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How to Build a Basement Apartment or Secondary Suite in Toronto Using Your Mortgage (Easy Guide 2025)

Information shared by Diana Puerta – Realtor® in Toronto & GTA

Many homeowners in Toronto and the Greater Toronto Area (GTA) are interested in building a basement apartment or secondary suite to generate additional rental income or accommodate family members. What many do not realize is that the Government of Canada offers official programs that can help finance these projects through mortgage refinancing.

This article is intended to inform and educate homeowners, so they can better understand and benefit from available government programs—particularly the CMHC Refinance program.

⚠️ Important Disclaimer (Please Read)

👉 Diana Puerta does NOT process, manage, or apply for CMHC or bank financing programs.

This information is shared strictly for informational and educational purposes, for:

  • Current clients
  • Prospective clients
  • The general public in Toronto and the GTA


The goal is to help homeowners become aware of official Government of Canada programs and contact the appropriate institutions directly.

🌱 Why Does the Government Support Secondary Suites?

The Government of Canada is promoting “gentle densification”, a housing strategy designed to:

  • ✔️ Increase housing supply without large-scale developments
  • ✔️ Make better use of existing residential properties
  • ✔️ Support long-term housing affordability


As a result, programs exist that allow homeowners to refinance their mortgage to build legal secondary suites.

🔑 What Is the CMHC Refinance Program?

The CMHC Refinance program, administered by the Canada Mortgage and Housing Corporation (CMHC), allows eligible homeowners to:

  • Refinance their existing mortgage
  • Use the funds exclusively to build a legal secondary suite
  • Access insured mortgage financing


📌 Important: Funds cannot be used for unrelated purposes or general equity withdrawal.

🧱 Key Rules for a Secondary Suite

To qualify, the secondary unit must:

  • ✔️ Be fully self-contained (kitchen, bathroom, separate entrance)
  • ✔️ Comply with all municipal bylaws and building codes
  • ❌ Not be used for Airbnb or short-term rentals


👉 The unit must be rented for 90 days or longer.

👨‍👩‍👧 Who Can Apply?

General Eligibility Requirements:

  • Must be the legal owner of the property
  • The homeowner or a close family member must live in the property
  • Applicant must be one of the following:

    • Canadian citizen

    • Permanent resident

    • Temporary resident authorized to work in Canada

💰 How Much Can Be Financed?

  • Up to 90% of the property value
  • Maximum of 4 units total (including the main dwelling)
  • Maximum property value after renovations: $2,000,000 CAD
  • Amortization period of up to 30 years

 

📄 Commonly Required Documents

While requirements may vary by lender, documentation often includes:

  • Contractor quotes and scope of work
  • Construction plans
  • Building permits
  • Occupancy permit or professional inspection report

 

🚨 Very Important Before You Build

⚠️ CMHC financing must be approved before construction begins, or at a very early stage of the project.

Starting construction before approval may result in loss of eligibility.

🏦 How to Get Started

1️⃣ Speak with Your Bank or Mortgage Lender

Ask specifically about:

CMHC Refinance for building a secondary suite

2️⃣ Contact CMHC Directly (If Needed)

📞 1-800-668-2642
✉️ contactcentre@cmhc.ca

CMHC can explain:

  • Eligibility requirements
  • Application process
  • Required documentation

 

🔗 Official Government of Canada Resources

For accurate and up-to-date information, consult these official sources: