction Overruns
   • Renovations frequently exceed the initial estimate. Always pad your budget with an extra 10–20% for unexpected costs.
5. Municipal Permits
   • Fees vary widely by region, but in Toronto, building permits can easily cost $1,500–$2,500 or more, depending on the scope of work.
6. Ongoing Maintenance
   • As a landlord, you’re responsible for maintaining the property. Set aside a portion of your rental income—some experts suggest 5–10% of monthly rent—to cover repairs and upgrades.
7. Additional Utility Costs
   • Installing separate electrical or water meters can be beneficial but adds upfront cost. If utilities aren’t separately metered, you might pay higher bills when your tenant leaves lights, heating, or cooling on.

Pro Tip: Create a detailed renovation budget and add a buffer. Then, calculate if your potential rental income still offers enough cushion after covering these extra costs.

8. Step-by-Step Application Process

Ready to move forward? Here’s a concise roadmap.

1. Check Your Eligibility
   • Ensure your credit score, debt-to-income ratio, and employment situation meet your lender’s criteria.
   • You’ll likely need a stable income and a track record of on-time mortgage payments.
2. Get an “As Improved” Appraisal
   • Provide detailed renovation plans or architectural drawings to an accredited appraiser.
   • The appraiser will estimate your home’s future value based on these improvements.
3. Shop Around for Lenders
   • Different lenders offer varying interest rates, terms, and loan conditions.
   • Consider both banks and mortgage brokers to find the best fit.
4. Submit Your Application
   • Provide the required documentation: income verification, renovation plans, property details, and more.
   • If you’re at a high LTV, the lender will submit your application to the mortgage insurer (CMHC, Sagen, or Canada Guaranty).
5. Closing and Funding
   • Once approved, you’ll sign the mortgage documents with your lawyer.
   • The lender typically releases funds either directly to you or in stages (draws), depending on your renovation timeline.
6. Renovate
   • If the funds were released in draws, you’ll need inspections at each stage to confirm the work is completed.
   • Focus on building a legal suite that meets your municipality’s safety and zoning requirements.
7. List and Screen Tenants
   • Once your unit is ready, take professional photos and craft a compelling listing.
   • Screen tenants carefully: run credit checks, request references, and confirm employment.

9. Frequently Asked Questions (FAQs)

Q: Do I have to live in one of the units?
A: Yes. Typically, this program is for owner-occupied properties. You’ll live in one suite, and the additional units are rented out.

Q: What if I already have an existing basement apartment?
A: If you want to upgrade or expand your existing suite—or add additional units—you can still take advantage of the 90% refinance, subject to appraisal and lender rules.

Q: Are there restrictions on how many times I can refinance?
A: Generally, you can refinance multiple times, but each time must meet the insurer and lender’s guidelines, including loan-to-value ratios and debt-service requirements.

Q: Is there a specific interest rate for this program?
A: Rates depend on market conditions, your credit profile, and lender offerings. This program doesn’t guarantee a special rate, but it allows a higher LTV refinance.

Q: Will I need a new appraisal when the renovations are finished?
A: In many cases, yes. The lender or insurer will require an appraisal confirming the final “as improved” value if they are releasing funds in draws.

10. Tips & Best Practices

1. Do Your Homework on Local Zoning

• Make sure your plans comply with municipal bylaws regarding the number of units allowed, parking requirements, and safety codes.

2. Factor in Tenant Protections

• Provinces like Ontario have strong tenant protection laws, which can make eviction or rent increases more complicated.
• Understand your obligations and rights as a landlord before finalizing your suite’s design and lease terms.

3. Be Realistic About Renovation Costs

• Building an attractive, code-compliant secondary suite isn’t cheap. Expect to spend anywhere from $60,000–$200,000+, depending on whether you’re finishing a basement or building an extension.

