Ottawa promises more cheap loans for homeowners to create rental suites

The federal government will provide more low-cost financing for homeowners to add a rental unit such as a basement apartment or a laneway house to their property.

 

Homeowners will be eligible for a low-cost loan of up to $80,000 – increased from a previously planned $40,000 maximum – under the Canada Secondary Suite Loan Program, which the federal government hopes will help create more rental housing.

 

The program is expected to launch in early January and the loans will have 15-year terms with an interest rate of 2 per cent. By comparison, the cheapest mortgages currently available have much shorter terms with an interest rate that is about 5 per cent.

 

“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, the federal Minister of Housing, Infrastructure and Communities, said in a news release.

In addition to the new loan program, homeowners will soon be able to refinance their insured mortgages if they use the equity to cover the cost of adding a secondary suite. Borrowers must pay for mortgage insurance if they have made a down payment that is less than 20 per cent of the property’s purchase price. The insurance protects the lender if the borrower defaults on payments.

 

Both programs will be effective Jan. 15.

 

They are part of the federal government’s latest round of policies to help create more homes and make housing more affordable. Being allowed to refinance with an insured mortgage is another relaxation of the country’s borrowing rules.

 

By mid-December, prospective homebuyers will be able to put smaller down payments on homes that cost up to $1.5-million. Under current rules, a buyer must make a down payment of at least 20 per cent if the home cost more than $1-million.

 

And first-time buyers will be able to stretch out their payments over 30 years instead of 25 if they have to take out an insured mortgage.

 

 

 

 

This article was first reported by The Globe and Mail