New Mortgage Insurance Rules to Facilitate the Addition of Accessory Dwelling Unit
Planiprêt
Oct 10, 2024
On October 8, 2024, the Department of Finance Canada announced significant changes to mortgage insurance rules, allowing homeowners to add accessory dwelling units (ADUs) to their properties. This initiative aims to promote urban densification and provide more affordable rental housing options.
Context
Many Canadian homeowners have unused spaces, such as basements or garages, that could be converted into rental units. However, these conversion projects have often been hindered by high renovation costs and municipal regulatory constraints.
Many Canadian homeowners have unused spaces, such as basements or garages, that could be converted into rental units. However, these conversion projects have often been hindered by high renovation costs and municipal regulatory constraints.
Recent municipal zoning reforms, encouraged by agreements under the Housing Accelerator Fund, now provide new opportunities. These changes enable homeowners to convert these spaces into rental units, supporting the densification of major Canadian cities.
Changes to Mortgage Insurance Rules
As part of its 2024 budget, the federal government introduced targeted changes to facilitate the addition of ADUs. Starting January 15, 2025, lenders and mortgage insurers will be able to offer insured mortgage refinancing for these densification projects.
Below are the key conditions:
As part of its 2024 budget, the federal government introduced targeted changes to facilitate the addition of ADUs. Starting January 15, 2025, lenders and mortgage insurers will be able to offer insured mortgage refinancing for these densification projects.
Below are the key conditions:
Eligibility
- Current homeowners looking to add accessory dwelling units.
- The borrower or a close relative must occupy one of the units.
- The new units must not be used as short-term rentals.
Refinancing Parameters
- Additional units must be self-contained and comply with municipal requirements (e.g., basement apartments with separate entrances or laneway houses).
- The property may have a maximum of four units, including the existing one.
- The value of the property after improvement must not exceed 2 million dollars.
- The maximum loan-to-value ratio is 90% of the total value, including improvements.
- The maximum amortization period is 30 years, and the financing must match the actual project costs.
Other Criteria
- Insured loans will be available for applications submitted starting January 15, 2025.
- Other eligibility criteria for government-backed mortgage insurance will remain applicable.
Objective
These measures aim to increase the supply of affordable housing while offering homeowners, particularly seniors, an additional source of income, enabling them to age in place longer.
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Source : Goverment Of Canada
Source : Goverment Of Canada
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