New Mortgage Rules in Ontario: Refinance Up to 90% LTV

The Ontario real estate market continues to evolve, and with it, so do the rules governing mortgages and refinancing. A recent change in mortgage policies now allows homeowners to refinance their properties up to 90% loan-to-value (LTV) to build income suites. This new regulation has significant implications for homeowners looking to maximize their property’s potential while addressing the housing crisis across the province.

In this blog post, we’ll dive into what these new rules mean, the benefits of refinancing to build income suites, and what homeowners need to consider before making this financial decision. Whether you’re an investor, a homeowner looking to increase your property’s value, or someone eager to create additional income streams, this guide is here to provide you with the insights you need.

Understanding the New 90% LTV Rule

Loan-to-value (LTV) is a key metric used by lenders to determine how much they’re willing to lend against a property. The LTV ratio is calculated by dividing the mortgage amount by the appraised property value. Traditionally, lenders in Ontario allowed refinancing up to 80% LTV, which limited the amount of equity homeowners could access.

With the new rules permitting refinancing up to 90% LTV, homeowners can now unlock more of their home’s equity. This change is particularly geared towards those who want to invest in creating income suites, such as basement apartments or secondary units, which can help alleviate the housing shortage while providing homeowners with an additional income stream.

Why the New Rules Matter

Ontario’s housing market is one of the most expensive in Canada, with affordability becoming an increasing challenge for residents. The introduction of these new mortgage rules addresses several key issues:

1. Increasing Rental Housing Supply: Allowing homeowners to access more equity to build income suites helps increase the availability of rental units, addressing a critical need in Ontario’s tight rental market.

2. Boosting Homeowner Income: By creating a secondary suite, homeowners can generate a steady rental income, which can be used to offset mortgage payments or other expenses.

3. Enhancing Property Value: Adding an income suite increases the value of the property, making it a sound investment for the future.

4. Supporting Economic Growth: Construction and renovation projects generate jobs and stimulate local economies, contributing to broader economic growth in Ontario.

Benefits of Refinancing to Build an Income Suite

Refinancing your mortgage to create an income suite can be a smart financial decision. Here are some key benefits:

1. Access to Lower Interest Rates

Mortgage refinancing often allows you to secure a lower interest rate compared to other types of borrowing, such as personal loans or credit cards. This makes it a cost-effective way to fund renovations or construction projects.

2. Build Wealth Through Real Estate

By adding a legal secondary unit, you not only increase your property’s value but also tap into the rental market. The rental income generated can help build long-term wealth and financial security.

3. Tax Benefits

The costs associated with creating and maintaining an income suite may qualify for tax deductions. These could include renovation expenses, maintenance costs, and even a portion of utility bills. Consult a tax professional to understand how this applies to your specific situation.

4. Contribute to Solving the Housing Crisis

Ontario’s housing shortage has reached critical levels. By building an income suite, you’re contributing to the supply of affordable housing, which benefits the community as a whole.

Steps to Refinance Your Mortgage for an Income Suite

If you’re considering refinancing your mortgage to build an income suite, it’s important to approach the process with careful planning. Here’s a step-by-step guide:

1. Assess Your Home’s Equity

Determine how much equity you have in your home. With the new 90% LTV rule, you can calculate the maximum amount you can borrow by multiplying your property’s appraised value by 90% and subtracting your existing mortgage balance.

2. Consult a Mortgage Professional

Speak with a mortgage agent (Me of course) to explore your refinancing options. They can help you find the best rates and terms while ensuring you meet the lender’s criteria.

3. Get Your Property Appraised

An up-to-date appraisal is essential for determining your property’s current market value. This will help your lender calculate the maximum amount you can refinance.

4. Develop a Renovation Plan

Create a detailed plan for your income suite, including design, construction, and costs. Ensure that your plans comply with local zoning laws and building codes.

5. Apply for Permits

Before starting any construction, secure the necessary permits from your local municipality. Building a legal income suite requires adherence to strict regulations.

6. Secure Financing and Begin Construction

Once your refinancing is approved, you can access the funds and start your renovation or construction project. Work with trusted contractors to ensure the project is completed on time and within budget.

Things to Consider Before Refinancing

While the new 90% LTV refinancing rule opens up exciting opportunities, it’s important to weigh the pros and cons. Here are some factors to consider:

1. Increased Debt Load

Refinancing to 90% LTV means taking on more debt, which could lead to higher monthly mortgage payments. Ensure that you’re financially prepared to manage this additional burden.

2. Renovation Costs

Building an income suite can be expensive. Get detailed quotes from contractors and factor in unexpected costs to avoid financial strain.

3. Market Conditions

The rental market can fluctuate, so it’s important to research demand and rental rates in your area. This will help you determine if the income from the suite will cover your costs.

4. Legal Compliance

Ensure your income suite meets all local regulations, including safety standards, zoning laws, and building codes. Non-compliance could result in fines or the inability to rent out the unit.

5. Impact on Property Taxes

Adding an income suite may increase your property’s assessed value, which could lead to higher property taxes. Consult with your local municipality to understand the potential impact.

Final Thoughts

The new mortgage rules in Ontario allowing homeowners to refinance up to 90% LTV to build income suites present an excellent opportunity to unlock the potential of your property. Whether you’re looking to generate rental income, increase your home’s value, or contribute to solving the housing crisis, this policy change offers significant benefits.

However, it’s essential to approach this opportunity with careful planning and professional guidance. Work with mortgage experts, contractors, and financial advisors to ensure that your refinancing and renovation journey is a success.

By taking advantage of this new regulation, you can not only enhance your financial future but also play a role in addressing Ontario’s pressing housing needs. If you’re ready to take the next step, consult with a trusted mortgage professional today to explore your refinancing options.

Kat Brazier
Mortgage Agent L2, MPFG
416-464-6763
info@katbrazier.com