Refinance Your Home for an ADU: CMHC 90% LTV Guide

Here’s something most homeowners don’t know: you can refinance your primary home and pull out cash to add a rental unit. And you can do this at up to 90% of your home’s value through a special CMHC program.

This isn’t just some niche option anymore. It’s becoming the future of real estate investing in Canada. With housing shortages across the country and new rules making it easier to add units to your property, this program is worth understanding.

What Is the CMHC ADU Refinance Program?

The government of Canada, through CMHC, lets you refinance your primary residence to fund the construction of an additional dwelling unit (ADU). That could be a basement apartment, a laneway house, a garden suite, or a backyard unit.

Here’s what makes it special: CMHC will lend you up to 90% of your home’s completed value. Not what it’s worth today, but what it will be worth after you add the unit. This means you might not need existing equity to make this work.

The Basic Requirements

The program has a few key rules:

Your property value must be under $2 million
You must use the funds specifically to add a rental unit
The loan is based on your home’s future completed value
You’ll pay CMHC insurance premiums on the loan

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Understanding the CMHC Premium

Just like when you first bought your home with less than 20% down, there’s a CMHC fee involved here. The good news? You only pay a premium on the top-up amount, not your entire mortgage balance.

If your home already has CMHC insurance, you won’t repay that original premium. You’ll just pay on the new money you’re borrowing. Top-up premiums are higher than new ones, but it’s still cheaper than paying a fresh premium on the whole balance.

The premium gets added to your loan amount, so you don’t need to pay it out of pocket.

The 80% Option Without CMHC

Don’t want to pay CMHC premiums? Some lenders will do this same deal at 80% of your completed value instead of 90%. You avoid the insurance cost, but you get less money to work with.

Both options give you access to 30-year Amortization, which is huge. Normally, insured mortgages cap you at 25 years unless you’re a first-time buyer or buying new construction. The longer amortization means lower monthly payments and better cash flow from your rental income.

What Counts as an ADU?

Different cities call these different things, but they’re all additional dwelling units. You have options:

Basement apartments (some people are even underpinning their foundation to create proper ceiling height)
Backyard cottages or garden suites
Laneway houses
Garage conversions
Second or third units within your existing structure

The rules vary wildly by location. Ontario generally allows up to three units per property without rezoning, though not every municipality follows this. Edmonton might let you build up to eight units depending on your lot size. Toronto calls this approach “the missing middle.”

Getting Your Quotes and Avoiding Overpaying

Here’s a warning: prices for ADU construction vary dramatically. Get multiple quotes before committing to anything.

Some people pay way more than they should because they don’t shop around. We’ve seen everything from tiny prefab units to full custom builds, and the price differences are shocking even for similar products.

Also, pad your budget. Construction always costs more than you expect. Materials go up in price. You start demo and find problems you didn’t know existed. Build in a cushion so you’re not scrambling halfway through the project.

Don’t Forget Your Lot and Zoning Rules

Before you get too excited, check your local rules. Most areas limit how much of your lot can be covered by buildings. Your contractor can usually tell by looking at your lot size and existing home placement whether an ADU will fit.

If you want to build a two-story unit but your house is single-story, you might need to apply for a variance (or whatever your city calls their exception process). These applications are getting easier as governments try to encourage more housing, but it’s still an extra step.

Why This Makes Sense Right Now

Canada has a housing shortage. Adding rental units helps with that, but it also helps your family’s finances. That extra rental income can make a real difference in your monthly budget.

Interest rates appear to be dropping, which makes borrowing more attractive. New policies are speeding up approvals and making permits easier to get. The timing is actually pretty good for this type of project.

Can You Do This on rental properties?

The 90% CMHC program is specifically for your primary home. But if you own rental properties and want to add units there, you can still do this at 80% (conventional financing with 20% equity).

The same local zoning rules apply. You still need to follow your municipality’s guidelines on how many units they allow per property. But yes, you can absolutely do this strategy on investment properties you already own.

Next Steps

This program requires working with someone who understands the ins and outs. Most mortgage professionals don’t deal with these applications regularly because they’re more complex than standard refinances.

Start by having a conversation with an expert who can look at your specific property and situation. There’s no cost to explore your options. You’ll learn what’s possible, get real numbers, and can decide if it makes sense for you.

The key is getting the right team around you from the start. That includes the right financing, the right contractor, and the right understanding of your local rules. Do that, and adding a rental unit to your property can be a game-changer for your finances.

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Frequently Asked Questions

What is the CMHC ADU refinance program?

It's a government program that lets you refinance your primary home up to 90% of its completed value to fund the construction of an additional dwelling unit like a basement apartment or backyard cottage.

Do I need existing equity in my home to qualify?

Not necessarily. CMHC lends based on your home's future completed value after adding the unit, so you might qualify even without much equity today.

What's the maximum property value for this program?

Your property value must be under $2 million to qualify for the CMHC ADU refinance program.

Can I avoid paying CMHC premiums?

Yes, some lenders offer this at 80% of completed value instead of 90%, which lets you avoid CMHC insurance premiums entirely.

What types of units qualify as ADUs?

Basement apartments, backyard cottages, laneway houses, garage conversions, and additional units within your existing home all qualify as ADUs.

Can I use this program on rental properties I already own?

The 90% CMHC program is only for primary residences, but you can do similar financing at 80% loan-to-value on existing rental properties using conventional financing.

What amortization can I get with this program?

Both the CMHC and conventional options offer 30-year amortization, which is longer than the typical 25-year limit for most insured mortgages.

How much does it cost to build an ADU?

Costs vary widely depending on the type of unit, location, and builder. Always get multiple quotes and budget extra for cost overruns and unexpected issues during construction.

Disclaimer: LendCity Mortgages is a licensed mortgage brokerage, and our team includes experienced real estate investors. While we are qualified to provide mortgage-related guidance, the broader financial, tax, and legal information in this article is provided for educational purposes only and does not constitute financial planning, tax, or legal advice. For matters outside mortgage financing, we recommend consulting a Chartered Professional Accountant (CPA), licensed financial planner, or qualified legal advisor.

Written by

LendCity

Published

December 22, 2025