The Government of Canada has been encouraging “gentle densification” in urban areas to increase the available housing supply. One of the incentives they’ve offered is the Canada Secondary Suite Loan Program, intended to provide low-cost loans for homeowners to add an extra independent living space to their existing property.
If you’ve been researching the Canada Secondary Suite Loan Program and how to apply, you might be having trouble figuring it out. You’re not alone: the details are hard to find because, despite the wide publicity around it, the program was never implemented.
Fortunately, there is a great alternative to the secondary suite loan program in Canada called the CMHC Refinance Program. Like the Canada Secondary Suite Loan Program, it helps homeowners build an additional living unit on their property, but it works slightly differently.
What Happened to the Canada Secondary Suite Loan Program?
The Canada Secondary Suite Loan Program was first announced in the 2024 budget. Its purpose was to help homeowners build basement apartments, laneway houses, garden suites, and other secondary suites on their property, either as additions to their homes or stand-alone structures. The program was going to offer loans of up to $80,000 at just 2% interest, with a loan term of 15 years.
This incentive had a lot of homeowners very excited about adding space to accommodate ageing parents or adult children, or to make extra money renting to tenants. However, when researching how to apply for the Canada Secondary Suite Loan Program, homeowners weren’t able to find a portal or instructions. In the 2025 federal government budget, the program was officially cancelled. You may still see references to a “Canada Secondary Suite Loan Program Application,” because many websites haven’t been updated.
The CMHC Refinance Program
The Canada Secondary Suite Program was cancelled because it was thought to significantly overlap with another program: the CMHC Refinance Program. The government decided there was no need for both programs and went ahead with the newer one.
Basics of the CMHC Refinance Program
The CMHC Refinance Program allows homeowners to refinance their existing mortgage to access up to 90% of their home’s post-renovation value (up to $2 million) to build a secondary suite. With this program, you borrow against the equity in your home plus the value that the secondary suite adds to fund the construction and related allowed expenses.
Requirements for the Secondary Suite
The secondary suite must be self-contained, with a separate kitchen, bathroom, living space, and entrance. It must be suitable for full-time, year-round occupancy and compliant with all local bylaws and building codes. The suite must be rented for a minimum of 90 consecutive days at a time; it can’t be used as a short-term rental.
Eligibility Requirements for CMHC Refinance
To qualify for this secondary suite refinancing, you must already own the home, and you or a close relative (specifically your spouse, common-law partner, parent, or child) must be living in the home (or in one of the units if it’s currently already a multi-unit home). You must be a Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada.
The minimum credit requirements are:
- Minimum credit score of 600 for at least one borrower or guarantor.
- Gross debt service (GDS) ratio maximum of 39%.
- Total debt service (TDS) ratio maximum of 44%.
How to Apply for the CMHC Refinance Program
The CMHC must approve your financing before construction starts. When you apply, you’ll need:
- Detailed building plans and permits.
- Cost estimates or quotes from contractors.
- The documents you’d normally use for a refinance, including proof of income, a credit report, and details of your current mortgage.
- A property appraisal showing the as-is value of your property and the post- construction value.
Not all lenders work with the CMHC Refinance Program. You will need to find a lender who is approved for CMHC insurance and understands this specific program. The lender will verify your income and credit, order an appraisal, and submit the application to CMHC for approval. The actual funds are advanced to you in stages as the work on the suite progresses.
CHMC Refinance vs Cash-out Refinance
If you’ve already been looking at accessing some of the equity in your home, you may be wondering whether there are advantages to a CMHC refinance over a traditional cash-out refinance. There are a few advantages to the CMHC program:
- Potential for a lower interest rate: the loan would be insured by CHMC, lowering the risk for lenders, thereby allowing them to offer you a lower rate.
- Longer amortization: under the CMHC program, you can amortize the loan over 30 years. This can be helpful if you want lower payments.
- More access to equity: with a normal cash-out refinance, you can only borrow 80% of the home’s as-is value. The CMHC program gives you up to 90% of the post-construction value.
To finance your secondary suite, you can also consider a home equity line of credit or a personal loan, depending on how much you’re spending, what interest rate you could get with each option, what you think you can earn in rent, and how low you need your payments to be.
Be sure to check for funding programs at the provincial level as well. Some may be available as substitutes for these funding sources or as adjuncts to them.
If you’re not sure which financing option is best for you, consult with a financial planner or your lender, who can help you evaluate the advantages and disadvantages of each one.
Financing a Secondary Suite
Homeowners who want to accommodate a family member or make rental income have a few options available for financing. Carefully assessing which is right for you, given the equity you have in your home and your monthly budget, is key to making the right choice. If in doubt, consult with an accountant who specializes in real estate, a financial advisor, or a real estate professional who understands funding options.
