Making Secondary Suites More Accessible: What You Need to Know About the New Secondary Suite Loan Program
Summary
With a loan limit of $80,000, more homeowners will be able to access the low-interest financing they need to add a secondary suite to their home. This will make it cheaper for homeowners to do so through 15-year loan terms at a low-interest rate of just 2 per cent.
In addition to the Secondary Suite Loan Program, homeowners will also be able to refinance with insured mortgages to help cover the cost of adding a secondary suite, starting January 15, 2025. Specifically, lenders and insurers will begin allowing mortgage refinancing of up to 90 per cent of the post-renovation value of their home up to $2 million, amortized over a period of up to 30 years. Homeowners will be able to make use of both the loan program and mortgage financing to help cover the cost of adding a secondary suite.
Introduction
In the latest federal push to solve the housing crisis, the federal government just announced a series of moves aimed at making it easier for Canadians to build secondary suites. Among new measures, the Canada Secondary Suite Loan Program and updated refinancing regulations with respect to insured mortgages form part of the 2024 Fall Economic Statement. Here's what is changing, both for homeowners and for possible investors:
Canada Secondary Suite Loan Program
Starting in January 2025, the program will provide home owners with loans of up to $80,000 at low interest (2%) within the Canada Secondary Suite Loan Program to defray some of the renovation costs associated with creating a secondary suite-be it a secondary suite or backyard suite. The government hopes removing some of the financial barriers to construction will yield a gentle densification and add to Canada's rental stock.
A second suite may offset the mortgage through rental income, or provide improved accommodation for elderly relatives or family members with special needs. Accommodation is a realistic option for allowing many seniors to remain in their homes and for many families to realize additional income sources.
New Refinancing Options for Home Owners
To complement the loan program, new mortgage insurance rules will come into effect on January 15, 2025. These updates allow homeowners to refinance their insured mortgages to access up to 90% of their home’s value up to a maximum property value of $2 million, including the value added by a secondary suite. Additionally, the amortization period for refinanced mortgages can be extended to 30 years, making it easier for homeowners to afford the necessary renovations.
These changes address various barriers that have made many homeowners apprehensive to develop a secondary suites The previously announced programs and values/rates were not substantial enough to move the needle as construction costs still vastly surpassed the available grants and loans. (especially backyard suites that can range upwards of $200k). The new financing options will allow homeowners to finance their projects in full. Check out Basement Suite Development Costs in Calgary and utilize our Calculator to understand the costs of your project.
Real-Life Example
Let's make it concrete with a real-life example.
Take for instance James and Lisa, a Calgary couple, who borrowed $80,000 at 2% amortized over 15 years to build a basement suite using the new program. Their monthly payment works out to $514.50. Using the funding, they built a 850-square foot, 2-bedroom basement suite with its own entrance, kitchen and laundry.
They rent that suite out for $1,600 a month — a typical market rate for a basement suite in Calgary. Take away their loan payment of $514.50, and they're still cash flowing $1,085.50 every month while the loan is being repaid. Over 15 years, that works out to $288,000 in rental income, while only paying $12,610 in total interest on the loan.
Once the loan repayment is complete, that basement suite starts bringing in some fairly steady revenue, freeing up an extra $1,600 a month (assuming rental rates have not changed over 15 years) that could go toward their mortgage, retirement savings, or other expenses.
This is a very good example of how the Canada Secondary Suite Loan Program allows owners to create value and makes sure more income is coming in while taking care of Canada's shortage in housing supply.
Why This Matters
The push for more secondary suites isn't about just adding a few more extra places to live; it's part of a bigger push to help solve Canada's shortage of housing. As rents within urban centers continue to skyrocket-and rentals become scarce-secondary suites offer a very affordable and immediate answer. They also facilitate multi-generational living and help aging Canadians stay in their homes.
How to Get Started
If you’re considering building a secondary suite, now is the time to start planning. Evaluate your property’s potential, consult local zoning laws, and estimate renovation costs. Once the Canada Secondary Suite Loan Program becomes available, you’ll be well-positioned to take advantage of this opportunity.
Notorious Suites specializes in helping homeowners transform underutilized spaces into income-generating or accessible living areas. From designing your suite to navigating legal requirements, we’re here to guide you every step of the way. Contact us today to learn how we can bring your vision to life.
