Starting in early 2025, the Canada Secondary Suite Loan Program will double the loan limit from $40,000 to $80,000, making it easier for homeowners to finance the creation of rental units on their property, such as basement suites or laneway homes.

In addition, the loans will be offered at a 2% interest rate with a 15-year term. More details are expected to be released in the government’s Fall Economic Statement on December 16.

The changes aim to increase housing density in communities while helping to address the rental housing shortage across the country, the government says.

The country is currently facing a significant housing supply gap, with millions of new homes needed to meet the demand for affordable housing, particularly in urban centres. In a report released last month, the Parliamentary Budget Officer (PBO) projected a housing gap of 658,000 homes by 2030.

“By providing low cost loans for homeowners to create new homes on their existing property, we’re going to create more spaces for folks to live, stay and rent across Canada,” Sean Fraser, Minister of Housing, Infrastructure and Communities, said in a statement.

Loan program paired with new refinancing options

Alongside the loan program, the government’s newly-announced mortgage refinancing options will come into effect starting January 15, 2025.

Homeowners will be able to refinance their mortgages up to 90% of their home’s post-renovation value (up to $2 million) and amortize the loan over 30 years. The new refinancing program marks a revival of a similar initiative that was discontinued in 2016 when the federal government tightened mortgage insurance rules to cool the overheated housing market.

While there’s general support for these initiatives, experts say these programs alone won’t solve the housing supply shortage.

“It’s a step in the right direction toward boosting supply, but it doesn’t address the urgent need for our country to enhance construction capacity to meet the housing demands of our growing population,” Mortgage Professionals Canada President and CEO, Lauren van den Berg, said previously.

However, van den Berg noted that the program presents an opportunity for mortgage brokers to “build new relationships” by helping Canadians navigate these options.

Choosing the right program for your needs

Both programs aim to alleviate housing shortages, but they offer different benefits depending on the homeowner’s needs.

Canadian Mortgage Trends recently ran a piece by Ross Taylor examining the pros and cons of the new federal secondary suite programs.

The Secondary Suite Loan Program, with its now-$80,000 loan limit and 2% interest rate over 15 years, is ideal for homeowners looking to finance smaller renovation projects that involve adding secondary suites.

In contrast, the new mortgage refinancing option offers higher loan amounts (up to $2 million) and a longer repayment term, ideal for homeowners looking to cover larger renovations or renovations that significantly increase their home’s value.

“This program aligns well with the multi-generational living trend, offering families a way to create living spaces for parents or adult children,” Taylor wrote in his piece.

However, he cautioned that anyone taking on a project of that size should be financially well-prepared. “In my view, if you’re looking to take on a project of that scale, you should have a strong financial foundation—meaning at least 20% equity in your home, though I’d even argue for 35%,” he said. “Having only 10% equity on a $2-million property feels risky and, frankly, irresponsible.”

Clarification: An earlier version of this story referenced a January 15, 2025 start-date for the Secondary-Suite Loan Program. In fact a start date hasn’t been released, however a government official confirmed it will be early in the new year.

Editor's pick federal government government programs housing supply crisis housing supply gap Lauren van den Berg Sean Fraser secondary suites

Last modified: December 11, 2024