Secondary Suite Refinance: The $80,000 Loan Is Gone, and 90% Has a Cliff at 65%
The federal $80,000 suite loan was cancelled in Budget 2025 before it ever opened, and on the insured refinance that replaced it, crossing 65% loan-to-value costs $9,922 in extra premium for $500 of extra money.
Wednesday, 11 November 2026. If you are planning a basement apartment or a laneway house, the single most important number to know is 65%. A secondary suite refinance lets you borrow up to 90% of what your home will be worth once the secondary suite is finished, to a lending value below $2,000,000, amortized over as long as 30 years. But CMHC's premium schedule has a step at 65% loan-to-value that is brutal in the wrong hands: on a $950,000 as-improved value, stopping at $617,500 costs you $1,820 in premium, and borrowing $618,000 costs you $11,742. That is $9,922 of extra premium for $500 of extra money, and it means crossing the line leaves you with less cash in hand until you borrow $10,104 past the cap.
The other thing to know is that the $80,000 loan at 2% you have probably read about is not available, and never was.
The $80,000 secondary suite loan does not exist
The Canada Secondary Suite Loan Program was announced in Budget 2024 as a $40,000 low-interest loan, with $409.6 million set aside over four years for CMHC to administer it. The 2024 Fall Economic Statement doubled it to $80,000 at a fixed 2% over 15 years and promised a launch in early 2025.
It never launched. Budget 2025's expenditure review states that "the Canada Secondary Suite Loan program, which is not yet operational, will not be implemented," on the grounds that it had "a large potential to overlap with the government's homeowner insured mortgage rule changes announced in January 2025." It was never operational, so there was never an application process to enter.
Those January 2025 rule changes did survive, and they are the whole of what a secondary suite refinance means today. Contractor and renovation sites still advertise the $80,000 loan as though you can apply for it. You cannot. If a builder quotes your project on the assumption that $80,000 of it arrives at 2%, the financing plan is wrong by roughly the cost of the secondary suite's kitchen and bathroom.
What a secondary suite refinance actually allows
The rules sit in section 6.1 of the Insurable Housing Loan Regulations, registered 27 February 2025 and deemed in force from 15 January 2025. They apply to insurance applications received on or after that date. The terms, taken from CMHC's own product page and the regulation:
| Condition | Requirement |
|---|---|
| Maximum loan-to-value | 90% of the estimated as-improved value |
| Maximum lending value | Below $2,000,000 |
| Maximum amortization | 30 years |
| Units permitted | Up to 4, including the existing unit or units |
| Occupancy | You or a related person must occupy one unit rent-free |
| Minimum credit score | 600 for at least one borrower or guarantor |
| Debt service limits | GDS 39%, TDS 44% |
| Qualifying rate | Greater of contract rate plus 2% or 5.25% |
| Use of funds | Project costs only, plus discharging the existing balance |
| Equity take-out | Not permitted |
| Short-term rental | Prohibited; minimum 90 consecutive days |
Two of those lines do most of the work. The lending value is the lesser of the as-improved value, or the as-is value plus the cost of improvements — so an optimistic appraisal does not create borrowing room on its own. And new principal above your old balance cannot exceed your estimated project cost. A secondary suite refinance is construction money, not an equity take-out dressed up as one. If you want cash for something else, that is a different transaction with a different ceiling.
At a contract rate of 4.44%, the lowest advertised insured five-year fixed as at 10 November 2026, the qualifying rate is 6.44%. If the mechanics of that second number are new to you, our explainer on how the mortgage stress test works in 2026 covers it.
The secondary suite premium cliff at 65% loan-to-value
CMHC charges the premium on one of two bases, and takes whichever produces the lesser charge: a rate applied to the whole new loan, or a higher rate applied only to the increase. Both rates change by band.
| Loan-to-value | On the total loan | On the increase only | Increase share where the basis flips |
|---|---|---|---|
| Up to 65% | 0.60% | 0.60% | — |
| 65.01% to 75% | 1.70% | 5.90% | 28.81% |
| 75.01% to 80% | 2.40% | 6.05% | 39.67% |
| 80.01% to 85% | 2.80% | 6.20% | 45.16% |
| 85.01% to 90% | 3.10% | 6.25% | 49.60% |
Add 0.20% for an amortization beyond 25 years, and 0.60% on the increase if you blend amortizations.
Below 65%, both columns read 0.60%, so you pay 0.60% of the draw and nothing on the money you already owed. One basis point above 65%, the total-loan rate nearly triples to 1.70% and the increase-only rate goes to 5.90%. Take an illustrative file: a home expected to appraise at $950,000 once the secondary suite is done, with $390,000 still owing.
| New loan | LTV | Draw | Premium basis | Premium incl. surcharge |
|---|---|---|---|---|
| $610,000 | 64.21% | $220,000 | Increase at 0.60% | $1,760 |
| $617,500 | 65.00% | $227,500 | Increase at 0.60% | $1,820 |
| $618,000 | 65.05% | $228,000 | Total at 1.70% | $11,742 |
| $625,000 | 65.79% | $235,000 | Total at 1.70% | $11,875 |
Read that table as a net-proceeds question. Stopping at $617,500 puts $615,680 of financed value in your hands after premium. To end up with the same amount having crossed the line, you have to borrow $627,604 — $10,104 more than the cap. Anything between those two points is money you borrow and hand straight to the insurer. If your project costs land you just over 65%, the arithmetic says either trim the scope or go well past it, not a little past it.
