A basement apartment can provide rental income. A garden suite can provide independent living space for aging parents. A laneway home can make better use of an underused property. For many GTA homeowners, an additional residential unit can provide financial flexibility without the cost and disruption of moving.

But adding another home to your property is a major financial project. Construction costs, permits, appraisals, mortgage rules, and municipal requirements all need to be considered before work begins.

Whether you’re looking to create rental income, accommodate family, or increase your property’s long-term value, understanding your financing options before construction begins can save time, money, and unnecessary stress.

As an experienced Mississauga mortgage broker, Joe Purewal helps homeowners explore financing for:

• Basement apartments and secondary suites
• Garden suites and laneway homes
• In-law and multigenerational suites
• Garage conversions
• Additional Residential Units, or ARUs
• Legalizing an existing secondary unit
• Buying a property that needs improvements to create an additional unit

With access to banks, credit unions, alternative lenders, and specialized mortgage programs, Joe can help determine which financing strategy fits the property, project, and homeowner.

Why Secondary Suites Are Becoming More Important Across the GTA

Housing costs have changed the way many GTA families think about their homes. Instead of selling and purchasing a larger property, some homeowners are creating another self-contained unit within or behind their existing home.

A secondary suite may help a homeowner:

• Earn long-term rental income
• Offset mortgage and household costs
• Accommodate aging parents
• Give adult children greater independence
• Support multigenerational living
• Add useful living space
• Increase the property’s future marketability

In Mississauga, owners of eligible detached, semi-detached, and townhouse properties may build up to two additional residential units in addition to the principal home. An ARU can be located inside the main house or in a detached garden suite, although the property, design and proposed use must meet zoning and building requirements.

The terminology varies by municipality. In Mississauga, Additional Residential Unit and garden suite are common terms. Toronto commonly uses secondary suite, laneway suite, and garden suite. Other GTA municipalities may refer to an accessory apartment, coach house, in-law suite, or Accessory Dwelling Unit (ADU).

Whatever it is called, the key financing question is the same:

Finance Up to 90% of Your Home’s As-Improved Value

Traditional uninsured refinancing is commonly limited to 80% of a property’s appraised value. That can leave homeowners without enough accessible equity to complete a major secondary-suite project.

The CMHC Refinance program provides another option for eligible homeowners creating a self-contained secondary suite. It permits insured refinancing of up to 90% of the qualifying loan amount and allows amortization of up to 30 years.

Importantly, the calculation considers the home’s potential value after the improvements—not simply its current value. CMHC determines the lending value using the lower of:

• The appraised value after the project is completed; or
• The current value of the home plus eligible improvement costs.

To qualify, the completed property must have no more than four units in total, and its lending (as-improved) value must be below $2 million.

This can provide considerably more financing than an ordinary refinance, but it is not a general-purpose equity withdrawal. The additional funds must be used for costs directly connected to building and completing the secondary suite. They cannot be taken out for unrelated spending or general debt consolidation.

Important CMHC Refinance Requirements

To be considered:

• The borrower must already own the property.
• The borrower or a close relative must occupy at least one unit.
• If a relative occupies the unit used to satisfy this condition, it must be on a rent-free basis.
• The new suite must be self-contained.
• The suite must comply with applicable municipal bylaws and building regulations.
• It cannot be used for rentals lasting fewer than 90 consecutive days.
• Financing must be approved before construction starts or while the project is still at an early stage.
• At least one borrower or guarantor must generally have a minimum credit score of 600.
• Borrowers must meet CMHC debt-service and mortgage stress-test requirements.

Mortgage loan insurance premiums apply. CMHC also charges a surcharge when the amortization exceeds 25 years. While a longer amortization can reduce the required monthly payment, it may also increase the total financing cost.

Not every lender will offer the program in the same way. Joe can assess lender availability, qualification requirements, and the overall cost before recommending it.

Other Ways to Finance a Secondary Suite

The 90% insured refinance is important, but it will not be the right solution for everyone.

Mortgage Refinance

Homeowners with sufficient equity may refinance through a traditional mortgage and use the released funds for construction. The existing mortgage rate, prepayment penalty, legal costs, and appraisal costs must be included in the decision.

A conventional refinance is generally limited to 80% of the home’s current appraised value and typically does not take the planned post-construction value into account the way CMHC Refinance does.

Home Equity Line of Credit

A HELOC provides flexible access to money as expenses arise. The homeowner pays interest only on the amount used, making it helpful for projects with costs spread over several stages.

The trade-off is that HELOC rates are normally variable, payments can rise, and the available limit depends on the homeowner’s equity and qualification.

Mortgage Plus Improvements

Someone purchasing a home that needs renovation may be able to include eligible improvement costs in the mortgage.

Under CMHC Improvement, qualifying owner-occupied purchases may receive insured financing of up to 95% of the as-improved value for one- or two-unit properties and up to 90% for three- or four-unit properties. Funds may be released in one advance or through progress advances, depending on the size of the improvements.

This is different from refinancing a property already owned, which is why it is important to identify the right program before making an offer or beginning construction.

