The federal government has announced two programs for January 15, 2025, aimed at helping homeowners build secondary suites. It is being introduced with the intent to increase affordable rental housing in response to Canada’s ongoing housing affordability crisis. These programs offer two distinct financial options: a $40,000 loan or a secondary suite refinance program. This will offer more flexibility for homeowners to build or renovate secondary suites.
Program 1: The $40,000 Loan for Building Secondary Suites
The $40,000 loan from the government is a low-interest loan to assist homeowners with the costs of building or renovating a secondary suite. This loan is specifically intended for creating rental units within existing homes. With the rising cost of borrowing in Canada, a low-interest loan is a significant advantage for homeowners looking to keep their renovation costs down.
However, while $40,000 can be helpful, it may not cover the full cost of building a secondary suite, especially in the Fraser Valley where construction and renovation costs are high. Depending on the size and complexity of the project, homeowners may still need additional financing through other means, such as a personal loan or a mortgage refinance. For homeowners this is a wonderful opportunity to access a new income stream from developing a secondary suite.
Program 2: Secondary suite refinance program
If you are considering building bigger this is where the secondary suite refinance program will help Canadians. This program also aims to create more living spaces to help with the housing crisis. This option allows homeowners to tap into the equity in their home to fund a renovation project. However, there is a larger risk due to the high borrowing limits up to 90% of the value of the home through CMHC, which risks amplifying current household debt levels.
Example:
Client bought their home in 2019 for $799,000 with 20% down
Mortgage at the time: $639,200
Value in 2024: $1,000,000
You can now access up to 90% of the value which would be up to $900,000 to build a secondary suite.
Which Option is Right for Fraser Valley Homeowners?
Both the $40,000 loan and the mortgage refinance option offer viable solutions for homeowners looking to build a secondary suite in the Fraser Valley, but the choice between the two depends on several factors. If your renovation project is relatively modest and you don’t need to access a large amount of capital, the $40,000 loan might be the better option. It offers a fixed loan amount, lower interest rates, and doesn’t require a full refinance of your mortgage. The Secondary Suite refinance program allows more access to funds for larger renovations or constructions, but this will leave you with minimal equity and limited financial flexibility.
For many homeowners in the Fraser Valley, these federal programs can be a helpful way to make building a secondary suite more affordable and financially sustainable. Homeowners looking into this new opportunity should consult with the Browne Mortgage Team to fully understand the potential benefits and concerns so that you can make the most informed decision. Get in touch today!