Can you finance a home with open permits or unpermitted work?
Often, yes, but only once the lender understands exactly what is open and why. An open permit or unpermitted work is a compliance and title problem, not a sign the property is in bad shape, and it can stop financing on a house that is otherwise in perfect condition.
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Can you finance a home with open permits or unpermitted work?
Often, yes, but not automatically. An open permit or unpermitted work is a title and compliance problem, not a condition problem, so a property in perfect physical shape can still be difficult to finance. Some lenders decline outright, some ask for the permit closed first, and some will fund once you and your lawyer address the risk directly.
An open permit means the municipality has an active file that was never closed with a final inspection. Unpermitted work means someone did work that legally needed a permit and never applied for one at all. Either one can sit quietly for years without causing a problem, right up until you try to sell, refinance, or insure the property.
A lender relies on the property as its collateral and reads title and municipal records as part of that reliance. An open file or missing permit tells the lender the municipality could still issue a work order, require the work be corrected, or place a hold on further permits at that address. That is a risk to the lender’s security, separate entirely from whether the addition, the basement apartment, or the deck was built well.
This is why the physical condition of the property tells you almost nothing about whether it will finance. For a property that needs visible physical work, a different underwriting question, see our pillar guide on financing a property that needs work.
The citable fact: an open building permit or unpermitted work is a title and compliance defect, and a property can be structurally sound and still be difficult or impossible to finance until the municipal file is resolved.
What is an open permit, and how does one happen?
A permit opens the moment a municipality issues it and stays open until a final inspection is passed and the file is closed. It becomes an open permit when the work is finished, partly finished, or abandoned, and nobody ever booked or passed that final inspection. Owners often do not know a permit is open at all, because it was pulled by a previous owner, a contractor, or years before they bought the property.
Municipalities require a permit for most structural, electrical, plumbing, and HVAC work, plus additions, finished basements, and secondary suites. Once the work starts, the file stays open on the municipal system until an inspector signs off.
A permit can stay open for a few common reasons: the contractor never called for the final inspection, the work failed an inspection and was never corrected, the project changed scope partway through, or the original owner sold the property before finishing the paperwork.
None of this shows up by looking at the house. It shows up in a permit history search at the municipality, which is why buyers and even current owners are often surprised to learn a permit is open at all.
The citable fact: an open permit is a municipal file that was never closed with a passed final inspection, and it can remain open for years without any visible sign on the property itself.
Why does a lender care about a permit at all?
A lender’s security position depends on clean, unencumbered title to the property. An open permit gives the municipality an order-making power over that property, including the ability to require work be corrected or removed, and that threatens the lender’s collateral regardless of how well the work was actually done. It is the municipal risk, not the workmanship, that underwriting reacts to.
Mortgage underwriting treats real estate as collateral. If the municipality can later order changes to the structure, register a lien for unpaid costs, or refuse further permits at that address, the lender’s claim on the property becomes less certain.
Conventional and insured lenders in particular want clean title and a compliant building history before they will fund, because their own risk policies assume no outstanding municipal claims exist. A private lender may tolerate more of this risk, but even then it is priced and disclosed, not ignored.
For the broader difference in how equity-based lenders and income-based lenders assess risk generally, see our answer on how equity-based lending differs from income-based lending.
The citable fact: a lender cares about an open permit because it represents a municipal order-making power over the property, a risk to the lender’s collateral that exists independently of the property’s actual condition.
How does unpermitted work differ from an open permit?
An open permit is a paperwork gap on work the municipality already knows about. Unpermitted work is work the municipality has no record of at all, done without ever applying for a permit that was legally required. The second is usually the bigger problem, because there is no existing file to close, only a violation to disclose and, in most cases, retroactively permit.
The two sit on a spectrum, and the table below sets out where each one falls and what closing the gap usually involves.
| Situation | What the municipality has on file | What resolving it usually involves |
|---|---|---|
| Open permit | A permit application and a file, but no passed final inspection. | Booking and passing the outstanding inspection, or reapplying if the permit has since lapsed. |
| Unpermitted work | No record of any permit for the work at all. | Applying for a permit after the fact and having the completed work inspected, or removing the work. |
| Permit lapsed or expired | An old permit that expired before the final inspection was completed. | Reapplying under current code, which can mean the work must meet a newer standard than when it was built. |
Both situations get discovered the same way, through a permit history search at the municipality, and both are municipal and title issues rather than physical defects. Neither is caught by a home inspection, which looks only at the property’s current condition and does not check municipal permit records at all.