Why the 90% headline costs more than it looks
The 90% figure is real, and it is the most expensive money in the schedule. On the same illustrative file, 90% of $950,000 is $855,000, a draw of $465,000 against the $390,000 already owing.
That draw is 54.39% of the new loan, above the 49.60% flip point for the top band, so the lesser charge is 3.10% of the whole $855,000 rather than 6.25% of the draw. The premium is $28,215, including the long-amortization surcharge. You are paying insurance premium a second time on the $390,000 you already owed and that was already insured. Blending amortizations instead of maintaining or resetting would add another $2,790.
| Scenario | Financed | Payment at 4.44% | Qualifying payment at 6.44% |
|---|---|---|---|
| 65% cap, 30-year amortization | $619,320 | $3,101.12 | $3,855.76 |
| 65% cap, 25-year amortization | $618,865 | $3,404.64 | $4,122.82 |
| 90% maximum, 30-year amortization | $883,215 | $4,422.52 | $5,498.71 |
| 90% maximum, 25-year amortization | $881,505 | $4,849.53 | $5,872.51 |
The 30-year amortization on the 90% file saves $427.01 a month and leaves $30,728 more owing after five years, for a 0.20% surcharge costing $1,710. Over five years the two amortizations cost within about $5,100 of each other once the remaining balance is counted, so this is a cash-flow decision rather than a cost decision.
What the secondary suite rent does to your qualifying income
This is where a secondary suite refinance earns its keep. For a two-unit owner-occupied property that is the subject of the loan application, CMHC's rental income rules allow up to 100% of gross rents added to gross annual income, and permit taxes and heat for the property to be excluded from the ratio. That is a materially better treatment than the 50% approach applied elsewhere.
On the 65% case above, with illustrative property taxes of $450 a month and heat of $150:
- No secondary suite income, taxes and heat counted: you need about $137,100 of income to fit 39% GDS.
- Secondary suite rents $1,600 a month, 100% of gross added, taxes and heat excluded: about $99,439.
- The same file under a 50% approach would need about $109,039 — the treatment itself is worth roughly $9,600 of required income.
On the 90% file the requirement runs from about $187,653 with no secondary suite income to about $149,991 at $1,600 of rent. The secondary suite does not merely pay for itself; it is what makes the file fit at all. Note that this treatment is specific to owner-occupied property, and differs from how lenders handle a property you do not live in — our guide to financing a rental property in Canada sets out that separate path.
Your secondary suite approval has to come before the first nail
The requirement that catches the most people is procedural. CMHC states that insured financing "must be approved by CMHC prior to the start of construction or at least at an early stage." Start digging first and you may have disqualified the project regardless of how well it would otherwise have scored.
You will also need an improvement list with quotes, building plans, a building permit, and either an occupancy permit or a report from a qualified inspector, architect or engineer confirming bylaw compliance. The secondary suite must be self-contained and meet municipal zoning. Progress advances come in two forms: CMHC validates up to four consecutive advances at no cost under its full service, or your lender validates them without prior CMHC approval under basic service.
One more practical point: a refinance usually means re-registering the charge on your title, and some lenders register a collateral charge when they do. Ask which form of charge your lender uses, because it affects what it costs you to leave later.
What to do before you commit
- Get a written as-improved value estimate and your contractor's hard cost, then compute both figures: the as-improved value, and the as-is value plus improvement cost. The lesser one is your lending value.
- Divide your intended loan by that lending value. If the answer lands between 65% and about 66%, redo the plan — that is the single most expensive place on the schedule to stop.
- Check your draw as a share of the new loan against the flip column above. Knowing which basis applies tells you whether trimming the draw or trimming the whole loan saves more.
- Price the premium both ways and add 0.20% if you want more than 25 years. Decide on blending only after seeing the 0.60% it adds.
- Get a realistic market rent for the finished secondary suite in writing from an appraiser or property manager, not from a listings search.
- Confirm with your lender which rental income approach it will apply, because the gap between 100% and 50% of gross rents was worth about $9,600 of required income on the file above.
- Secure CMHC approval before construction starts, and hold your rate while the permits move. Our explainer on how mortgage rate holds work covers the timing.
- Ask what your lender charges for the appraisal, legal work and re-registration, and get those numbers in writing.
Common questions
Can I use a secondary suite refinance to take out cash for other things?
No. New principal above your existing balance cannot exceed your estimated project cost, and equity take-out is not permitted under this programme. A conventional refinance can take equity out, but it is capped at 80% loan-to-value and carries no insurance premium, which is a different trade entirely.
Does the 90% limit apply to what my home is worth now or afterwards?
Afterwards, subject to the lesser-of test. The 90% applies to the estimated value once the secondary suite is complete, which is what makes the programme useful — but your lending value is capped at the as-is value plus improvement costs if that is lower, and the whole thing must come in below $2,000,000.
Will rates be lower by the time my permits come through?
Nobody can tell you that. The Bank of Canada raised its policy rate to 2.50% on 28 October 2026 and prime moved to 4.70%, while the five-year Government of Canada yield has eased from 3.62% on 28 October to 3.36% on 6 November — the long end easing against a tightening Bank. Market participants generally expect fixed pricing to follow the bond market rather than the policy rate, but that is a market expectation and it can change. The next scheduled decision is 9 December 2026. Build your plan on the qualifying rate you face today, and treat anything better as a bonus rather than a budget line.
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