New 2025 Program Allows Homeowners to Refinance Up to 90% for Secondary Suites: What You Need to Know

Shawn Dreger • October 18, 2024

On October 8, 2024, the government announced a new program that will take effect on January 15, 2025, allowing homeowners to refinance up to 90% of their home’s value to create secondary suites. This is a significant increase from the current refinancing limit of 80%. The program aims to provide homeowners with more flexibility to unlock their home equity and add additional legal units like basement suites or laneway homes, provided they meet municipal zoning requirements and are not used for short-term rentals.

The program comes with specific guidelines, outlined by CMHC (Canada Mortgage and Housing Corporation), that include:

Eligibility: Homeowners must already own their property, live in one of the existing units, and plan to add additional fully self-contained suites.
Refinancing Details: Homeowners can refinance up to 90% of the property's value, including the value added by the new units. The maximum property value, once the new units are built, must not exceed $2 million.
Loan Parameters: The loan-to-value limit will be 90%, and the maximum amortization period is 30 years. Any additional financing must not exceed project costs.

To give an example, under this new program, if a home is valued at $800,000, homeowners could now refinance up to $720,000 for building a secondary suite—$80,000 more than the previous limit of $640,000.

This program could be particularly beneficial for homeowners who have recently purchased their property and built up a moderate amount of equity, offering them an opportunity to create an income-generating suite or expand their home without needing to sell. As housing affordability continues to be a pressing issue in many parts of Canada, adding secondary suites could also contribute to easing the rental supply shortage.

While this program represents a significant step forward in unlocking home equity for homeowners, we are still awaiting specific guidelines from lenders. These rules will clarify how lenders will approach refinancing applications under this program. Stay tuned for further updates as more information becomes available from financial institutions.

This program is expected to spark significant interest, particularly from younger homeowners or those with growing families, as it offers a pathway to enhance both living space and long-term financial stability. Homeowners looking to leverage this new opportunity should consult with mortgage experts to fully understand the potential benefits and ensure they are making informed decisions.

If you're interested in how this program could benefit you or want to explore refinancing options to add a secondary suite, get in touch with a mortgage professional today.

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Shawn Dreger

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Mortgage Advice to Help You Through a Separation

By Shawn Dreger • January 21, 2025

With the latest stats claiming that about half of marriages end in divorce and with around three-quarters of Canadians being homeowners, it’s important to know how to handle your mortgage if you decide to separate. Here’s a quick list of things to consider. Keep making your payments. A mortgage is a legally binding contract between you and the lender. It doesn’t take marriage into account. If your name appears on the mortgage, you're responsible for making sure the regular payments are made. A marital breakdown does not give you an excuse not to make your mortgage payments. If, during your marriage, you've relied on your spouse to make the mortgage payments and you aren’t certain payments are being made after separating, it's in your best interest to contact the lender directly to verify your mortgage is being paid. If payments aren't being made, it could affect your credit score or worse; the lender could start foreclosure proceedings. There is always a financial cost to break your mortgage. When working through how to split your finances, you decided to either refinance your mortgage, remove someone from the title, or sell the property, keep in mind that you will incur legal costs. If you’re in the middle of a term, the penalty for breaking your mortgage might be significant, especially if you have a fixed-rate mortgage. It’s certainly worth contacting your mortgage lender directly to verify the cost of breaking your mortgage. Having that information accessible when writing out your separation agreement will provide increased clarity. Listing your marital status as separated or divorced. When completing a mortgage application for securing new mortgage financing, when you list your marital status as separated or divorced, you can expect that a lender will want to see your legal separation agreement or your divorce papers. The lender wants to make sure you aren’t responsible for support payments. So if you haven’t finalized the paperwork, expect delays in securing mortgage financing. It could be harder to qualify for a new mortgage. With the separation of assets also comes the separation of incomes. If you qualified for your existing mortgage on a double income, you might find it hard to maintain the same quality of lifestyle post-separation. This is where careful planning comes in. Working closely with your independent mortgage professional will ensure you understand exactly where you stand. You’ll want to put together a plan for how to handle the mortgage on the matrimonial home. Purchasing the matrimonial home from your ex. There are special considerations given to people going through a separation to buy out the matrimonial home. Instead of looking at the transaction like a refinance where you can only borrow up to 80% of the property’s value, lenders will consider one spouse buying out the other up to a 95% loan to value ratio. This comes in handy when dividing assets and liabilities. Navigating the ins and outs of mortgage financing isn’t something you have to do alone. If you're going through a separation and you’d like to discuss all your mortgage options, please connect anytime. It would be a pleasure to walk you through the process.

What is a Second Mortgage?

By Shawn Dreger • January 7, 2025

If you're not all that familiar with the ins and outs of mortgage financing, the term "second mortgage" might cause a bit of confusion. Many people incorrectly assume that a second mortgage is arranged when your first term is up for renewal or when you sell your first home. They think that the next mortgage you get is your "second mortgage." This is not the case. A second mortgage is an additional mortgage on a single property, not the second mortgage you get in your lifetime. When you borrow money to buy a house, your lawyer or notary will register your mortgage on the property title in what is called first position. This means that your mortgage lender has the first claim against the sale proceeds if you sell your property. If you happen to default on your mortgage, this is the security the lender has in repossessing your property. A second mortgage falls in behind the first mortgage on your property title. When you sell your property, the lawyers will use the sale proceeds to pay off your mortgages in sequence, the first position mortgage is paid out first, and the second mortgage is paid out second. After both mortgages are paid off completely, you get the remaining equity. When you secure a second mortgage, you continue making payments on your first mortgage as per your mortgage agreement. You must also then fulfill the terms of the second mortgage. So why would you want a second mortgage? Well, a second mortgage comes in handy when you're looking to access some of your home equity, but you either have excellent terms on your first mortgage that you don't want to break, or you’d incur a huge penalty to break your first mortgage. Instead of refinancing the first mortgage, a second mortgage can be a better option. A second mortgage is often used as a short-term debt consolidation tool to help provide you with better cash flow. If you’ve accumulated a considerable amount of high-interest unsecured debt, and you have equity in your home, you can secure a second mortgage to lower your overall cost of borrowing. If you'd like to know more about how a second mortgage works, or if you'd like to discuss anything related to mortgage financing, please connect anytime!