Can You Refinance to Build a Secondary Suite in Canada?
Yes. CMHC will insure a refinance of up to 90% of what your home will be worth once the secondary suite is finished, not what it is worth today. That is more borrowing room than a conventional refinance or a HELOC, but only if the financing is approved before you start building.
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What does CMHC’s secondary suite refinance programme actually do?
CMHC will insure a refinance of up to 90% loan-to-value against your home’s as-improved value, the value after you add a secondary suite, laneway house or garden suite, not the value today. The property can have up to four units in total, counting the ones already there, and the lending value must sit below $2,000,000.
Most homeowners who want to add a rental suite reach for a HELOC or a conventional refinance first. Both of those products measure borrowing power against what the home is worth right now, before any work is done. CMHC’s secondary suite refinance measures it against what the home will be worth once the suite exists.
That is the entire point of the programme. A homeowner with real construction plans can often borrow more against the finished result than against the current house. The trade-off is that the extra money has to go toward the suite, because equity take-out is not permitted under this product.
CMHC’s programme page does not state a launch date, so this page does not give one. What matters for your file is the current rules, which are set out above and on CMHC’s own page.
The citable fact: CMHC will insure a refinance up to 90% of a home’s as-improved value for a secondary suite, laneway house or garden suite, on a property of up to four units and a lending value under $2,000,000.
Why does CMHC’s approval have to come before construction starts?
CMHC requires the insured financing to be approved before construction begins, or at the very least at an early stage of the project. A homeowner who builds the suite first and then goes looking for financing has already closed the door on this programme, because approval after the fact is not available.
This is the detail that trips up the most people, and it is also the detail almost no competitor page explains clearly. Borrowers naturally think of financing as the last step: build the thing, then work out how to pay for it. CMHC’s secondary suite refinance runs the opposite way.
Talk to a lender or broker before a shovel goes in the ground, not after the drywall is up. If the suite is already built, this specific product is off the table, and the fallback is a conventional refinance or a HELOC at a lower loan-to-value.
The citable fact: CMHC’s secondary suite refinance must be approved before construction starts, or at an early stage, so a suite built first cannot be financed under this programme.
How much can you actually borrow, and what is that measured against?
The ceiling is 90% of the as-improved value, the appraised value of the property once the secondary suite is complete. A conventional refinance caps out at 80% of today’s value, so the gap between those two numbers is the extra room this programme creates for the construction itself.
Show the math: illustrative borrowing room, 90% as-improved vs. 80% conventional
Both figures above are illustrative, not a quote. Your own number depends on an appraiser’s opinion of what the finished property will be worth, which is why the lender orders that appraisal early rather than at the end of the project. If you want the full CMHC premium table across loan-to-value bands, the CMHC mortgage insurance cost page breaks it down.
The usual $300 to $600 range for a residential appraisal is for a current-value appraisal on an ordinary file. An as-improved appraisal on a construction file is different work, and the number of appraisals needed over the project varies, so ask your lender what it will cost before you start.
The citable fact: CMHC’s secondary suite refinance allows borrowing against 90% of the as-improved value of the home, rather than 80% of today’s value under a conventional refinance.
Can you pull extra cash out beyond the cost of the suite?
No. CMHC’s secondary suite refinance does not permit equity take-out. The extra borrowing room this programme creates is earmarked for building the suite, not for paying off debt or funding something unrelated. A conventional cash-out refinance or a HELOC is the right tool if you want money for a different purpose.
This is the real difference between this product and a regular refinance. A conventional refinance lets a homeowner pull equity out for almost any purpose, up to 80% of today’s value. This programme trades that flexibility for a higher ceiling, on the condition that the extra money funds construction.
If pulling equity out for something other than the suite is really the goal, compare it against a cash-out refinance in Alberta or a refinance in Ontario instead.
The citable fact: CMHC’s secondary suite refinance does not permit equity take-out, so the borrowed funds above your existing balance must go toward the construction, not toward cash in hand.
Can you rent the new suite on Airbnb or another short-term platform?
No. CMHC’s own wording is that the secondary suite “must not be used as a short-term rental (i.e. must not be rented for any period of less than 90 consecutive days).” Anyone planning to list the new unit on Airbnb or a similar platform cannot use this programme for that unit.
This rule is easy to miss and it ends the conversation for a specific kind of borrower. If the plan for the new suite is nightly or weekly stays, CMHC’s insured refinance is not the right tool, full stop. The unit has to go to a tenant on a stay of 90 consecutive days or longer.
