Refinance Your Home to Build a Legal Basement Apartment or Income Suite

The housing market continues to shift, and with it come new opportunities for homeowners. If you've ever thought about building a legal basement apartment or creating an income suite, recent changes in mortgage rules might make now the perfect time.

Homeowners can now refinance up to 90% of their home’s value but only if the funds are used to construct or legalize a secondary dwelling unit, such as a basement rental apartment or in-law suite. This is a game changer for anyone looking to generate rental income, boost property value, or support multi-generational living.

Let’s break down how this refinance opportunity works, who it benefits, and what you need to know before converting your basement into a money-making machine.

Book a call now to find out more!

What Is a Legal Basement Apartment?

A legal basement apartment (also called a secondary suite or accessory dwelling unit) is a self-contained living space within your home that meets local building codes, fire regulations, and zoning bylaws. It must include a private entrance, kitchen, bathroom, and sleeping area.

Unlike informal basement rentals, a legal unit ensures the safety of tenants, protects the homeowner, and makes lenders and future buyers much more comfortable.

New 90% Refinance Rule for Income Suite Projects
Traditionally, lenders allowed homeowners to refinance up to 80% loan-to-value (LTV). That meant limited access to the equity you’ve built up. Now, with this updated policy, you may be able to refinance up to 90% of your home’s value—if you’re using the funds to create or legalize an income-generating suite.

Example:
🏠 Appraised Home Value: $900,000
🔒 Traditional 80% Refinance: $720,000
✅ 90% Refinance for Income Suite: $810,000
That’s an extra $90,000 that could go directly into your renovation budget

Why Add a Legal Income Suite?

There are multiple advantages to building a basement apartment or income suite—especially in high-demand housing markets.

💰 1. Rental Income Potential

Legal basement apartments can rent for $1,200–$2,500+ per month, depending on your location. That rental income can significantly offset your mortgage or household expenses.

🏠 2. Higher Property Value

Homes with legal secondary suites are often more attractive to buyers, especially those looking for a mortgage helper. You’re investing in both current income and long-term equity.

3. Support for Extended Family

A properly built in-law suite can provide a private, affordable space for aging parents or adult children, helping families stay close and cut down on living costs.

4. Affordable Housing Contribution

Legal income suites help increase the supply of affordable rental housing in your community a much-needed win in today’s market.

How to Refinance and Build a Legal Basement Apartment

Here’s your step-by-step roadmap for turning equity into an income-generating unit:

  ✔ Step 1: Assess Your Equity

First, calculate how much equity you’ve built up. With the new 90% rule, you may qualify for more than you think.

  ✔ Step 2: Chat With a Mortgage Professional (That’s Me!)

Not all lenders allow 90% LTV for this purpose. I’ll help you compare mortgage options and find one that supports income suite construction.

  ✔ Step 3: Get an Updated Appraisal

Your lender will require a current home appraisal to calculate the maximum amount you can borrow.

  ✔ Step 4: Create a Renovation Plan

Design your suite with local building and fire codes in mind. Make sure it includes all necessary components like a separate entrance and kitchen.

  ✔ Step 5: Apply for Permits

A legal basement apartment must be registered and permitted by your municipality. Don’t skip this step—an unpermitted suite could result in fines or lost rental income.

  ✔ Step 6: Finalize Financing and Get Building

Once your refinance is approved, you can begin construction. Work with licensed contractors who are experienced in legal secondary suite projects.

Things to Consider Before Refinancing

While this refinance opportunity is exciting, it’s important to consider the financial and logistical implications:

• 💵 Higher Monthly Payments: Borrowing more means a larger mortgage. Make sure your cash flow supports this.

• 🛠 Renovation Surprises: Basements are full of mysteries. Plan for unexpected costs.

• 📉 Rental Market Fluctuations: Research your local rental market so you know what kind of income to expect.

• 🚨 Legal Compliance: Non-compliant suites cannot be legally rented. Stick to the rules, and you’ll avoid trouble later.

• 💼 Tax Implications: Rental income and renovation expenses may affect your taxes. Always consult a tax advisor.

Final Thoughts: Make Your Basement Work for You

Turning unused basement space into a legal apartment is a powerful way to boost your income, increase home value, and support the local rental market. With the new 90% refinance rule, the timing couldn’t be better to invest in your property—and your future.

If you’re ready to explore your refinancing options and start your income suite journey, I’m here to guide you every step of the way.

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