The citable fact: unpermitted work has no municipal file to close at all, while an open permit has a file that exists but was never signed off, and both require going back to the municipality to resolve.
How do you find out before you buy?
Order a permit history or building compliance search directly from the municipality’s building department before your financing conditions expire, since this is not part of a standard title search or a home inspection. Your real estate lawyer can request this alongside the title search, and some municipalities offer online permit record lookups. Ask the seller directly as well, since a seller who did the work is expected to disclose known defects.
A standard title search checks ownership, liens, and registered interests. It does not check whether a permit is open or whether work was done without one, because that information lives in the municipality’s building department records, not the land registry.
Ask your lawyer specifically to request a permit history or a zoning and building compliance search for the property address as part of your due diligence period. Many municipalities let you request this directly, and the process and turnaround vary by location, so ask early rather than close to your condition deadline.
If anything shows up, raise it as a condition of your purchase agreement before you waive your conditions, not after.
The citable fact: a permit history search from the municipality’s building department, not a standard title search or a home inspection, is what reveals an open permit or unpermitted work before you buy.
Can a private lender fund it while you sort it out?
Sometimes, because private lending is equity-based rather than driven purely by clean-title checklists, but it is not automatic and not every private lender will take the file. A private lender will usually want the issue disclosed upfront, may ask for a holdback until the permit closes, or may price the extra risk into the terms offered. Expect your broker to shop the file to lenders who have handled a similar situation before.
A conventional or insured lender is the most likely to decline outright while a permit sits open, because default insurers and institutional risk policies are strict about clean title and compliant construction. A private lender, working from the equity in the property rather than a rigid checklist, has more room to evaluate the specific situation file by file.
That does not mean private lenders ignore the issue. Full disclosure of the open permit or the unpermitted work is expected, and the lender’s own comfort with the municipality’s possible order-making power still shapes the decision and the terms offered.
See our guides to private mortgage lending in Ontario and private mortgage lending in Alberta for how equity-based underwriting works more generally, and our answer on whether private lenders require an appraisal for how the property gets valued in that process.
The citable fact: a private lender can sometimes fund a property with an open permit or unpermitted work because private lending is equity-based, but disclosure of the issue and the lender’s own comfort with the municipal risk still govern the decision.
What does it take to close an open permit?
Closing an open permit means going back to the municipality, usually reapplying if the original permit has lapsed, and passing whatever inspection was never completed. For unpermitted work, it usually means applying for a permit after the fact and having the completed work inspected against the applicable code, sometimes the current code rather than the one in force when the work was done. Ask the building department directly for the cost and the steps that apply to your address, since both vary by municipality and by the scope of the work.
The municipality is the only party that can close its own file. No lender, lawyer, or broker can close a permit on your behalf, though a lawyer can help you understand your legal position and a broker can help time your financing around it.
If an inspector finds the completed work does not meet code, expect a requirement to correct it before the file closes, which can mean opening up finished walls or ceilings to verify what is behind them.
The citable fact: only the municipality that issued the permit can close its own file, and the process almost always requires reapplying or completing an inspection that was never finished.
Does insurance become a problem too?
It can. A home insurer that learns about unpermitted work or an open permit may decline coverage for a related claim, adjust the premium, or ask for the work to be brought up to code before renewing. Disclosure obligations to your insurer are separate from disclosure obligations to your lender, and the two do not automatically share information with each other.
Most home insurance applications ask directly whether renovations were permitted. Answering incorrectly, even unintentionally, can affect a claim years later if the insurer discovers the truth during the claims process.
An insurer’s main concern is usually the same as a lender’s: that unpermitted work may not meet the building or electrical code the insurer assumed was followed when it priced the policy. A basement apartment or a finished space added without a permit is a common trigger for this kind of question at renewal or at claim time.
The citable fact: a home insurer can decline a claim or adjust coverage over unpermitted work discovered after the fact, which makes insurance a second, separate reason to resolve an open permit rather than leave it alone.