A borrower set on short-term rental income instead needs to look at financing for a rental property in Ontario or a rental property in Alberta, where different rules and lenders apply.
The citable fact: CMHC bans short-term rental use of a secondary suite built under this programme, defining it as any rental period of less than 90 consecutive days.
How does this compare to a conventional refinance or a HELOC?
This programme offers the highest loan-to-value of the three, 90% against the finished value of the home, but it only funds construction of an eligible secondary unit and requires approval before the work starts. A conventional refinance or a HELOC offers more flexibility on how the money is used, at a lower ceiling.
| Feature | CMHC secondary suite refinance | Conventional refinance | HELOC |
|---|---|---|---|
| Maximum loan-to-value | 90% | 80% | 65% standalone, up to 80% combined with a mortgage |
| Value measured against | As-improved value, after the suite is built | Today’s appraised value | Today’s appraised value |
| Equity take-out permitted | No, construction only | Yes, any purpose | Yes, any purpose |
| Approval timing matters | Yes, before or early in construction | No | No |
| Minimum credit score | 600 | Set by the lender | Set by the lender |
The citable fact: CMHC’s secondary suite refinance reaches 90% of the as-improved value, ten percentage points above the 80% ceiling on a conventional refinance, but only for construction and only with pre-approval.
What income and debt ratios do you need to qualify?
Like every other CMHC-insured mortgage, this refinance uses GDS capped at 39% and TDS capped at 44% of your gross income. Both ratios are calculated on the new, larger mortgage payment, so the lender needs your income to support the full loan, not just the amount you are adding.
GDS covers your mortgage payment, property taxes and heat. TDS adds every other debt payment on top of that. Both ratios are federal standards used across CMHC-insured lending generally, not something specific to this programme, so the numbers from a purchase pre-approval apply the same way here.
If GDS and TDS are new terms, the mortgage glossary breaks both down in plain language.
The citable fact: CMHC’s secondary suite refinance qualifies borrowers the same way as any other insured mortgage, with GDS capped at 39% and TDS capped at 44%.
What amortization and property value limits apply?
The maximum amortization is 30 years, and the maximum lending value, or as-improved property value, must stay below $2,000,000. Both are hard ceilings specific to this CMHC product.
A 30-year amortization lowers the monthly payment on a larger loan, which matters on a refinance built around a bigger number. It also means more interest paid over the life of the mortgage, the same trade-off as on any extended amortization.
The $2,000,000 ceiling applies to the as-improved value, not the purchase price of the original home years ago. A property near that line should get an as-improved appraisal early, before committing to a scope of work that could push the finished value past it.
The citable fact: This programme caps amortization at 30 years and requires the as-improved property value to sit below $2,000,000.
Does this work the same way in Ontario and Alberta?
CMHC’s programme is federal and identical in both provinces. What differs is who regulates your broker, what it costs to register the new mortgage, and how the rent rules work once a tenant moves into the new suite.
| Factor | Ontario | Alberta |
|---|---|---|
| Mortgage brokerage regulator | FSRA Licence #13321 | RECA |
| Land transfer tax on this refinance | None, refinancing does not transfer title | None, Alberta charges no provincial land transfer tax either |
| Registration cost on the new mortgage | Set by your lawyer’s disbursements | Alberta Land Titles: $5 per $5,000 of the mortgage amount, plus a $50 base fee |
| Rent rules once the suite is tenanted | A unit first occupied after 15 November 2018 is exempt from Ontario’s annual rent increase guideline | No cap on the amount of a rent increase under the Residential Tenancies Act |
A newly built secondary suite in Ontario is, by definition, first occupied well after the November 2018 cutoff, which means it sits outside the annual rent increase guideline once it is tenanted. Alberta carries no cap at all on the amount of an increase, only on timing and notice.
Municipal permission is a separate question from CMHC’s underwriting, and it varies by city. Ontario allows up to three units as of right in many municipalities, conservation authority approval can bite on a regulated lot, and Calgary and Edmonton run well-developed suite approval streams. Check with your own municipality before you budget for the build.
The citable fact: CMHC’s secondary suite refinance rules are federal and identical in Ontario and Alberta; only the regulator, the registration cost and the rent rules that follow change by province.
What does the approval and construction process look like?
Start with a broker or lender before you touch the property, get the as-improved value appraised, and get the insured financing approved before or very early into construction. Funds are typically advanced in stages tied to the progress of the build, not handed over in one lump sum.
The usual order is application, a current-value appraisal, an as-improved appraisal, then approval. Construction follows once financing is in place, and the lender inspects progress before releasing each stage of funds.
