Mortgage Insurance Rule Changes to Enable Homeowners to Add Secondary Suites

October 8, 2024

Many homeowners have extra space they may want to convert into rental suites, such as an unused basement, or a garage that could be converted into a laneway home. Historically, the cost of renovating, combined with municipal red tape, has made this both difficult and expensive.

Recent municipal zoning reforms in Canada’s major cities, made possible through Housing Accelerator Fund agreements, are creating new opportunities for homeowners to add additional suites and increase density. New rental suites would provide more homes for Canadians and could provide an important source of income for seniors continuing to age at home.

In Budget 2024, the federal government announced its intention to make targeted changes to mortgage insurance rules to encourage densification and enable homeowners to add more units to their homes.

Today, the government is releasing details for lenders and insurers to offer this new insured mortgage refinancing product, effective January 15, 2025.

Parameters

• This measure will apply to all borrowers seeking to access mortgage insurance in Canada to add more units (secondary suites). These borrowers must satisfy the following requirements:
  • Already own their properties;
  • The borrower or a close relative are occupying one of the current units;
  • Intend to construct additional units; and,
  • The additional unit(s) must not be used as a short-term rental.
• Refinancing: Insured refinancing will be allowed for the purpose of building additional unit(s).
• Legal units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.
• Number of units: Maximum of four dwelling units including the existing unit.
• Maximum Property Value Limit: The “as improved” value of the eligible residential property against which the loan is secured must be less than $2 million.
• Maximum Loan-to-Value limit: Up to 90 per cent of the property value, including the value added by the secondary suite(s), in combination with any other outstanding loans secured by the property.
• Maximum amortization: 30 years.
• Additional financing must not exceed the project costs.

Other Parameters

• Effective date: These measures will be available for mortgage insurance applications that lenders submit to mortgage insurers on or after January 15, 2025.
• All other eligibility criteria for government-guaranteed mortgage insurance will continue to apply.