Borrowing against your home normally stops at 80% of its value, and you can spend the money on whatever you like. There is one route that goes to 90% instead, and the trade is simple: every dollar has to go into building a suite, and the insurer has to approve it before anyone picks up a hammer.
The normal ceiling, first
If you refinance to pull equity out for any ordinary reason, renovations, debt consolidation, a business, the ceiling is 80% of what your home is worth. The Financial Consumer Agency of Canada puts the same line in a different way when it describes qualifying for a home equity line of credit: you need at least 20% equity for a line of credit combined with a mortgage, and more than 35% for a standalone one.
That 80% number also changes how your mortgage is priced. A refinance is not an insured mortgage, and refinance pricing generally sits above purchase pricing for that reason. There is more on how the pricing categories work on the Rates Explained page.
The exception: building a suite
Since January 15, 2025, insured refinancing has been allowed for the purpose of building additional units. The Department of Finance set the parameters: the borrower already owns the property, the borrower or a close relative occupies one of the current units, the new units are fully self-contained and meet municipal zoning requirements, a maximum of four dwelling units including the existing one, an as-improved property value below $2 million, up to 90% of the property value including the value the suite adds, amortization up to 30 years, and the additional financing cannot exceed the project costs.
CMHC’s version of the program lays out how the value is worked out. Your property gets assessed twice: the as-is value today, and the as-improved value once the work is done. The lending value is the lesser of the as-improved value or the as-is value plus the cost of the improvements. The 90% is measured against that.
This is not an equity take-out with a renovation attached. CMHC states that the additional financing must only be used to build and complete the project, and that equity take out is not permitted.
All three default insurers have a version of this. CMHC calls it CMHC Refinance, Sagen calls it Refinance for Secondary Suites, and Canada Guaranty calls it Refinance to Add Secondary Suites. The details differ in ways that matter on a real file. Sagen, for example, allows existing debt secured against the property to be folded into the insured first mortgage and lets the loan be increased by up to $3,000 for related transaction costs.
What the insurers allow and what you can actually get are two different things, though. The insurers make the program available; each lender decides whether to offer it. I checked with mine, and only some of them do these files. That is worth knowing before you plan around it, because it narrows the list of places your application can go.
The conditions that catch people
- Approval comes before construction. CMHC requires the insured financing to be approved before the start of construction, and the money is released in stages as the work progresses.
- Paperwork is real. Improvement lists and cost estimates, building plans, a building permit, and then either an occupancy permit or a third-party report from a qualified professional confirming the construction complies with applicable bylaws and regulations.
- Someone has to live there. At least one unit must be occupied by you or by a person related to you by marriage, common-law partnership, or a legal parent-child relationship, on a rent-free basis.
- No short-term rentals. The suite cannot be rented for any period of less than 90 consecutive days.
- Qualification still applies. A minimum credit score of 600 for at least one borrower, gross debt service up to 39% and total debt service up to 44%, calculated at the greater of your contract rate plus 2% or 5.25%.
What the insurance costs
Insured financing means a premium, and yes, that applies even if you paid one when you bought. On CMHC Refinance, the premium between 85.01% and 90% loan-to-value is 3.10% of the total loan amount or 6.25% of the increase to the loan amount, whichever of those two calculations is less. Between 75.01% and 80% it is 2.40% of the total or 6.05% of the increase. An amortization beyond 25 years adds a 0.20% surcharge, and a blended amortization adds 0.60% applied to the increase.
That second calculation is the one that saves money, because it charges the higher rate only on the new money rather than the standard rate on everything. Sagen is explicit that its top-up premium applies where the existing loan is already insured. Whether you get that treatment depends on your current mortgage, so it is a question for the lender and the insurer on your specific file, not something to assume.
That premium is part of the arithmetic of whether the suite pays for itself. So is the rent, and CMHC does allow rental income to be used in qualifying, though how much of it counts varies by lender. Run the payment on the calculator on the homepage using the new balance, not the old one, before you decide anything.
What Edmonton allows, which is a separate question
The federal rules cap you at four dwelling units. Your city and the building code decide what you can actually build, and in Edmonton the answer is narrower than four.
The City of Edmonton defines a secondary suite as a separate dwelling inside a single detached, semi-detached, backyard house or row house, with its own living room, kitchen, bedroom and bathroom, and its own entrance. Permits are required for all secondary suites. Only one secondary suite may be developed for each principal dwelling or backyard house unit, and the city notes that the Alberta Building Code allows a maximum of one secondary suite per principal dwelling. A secondary suite also cannot be separated from the principal dwelling by a condominium conversion or a subdivision.
Zoning decides whether your specific lot qualifies at all, and that is worth confirming with the city before you spend money on plans.
If you are not building a suite
A regular refinance still makes sense for plenty of people, but the costs deserve a clear look before you start. If you break your mortgage mid-term, the prepayment penalty is usually the higher of three months’ interest on what you still owe or the interest rate differential. On top of that you may face administration fees, appraisal fees, reinvestment fees and a discharge fee to remove the old charge and register the new one, and you may have to repay any cash back you received when you signed.
Sometimes the answer is to wait for renewal instead, when there is no penalty at all. That is a different conversation, and there is more on it on my mortgage renewals page and my refinancing page.
Sources: The January 15, 2025 effective date and the program parameters, including the four unit maximum, the $2 million as-improved value limit, the 90% loan-to-value limit, the 30 year amortization, the occupancy requirement and the short-term rental restriction, are from the Department of Finance Canada’s backgrounder Mortgage Insurance Rule Changes to Enable Homeowners to Add Secondary Suites. The as-improved value calculation, the requirement that financing be approved before construction starts, progress advances, required documentation, the rent-free occupancy condition, the 90 consecutive day short-term rental rule, the 600 minimum credit score, the 39% and 44% debt service limits, the qualifying rate, the premium rates and the amortization surcharges are from CMHC’s CMHC Refinance. The Sagen program details, including the debt consolidation allowance, the $3,000 for transaction costs and the top-up premium applying where the existing loan is insured, are from Sagen’s Refinance for Secondary Suites, and Canada Guaranty’s version is Refinance to Add Secondary Suites. The minimum equity requirements for a home equity line of credit are from the Financial Consumer Agency of Canada’s Home equity lines of credit. The prepayment penalty calculation is from FCAC’s Mortgage fees: Prepayment penalties, and the administration, appraisal, reinvestment, discharge and cash back costs are from FCAC’s Breaking your mortgage contract. The definition of a secondary suite, the permit requirement, the one suite per principal dwelling limit, the Alberta Building Code maximum and the subdivision restriction are from the City of Edmonton’s Secondary Suites. Program rules, lender policies and municipal requirements change. This article is general information, not advice on your specific file, and not legal or construction advice.