4. Consult a Mortgage Broker

• Brokers can often shop multiple lenders on your behalf, potentially saving you money on rates and closing costs. They also know which lenders specialize in or welcome high-LTV refinances.

5. Be Strategic with Unit Design

• A well-designed suite with private entrances, modern appliances, and adequate soundproofing can command higher rent and attract more reliable tenants.

6. Keep Good Records

• Document all renovation costs and keep receipts. You may need them for appraisal validations or future refinancing.

7. Think Long-Term

• While the 30-year amortization lowers your monthly payment, it extends how long you’ll be paying interest. Consider making lump-sum payments whenever possible.

11. Conclusion & Final Thoughts

The 90% mortgage refinancing program represents a significant opportunity for Canadian homeowners. By allowing borrowers to tap into more of their home’s equity—and by focusing on the creation of secondary suites—the government aims to address Canada’s housing shortage while giving individual homeowners a powerful tool to manage and offset rising mortgage costs.

Here are the key takeaways to remember:

• You can borrow up to 90% of your home’s post-improvement value, capped at $2 million.
• 30-year amortizations make monthly payments more affordable, though you’ll pay more interest over time.
• Creating a secondary suite can generate stable rental income—often $2,000 or more per month in places like Toronto.
• Offset your housing costs by comparing your new refinance payment to the additional rental income. In many cases, you could come out with a healthy net positive cash flow.
• Don’t forget the costs of renovations, insurance, permits, and time needed to complete the project. Make sure the math still works in your favor.

With the program officially active as of January 15, 2025, now is the time to discuss your financing options—especially if you’ve been on the fence about expanding your living space or building a legal rental suite. Consult with a mortgage professional, get your property appraised, and map out a clear renovation budget before diving in. If you do it right, you could end up with a more valuable property and a steady new revenue stream that helps you weather uncertain economic times.

Quick Reference Table: Monthly Costs & Rental Income

Below is a simple table illustrating different refinancing amounts and approximate monthly payments, compared to a possible rental income of $2,000. (Figures assume a 5% interest rate over 30 years, plus an extra buffer for expenses.)

Note: These figures are illustrative only and will vary based on your interest rate, credit profile, insurance premiums, property taxes, and utility arrangements.

Sample Monthly Cash Flow Chart

Below is a simplified representation of how your monthly budget might change once you add a rental unit. (Imagine each bar in a bar chart labeled as “Mortgage,” “Insurance,” “Taxes,” “Rental Income,” “Net Cash.”)

              |    Mortgage/Refi Payment
              |****                            
              |****         Rental Income
 Monthly $$    |****    ***************
              |****    ***************
              |****    ***************
              +--------------------------------
               Before   After Refi & Rental

• Before Refi: You have just your original mortgage payment (no rental income).
• After Refi & Rental: You have a higher mortgage payment, but also a significant rental income chunk that offsets those costs.

(Use this mental image to gauge how your monthly expenses and income might stack up.)

Final Word

Whether you’re an existing homeowner looking to tap into equity or a newcomer looking for creative ways to finance a property, the 90% mortgage refinancing program could be the key. With proper planning, solid budgeting, and a focus on long-term stability, you could transform unused space into a steady income stream that also increases your property’s overall value.

Interested in learning more? Contact our Toronto-based mortgage team today. We’d be happy to discuss your individual financial situation and show you how to make the most of this exciting new program.

Ready to Start?

• Step 1: Gather your financial documents (income statements, mortgage statements, credit reports).
• Step 2: Talk to a mortgage broker or lending specialist to explore interest rates and terms.
• Step 3: Get an “as improved” appraisal to determine how much equity you can unlock.
• Step 4: Plan your renovations or additions—then watch your home’s value and your monthly cash flow grow!

If you’re still on the fence, remember: the earlier you start planning, the sooner you can lock in a competitive rate and begin building the secondary suite that can ease your mortgage costs or provide you with extra income down the road.

Thanks for reading, and here’s to making your home work smarter for you!

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