CMHC Refinance: Empowering Homeowners to Create Secondary Suites
Estimated reading time: 7 minutes
Key Takeaways
- Eligibility Requirements: Homeowners and close relatives can access this refinance option provided at least one unit is owner-occupied without rent.
- Secondary Suite Standards: The new suite must be fully self-contained, comply with local bylaws, and is not intended for short-term rental.
- Flexible Financing: With LTV ratios up to 90% and various loan advancing options, you can tailor financing to your needs.
- Documentation and Regulations: Detailed building plans, permits, and compliance reports are required for approval.
- Upfront Costs and Premiums: Premiums vary by loan-to-value ratio with additional surcharges for extended amortization terms.
Table of contents
Introduction
Are you looking to maximize your property’s potential while embracing gentle densification in your community? The CMHC Refinance program is here to help Canadian homeowners unlock a world of opportunities by financing the construction of secondary suites.
Who Can Benefit?
This program is ideally suited for homeowners who already own their property and have an immediate family member or close relative residing rent-free. Whether you are a Canadian citizen, a permanent resident, or a non-permanent resident with work authorization, this option is designed with you in mind.
Property and Financing Essentials
The new secondary suite must be fully self-contained and comply with all local bylaws and regulations. Note that the suite is not eligible for short-term rentals, requiring a minimum rental period of 90 consecutive days. Financing is dedicated solely to the construction and completion of the suite, with no equity take-out permitted.
Flexible Financing Features
For owner-occupied properties with up to four units (including the new suite), financing is available for up to 90% of the property’s value. The value after improvements must remain below $2,000,000. You also have options for a maximum amortization period of up to 30 years, with several flexible methods to adjust amortization terms.
Application and Documentation
Applicants are required to submit detailed improvement lists, cost estimates, building plans, permits, and an occupancy permit or third-party report confirming that the suite meets all local regulations. Proper documentation is key
to ensuring a smooth financing process.
Understanding Rental Income & Qualification
The program offers flexibility when it comes to incorporating rental income into your mortgage qualification. It is important to consult with your lender to determine the best method for your situation. Additionally, borrowers or guarantors are expected to have a minimum credit score of 600, with debt service ratios capped at 39% (GDS) and 44% (TDS) calculated on specified rate criteria.
Loans and Service Options
CMHC offers two main service options for advancing your loan:
- Full Service: Up to four advances validated directly by CMHC at no extra charge.
- Basic Service: Advances that are validated by your lender.
Upfront Premiums and Surcharges
A one-time application premium is applicable and varies based on your loan-to-value ratio. For example, for owner-occupied homes with up to four units, the premiums range as follows:
| Loan-to-Value Ratio | Premium on Total Loan Amount | Premium on Increase to Loan Amount (Refinance) |
|---|---|---|
| Up to 65% | 0.60% | 0.60% |
| 65.01% – 75% | 1.70% | 5.90% |
| 75.01% – 80% | 2.40% | 6.05% |
| 80.01% – 85% | 2.80% | 6.20% |
| 85.01% – 90% | 3.10% | 6.25% |
Helpful Resources
CMHC provides a range of resources including comprehensive fact sheets and mortgage calculators, ensuring you have the necessary tools to make informed decisions about your home financing.
We’re Here to Help
The Homeowner Underwriting Centre boasts a dedicated team ready to assist with every aspect of the loan process—from policy queries to application guidance. For more information, call 1-888-Go-emili (1-888-463-6454) and take the next step towards enhancing your living space.
Frequently Asked Questions
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Who is eligible to apply?
Eligible applicants include homeowners who already reside in the property, along with a close relative (spouse, partner, or legal parent/child) living rent-free. Canadian citizens, permanent residents, and certain non-permanent residents may apply.
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What documentation is required?
You will need detailed building plans, cost estimates, permits, and an occupancy or compliance report from a recognized third party to verify that the suite meets local bylaws.
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How does the premium structure work?
The premium is determined by your loan-to-value ratio, with additional surcharges applied for amortization periods over 25 years and blended amortization methods. It’s important to review these details with your lender.
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Can I use rental income for mortgage qualification?
Yes, there are various methods to incorporate rental income into your mortgage qualification. Discuss with your lender to decide which approach best suits your financial situation.
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