Alternative Lending

Homeowners who cannot qualify through a traditional bank may still have options through credit unions, alternative lenders, or private lenders. These options can be useful when income is difficult to document, credit has been challenged, or the project does not fit standard lending guidelines.

Because rates and fees are generally higher, alternative financing can be an effective short-term solution when there is a clear plan for refinancing into lower-cost financing later.

Can Future Rental Income Help You Qualify?

Potential rental income from a legal secondary suite may strengthen a mortgage application, but lenders do not all calculate it the same way.

Depending on the lender and insurer, rental income may be:

• Added to the borrower’s qualifying income
• Used to offset some property expenses
• Supported by an existing lease
• Estimated through an appraiser’s market-rent assessment

A lender may treat an existing legal apartment differently from a unit that has not yet been built. The amount of rent accepted—and the documents required—will depend on the property, occupancy arrangement, and lending program.

CMHC permits different rental-income qualification approaches, but the proposed rent does not automatically guarantee approval.

Joe can compare lenders to determine which rental-income policy is most favourable for the application.

Building an Additional Residential Unit in Mississauga

Mississauga permits up to two ARUs on many detached, semi-detached and townhouse properties. These may be attached units within the main house or one detached garden suite. Standard condominium townhouses are treated differently, and condominium approval may also be required.

The City currently offers several measures intended to reduce the cost and complexity of adding units:

• Building permit fees may be refunded for eligible ARUs, including new construction and legalization projects.
• Second and third units are exempt from most municipal charges.
• The gentle-density incentive program provides grants toward qualifying City fees and development charges.
• Free pre-approved garden-suite designs and materials lists are available, although a building permit and property-specific review are still required.

Some charges may still apply, including address, permit, or development-related costs. Programs and eligibility can change, so homeowners should confirm current details directly with the City before relying on an incentive in their construction budget.

Joe provides mortgage advice, not zoning or building approval. Homeowners should work with the City, a qualified designer, engineer, architect or contractor to confirm what can legally be built.

Toronto Laneway and Garden Suites

Toronto homeowners may also be able to construct a detached suite in a rear yard or beside a public laneway, subject to zoning, access, servicing, emergency-access and building requirements.

Toronto also offers pre-approved design options and a development-charge deferral program for eligible laneway and garden suites. Under the program, eligible charges are deferred for 20 years, which may become payable if specified events occur, including the creation of a new lot or a transfer without the required assumption agreement. The former Affordable Laneway Suites Program has been discontinued.

This is an important distinction: a deferral is not the same thing as an upfront grant, and homeowners must follow the City’s application and registration process.

Multigenerational Home Renovation Tax Credit

Some families creating a suite for a senior or an adult eligible for the Disability Tax Credit may qualify for the federal Multigenerational Home Renovation Tax Credit.

For the 2026 tax year, eligible claimants can claim up to $50,000 in qualifying expenditures. The refundable credit is calculated at 14.5%, providing a maximum credit of $7,250.

The unit must be self-contained and created for a qualifying individual who is:

• At least 65 by the end of the applicable tax year; or
• Between 18 and 64 and eligible for the Disability Tax Credit.

Additional ownership, residency, relationship and expense requirements apply. It is not a general tax credit for every rental suite. Homeowners should obtain tax advice before factoring it into their renovation budget.

Talk to Joe Before You Build

A well-planned secondary suite can create rental income, accommodate family, and make better use of a GTA property. The right financing can make the entire project more affordable—from the first contractor deposit through final inspection.

As a Mississauga mortgage broker serving homeowners across the GTA, Joe can help you explore the financing options available before your project begins. Contact Joe Purewal, Mississauga mortgage broker, to explore financing for a basement apartment, garden suite, laneway home or Accessory Dwelling Unit (ADU) anywhere in the GTA.

Frequently Asked Questions

Can I refinance up to 90% to build a secondary suite?

Potentially. CMHC Refinance permits eligible homeowners to refinance up to 90% of the qualifying lending value to create a legal, self-contained secondary suite. Borrower, occupancy, property value, credit, and construction requirements apply.

Can I get a 30-year amortization?

The CMHC Refinance program permits an amortization of up to 30 years. A mortgage-insurance surcharge applies beyond 25 years, and approval remains subject to the lender and insurer.

Can I use the funds to pay off other debts?

Not under the special CMHC Refinance program. Additional financing must be used for costs directly related to construction of the completed suite. A conventional refinance may offer more flexibility when sufficient equity is available.

Can I use the suite for Airbnb?

The CMHC Refinance program does not permit the new suite to be used for rental periods of fewer than 90 consecutive days.

Does Mississauga allow garden suites?

Yes, garden suites are permitted on many eligible properties, subject to zoning, servicing, building-permit and site-specific requirements.

Should I get permits or financing first?

Begin investigating both early, but speak with Joe before construction starts. Some mortgage programs require approval before work begins.

Can I use the equity in my home to build a garden suite?

In many cases, yes. Homeowners may be able to use a mortgage refinance, HELOC, or the CMHC Refinance program, depending on their equity, income, and the details of the project.