90% LTV Refinance for Building a Secondary Suite in Ontario: How It Works

Most Ontario homeowners know they can refinance up to 80% of their home's value. What fewer people know is that there's a program that pushes that ceiling to 90%, but only for one specific purpose: building a self-contained secondary suite.

If you've been thinking about adding a basement apartment, a laneway house, or a coach house, this program changes the math in a meaningful way. Here's what it is, how it works, and whether it fits your situation.

What Is the 90% LTV Secondary Suite Refinance?

It's an insured refinance that lets you borrow up to 90% of your property's value to fund the construction of a new, self-contained suite. It took effect on January 15, 2025. Before that date, 80% was the ceiling on every refinance in Canada, no exceptions. The carve-out exists for one reason: more legal units means more rental housing, and Ottawa decided that was worth loosening the equity rules.

Because the new mortgage goes above 80%, it needs mortgage default insurance. CMHC, Sagen and Canada Guaranty all offer the product, and their core rules line up. The premium gets added to your mortgage balance. I'll get to that number below, because it's the one people underestimate.

Who Qualifies

These are the rules the insurers publish. They're stricter than most people expect.

• You, or close family, live there. One of the existing units has to be occupied by you or by a close relative living rent-free. Close relative means a spouse, common-law partner, parent or child. This isn't built for pure investment properties.
• The money builds new units. Only. No equity take-out, and the insurers won't finance more than the project costs. Turning an unfinished basement into a new legal apartment counts. Refinancing against a suite you already rent out doesn't.
• Self-contained and legal. Separate entrance, its own kitchen, its own bathroom, and it has to meet zoning and the building code. A finished basement with a spare bedroom doesn't qualify. A legal basement apartment does.
• Four units, maximum. Count the existing home plus what you're adding. Four is the cap once the build is done.
• Under $2 million. The property's as-improved value has to come in below $2,000,000.
• No short-term rentals. The new unit can't go on Airbnb. CMHC defines short-term as anything under 90 consecutive days.
• You still have to qualify. The stress test applies. All three insurers cap debt ratios at 39% GDS and 44% TDS, and CMHC wants at least one borrower with a credit score of 600 or higher.

How the Numbers Work

This is the part most people get wrong. The program doesn't hand you 90% of your home's value to spend however you like. It lends up to 90% of the lending value, and never more than the build actually costs.

The insurers set lending value as the lower of two numbers: the appraiser's as-improved value (what the house is worth with the suite finished), or today's value plus the cost of the build.

Here's how that plays out. Your home is worth $900,000 and you owe $700,000. A contractor quotes $150,000 for a legal basement apartment. The appraiser says the finished property would be worth $1,080,000.

• Standard refinance at 80%: $720,000 maximum. That leaves $20,000 for the build. The suite doesn't happen.
• Secondary suite refinance: Lending value is $1,050,000 (the $900,000 plus the $150,000 build), because that's lower than the $1,080,000 as-improved figure. Ninety percent of it is $945,000. You need $850,000 to cover your balance and the build. It fits, at roughly 81% LTV.

That's who this program is really for. Not the homeowner sitting on a mountain of equity, who can do a regular refinance and skip the insurance premium entirely. It's for the one with a solid plan who comes up short at 80%.

Now the cost. Premiums run on a sliding scale by LTV, from 0.60% at the low end to 3.10% at 85.01 to 90%, when your current mortgage isn't already insured. Our example lands in the 80.01 to 85% band at 2.80%, so $23,800 gets added to the mortgage. Stretch the amortization past 25 years (the maximum is 30) and there's a 0.20% surcharge on top. Ontario also charges 8% sales tax on the premium, and that part is due in cash at closing. About $1,900 here. If your existing mortgage is already insured, a higher top-up premium applies to the increase instead. Run your numbers with my refinance savings calculator, then have me price it properly before you sign with a contractor.

The Real Benefit: Building Rental Income

The financial case for a secondary suite isn't just the mortgage program. It's what the suite produces once it's built.

In Halton Hills, Georgetown, and across the GTA, a legal basement suite typically rents for $1,400 to $2,200 per month depending on size, finish, and location. Over a 25 or 30 year amortization, that income stream matters a lot more than the one-time insurance premium.

It can also help you qualify. Sagen and Canada Guaranty both let the lender count projected rent from the new unit, using the appraiser's market rent figure. For a lot of files, that's the difference between a yes and a no.

Many clients use this program to fund a suite renovation and then use the rental income to aggressively prepay the mortgage. Done right, the suite pays for itself and then some.

How to Approach the Application

1. Get a current appraisal or estimate of your home's value. This sets the ceiling on what you can borrow.
2. Get at least two quotes for the renovation work. Lenders want to see that the funds will be used specifically for suite construction, not general home improvements.
3. Confirm your municipality's zoning rules. The suite must be permitted. Your local planning department or a real estate lawyer can confirm this.
4. Get approved before you break ground. CMHC wants the insured financing approved before construction starts, or at a very early stage. Build first and ask later, and you've likely lost the program.
5. Apply through a broker. Not all lenders offer this product. A broker who knows the insured refinance market will get you the right lender and the right rate.
6. Plan for staged funding. Money is released in draws as the work hits milestones, and the insurers pay for up to four progress inspections. Line up a way to cover the contractor's deposit and first stage, because the first draw doesn't land on day one.

Does It Cover Garden Suites and Laneway Homes?

Yes, if the unit is legal and self-contained. Finance Canada's own announcement names laneway homes alongside basement suites, and a detached garden suite in the backyard follows the same rules.

Ontario makes this easier than most provinces. Under Bill 23, most homes on full municipal water and sewer can have up to three units on one lot as of right, and one of them can sit in a separate building. Your town still sets the size, height and setback rules. Check those before you pay anyone for drawings.

A detached build costs more than a basement conversion, so this program isn't always enough on its own. I've laid out every way to pay for one, grants and private options included, in my guide to garden suite and ADU financing in Ontario.

When This Program Isn't the Right Move

This program is a good tool in the right situation. It isn't the right move for everyone.

• If the CMHC premium plus construction costs push your break-even point past 5 years and you're planning to sell before then, the math doesn't work.
• If your current balance plus the build cost comes to more than 90% of the lending value, the program can't stretch far enough.
• If your renovation budget exceeds what's available at 90%, you'll need to bridge the gap another way: savings, HELOC, or a construction draw facility.
• If the rental income in your area doesn't cover a meaningful portion of the new mortgage payment, the investment case weakens significantly.

For more on how refinancing works in Ontario generally, see my guide on what a lawyer does when you refinance.

Common Questions