How New Mortgage Rules Will Impact Homeowners with Secondary Suites

 

As a homeowner you might find yourself sitting on unused space, whether it’s an empty basement or a garage that could easily be transformed into a secondary suite. Historically, the renovation process to create secondary suites has been laden with challenges—from steep costs to the complexities of municipal regulations. However, recent changes in municipal zoning laws and federal budget measures are paving the way for a new era of opportunity for homeowners looking to maximize their properties.

 

The Shift in Zoning Laws

Thanks to municipal zoning reforms driven by the CMHC’s Housing Accelerator Fund, homeowners are now better positioned to convert extra space into additional rental units (ADUs). These reforms aim to promote urban density, creating more rental options while supporting homeowners in generating supplemental income.

 

Implications of Federal Budget 2024

Federal Budget 2024 introduced significant changes to mortgage insurance rules, which are designed to encourage homeowners to add secondary suites. These targeted measures, effective January 15, 2025, present a unique opportunity for those looking to invest in their homes and contribute to the housing supply.

 

Key Details for Homeowners

To qualify for this new refinancing option, homeowners must meet specific requirements:

  • You must already own your property.
  • Either you or a close relative must occupy one of the existing units.
  • You must plan to construct additional units.
  • The new unit(s) cannot be used for short-term rentals (STRs).

Homeowners can access insured refinancing specifically for the purpose of building additional units. This means you can leverage your home’s equity to fund renovations that enhance your living space and create rental opportunities. Moreover, the additional units must be fully self-contained—think basement suites with separate entrances or new laneway homes. They must also adhere to municipal zoning requirements. Finally, homeowners can add a maximum of four dwelling units, including the existing unit – opening significant potential for generating rental income.

In addition, the “as improved” value of your residential property must be less than $2 million, and homeowners can secure up to 90% of the property value, including the value added by the secondary suites with a maximum amortization period for this financing is set at 30 years.

It’s crucial to ensure that any additional financing does not exceed the project costs. Careful budgeting will be key to maximizing the benefits of this new program.

 

Moving Forward

The introduction of these new mortgage insurance rules signals a shift towards more flexible, supportive financing options for homeowners. As you consider the possibility of converting your unused space into rental suites, keep these changes in mind. Not only can you enhance your property’s value, but you also contribute to solving the housing crisis in Canada.

If you're thinking about making the leap into secondary suites, it may be wise to consult with the House of Three team who can help you navigate the complexities of renovations, zoning laws, and municipal requirements. Together, we can turn your vision into reality and help you make the most of your property.