Who should you call first?
Call your real estate lawyer first if you are still under contract to buy, since they can build a permit search and a condition into the deal before you close. If you already own the property, start with the municipality’s building department to confirm exactly what is open, then bring in a broker once you know what you are financing around. Your broker cannot close a municipal file, but can tell you which lenders are realistic for the file as it stands.
Order matters here. Finding out what the municipality actually has on file, before you talk to a lender, gives your broker something concrete to place with a lender rather than a vague description of the issue.
In Ontario, Pekoe is licensed by FSRA under Brokerage Licence #13321. In Alberta, Pekoe is licensed by RECA, the Real Estate Council of Alberta. Building permit authority itself sits with the local municipality in both provinces, not with either provincial regulator.
| Who | What they can do |
|---|---|
| Municipal building department | Confirms exactly what is open on file. Only the municipality can close its own permit. |
| Real estate lawyer | Reviews title, builds a permit search and a condition into a purchase agreement, and advises on legal exposure. |
| Mortgage broker, FSRA-licensed (Ontario) or RECA-licensed (Alberta) | Shops the file to lenders who can realistically fund it as it stands, or once the permit is closed. |
| Home insurer | Confirms whether the work affects coverage or premium, separately from your lender’s decision. |
The citable fact: resolving an open permit starts with the municipality that issued it, runs through a real estate lawyer for the legal and contractual side, and only then reaches a broker who can match the file to a realistic lender.
Where else can you find answers on financing a flagged property?
These three pages cover related underwriting and approval questions in more depth.
- Do private lenders require an appraisal?
- How does equity-based lending differ from income-based lending?
- What happens if you are declined by a B lender?
For financing a property with visible physical work needed, see our pillar guide on private mortgages on a property that needs work. The full set of questions lives on the Ask a Broker hub.
Frequently asked questions
Can a house with an open building permit still get a mortgage?
Often yes, though not automatically, since it depends on the lender and how the file is disclosed. A conventional or insured lender is the most likely to decline or add conditions, while some alternative and private lenders will consider the file with full disclosure.
What is the difference between an open permit and unpermitted work?
An open permit means the municipality issued a permit for the work but never signed off with a final inspection. Unpermitted work means the work was done without ever applying for a permit that was legally required.
Does a home inspection catch an open permit?
No. A home inspection checks the current physical condition of the property, while an open permit or unpermitted work is a municipal record issue found through a permit history search at the building department.
Who can close an open building permit?
Only the municipality that issued it. A lender, lawyer, or broker can help you work through the process, but none of them can sign off the file on the municipality’s behalf.
Will my lender find out about an open permit on its own?
Not always automatically, but a lender’s title search can surface municipal work orders or liens tied to the file. Disclosing it upfront to your broker is safer than hoping it goes unnoticed.
Can I sell a house with an open permit?
Yes, but the buyer’s lawyer and lender will likely raise it as part of their own due diligence, and it can affect the buyer’s financing the same way it affects yours. Closing the permit before listing usually makes the sale smoother.
Does unpermitted work need to be removed if it does not meet code?
Sometimes. If a municipal inspection finds the completed work does not meet the applicable code, correcting it, which can include opening up finished areas, is usually required before the file can close.
Is the situation different in Ontario than in Alberta?
The underwriting logic is the same in both provinces, since building permits are issued by the local municipality either way. The regulator differs: Pekoe is FSRA-licensed in Ontario under Brokerage Licence #13321, and RECA-licensed in Alberta.
Can I get a mortgage on a house with a basement apartment that was never permitted?
It depends on the lender and how the file is disclosed, since an unpermitted secondary suite is treated the same as any other unpermitted work. Expect the lender to ask whether the space is being used as a second unit and how that affects insurance and title.
Does insurance care about an open permit even if my lender does not?
Yes, insurance and lending are separate. An insurer can still decline a related claim or adjust a policy over unpermitted work even if your mortgage lender never raised the issue.
How do I find out if a property has an open permit before I buy it?
Ask your real estate lawyer to request a permit history or building compliance search from the municipality as part of your due diligence, since this is not part of a standard title search. Some municipalities also offer online permit record lookups.
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