Details for New Insured Mortgages for Secondary Suite Builds

This month the Finance Department announced changes for lenders and insurers to make mortgages available for those who want to build secondary suites on their properties.  This provides a good reason to discuss year end tax planning relating to real estate assets,  as the loans will be available on January 15, 2025.  Here’s what borrowers need to know:

Eligibility.  Borrowers must already own their own properties and either occupying the units or have a close relative occupy them.   Owners must show that they intend to construct additional units that will not be used for Short-term Rental purposes.

The units – a maximum of four - must be fully self-contained and this can include basement or other suites in the property that have a separate entrance.  Municipal zoning rules must be met in these cases. 

Refinancing.  The borrower will be allowed to refinance to build the additional units.  the improved value of the residential property against which the loan is secured must be less than $2 Million.  The maximum loan-to-value limit is up to 90 percent of the property value, which will include the value of the new suite.  This criteria can be met in combination with any other outstanding loan that is secured by the property.

Term.  There is a maximum amortization period of 30 years.

Tax Issues.  Is the main reason for owning the property to be a principal residence? Or is it to gain or produce income?  If the latter, the property is not generally considered to be “ordinarily inhabited in the year, especially if it is only inhabited for a short period of time.  Will the construction throw the property offside for principal residence exemption purposes?  It’s a matter of fact.

Additional Educational Resources:  Be sure to attend the November 6 Advanced Year End Tax Planning CE Summit in which this and the latest tax changes for 2024/2025 will be discussed with special guest experts:  check it out!