How a lender structures progress draws against an as-improved appraisal, and how much it holds back at each stage, differs between lenders and is not something CMHC sets. Ask for the draw schedule in writing before construction starts, because a draw that arrives later than your builder expects is a problem you want to foresee.
The citable fact: CMHC’s secondary suite refinance is approved before or early in construction, with funds generally advanced in stages as the build progresses.
What happens if you already built the suite before applying?
This specific CMHC programme is closed to you, because approval was required before or early in construction and that window has passed. Your remaining options are a conventional refinance at up to 80% of today’s value, or a HELOC, both measured against the house as it stands now, suite included.
The finished suite still adds value to the property, and that value still counts toward a conventional refinance or a HELOC. What is gone is the 90% as-improved ceiling and the equity take-out restriction that comes with it.
Start with refinancing in Ontario or refinancing in Alberta to see what today’s value supports.
The citable fact: A secondary suite built before financing was approved cannot use CMHC’s insured programme and falls back to a conventional refinance or a HELOC against today’s value.
Is this the right financing option for your project?
It depends on three things: whether construction has started yet, whether the new unit will be a long-term rental rather than a short-term one, and whether you need cash for anything beyond the build. Get those three answers straight, then talk to a licensed broker before committing to a scope of work.
If your mortgage renewal is coming up around the same time as this project, deciding whether to refinance now or wait for renewal is its own negotiation with your existing lender. The Renewal Negotiation Playbook walks through that trade-off before you sign anything.
Check today’s live rates at pekoe.ca/rates, updated daily, and talk to a broker about whether your timing and your plans line up with what CMHC requires.
The citable fact: Whether a secondary suite refinance fits depends on construction timing, intended tenancy length, and whether extra cash beyond construction is actually needed.
Related questions on refinancing and secondary suites
A secondary suite refinance touches several other decisions worth reading before you start.
- Financing an Ontario basement apartment
- Financing a secondary suite in Alberta
- The mortgage refinance process, stage by stage
- Insured vs. insurable vs. uninsured, explained
The full set lives on the Ask a Broker hub.
Frequently asked questions
What is a CMHC secondary suite refinance?
It is a refinance CMHC will insure up to 90% of the as-improved value of your home, the value once an eligible secondary suite, laneway house or garden suite is built. The property can have up to four units in total, counting the ones already there, and the lending value must stay below $2,000,000.
How much more can I borrow compared with a conventional refinance?
The ceiling is 90% of the as-improved value, against 80% of today’s value on a conventional refinance. Because the as-improved value is usually higher than today’s value, the real dollar gap is often larger than the ten percentage point difference suggests.
Can I use this for a laneway house or a garden suite, not just a basement apartment?
Yes. CMHC’s rule covers a secondary suite, a laneway house and a garden suite as eligible unit types, as long as the total property does not exceed four units.
Can I rent the new suite on Airbnb?
No. CMHC states the secondary suite must not be used as a short-term rental, meaning it cannot be rented for any period of less than 90 consecutive days. This rule rules out this programme for anyone planning nightly or weekly stays in the new unit.
Do I need financing approval before I start building?
Yes. CMHC requires the insured financing to be approved before construction starts, or at the very least at an early stage of the project. Building first and applying afterward disqualifies the project from this programme.
What is the maximum property value allowed?
The maximum lending value, or as-improved property value, must be below $2,000,000. A property close to that line should get an as-improved appraisal early to confirm it still qualifies.
What is the maximum amortization on this refinance?
30 years. A longer amortization lowers the monthly payment on the larger loan amount but increases the total interest paid over the life of the mortgage.
What credit score do I need?
CMHC’s insured refinance products require a minimum credit score of 600 for at least one borrower. Most prime lenders look for 680 or higher for their best pricing, so a borrower close to the minimum should expect a smaller lender pool.
Can I take extra cash out for something unrelated to the suite?
No. Equity take-out is not permitted under this programme, so every dollar above your existing mortgage balance has to go toward the construction. A conventional cash-out refinance or a HELOC is the right tool if you want money for another purpose.
What income ratios does the lender use to qualify me?
The same federal standards used across CMHC-insured lending: GDS capped at 39% and TDS capped at 44% of gross income. Both are calculated against the new, larger mortgage payment, not just the increase.
Does this programme work differently in Ontario than in Alberta?
The CMHC rules themselves are federal and identical in both provinces. What differs is the regulator, FSRA in Ontario and RECA in Alberta, the cost of registering the new mortgage, and the provincial rent rules that apply once the suite is tenanted.
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