🛠️ Renovation Revenue: How Adding a Legal Suite Can Lower Your Monthly Mortgage Cost

Many homeowners love their current home and neighborhood but are feeling the pinch of monthly expenses. You might think the only way to lower your costs is to downsize or sell. But there is a "hidden" strategy that allows you to keep your home, upgrade its value, and significantly reduce your monthly housing expense: Refinancing to build a legal rental suite.

Thanks to new government mortgage rules coming into effect January 15, 2025, and lower interest rates, accessing the cash to build these money-making suites has never been easier.

The "Suite Spot": How Investing $100k Saves You Money

It sounds counterintuitive: "How can borrowing MORE money lower my monthly payments?"

The answer lies in the Rental Income Offset. While your mortgage balance increases to pay for the renovation, the income generated by a legal suite often far outweighs the cost of the additional borrowing.

The Math: A "Refinance-to-Build" Scenario

Let's look at a typical Calgary homeowner scenario. You refinance your mortgage to pull out $100,000 to build a high-quality, legal basement suite.

Assumptions: 4.00% Interest Rate, 25-Year Amortization.

Feature	Current Situation (No Suite)	After Refinance (With Legal Suite)
Mortgage Balance	$400,000	$500,000 (Includes $100k Reno)
Monthly Mortgage Payment	~$2,105	~$2,631 (Payment increases by $526)
Rental Income	$0	-$1,600 (Conservative Rent)
Net Monthly Housing Cost	$2,105	$1,031
Monthly Savings	--	$1,074 Saved Per Month

In this scenario, even though your debt increased, your life got over $1,000/month cheaper. You have effectively subsidized your own mortgage while increasing the resale value of your home.

The Game Changer: New 2025 Mortgage Rules

Historically, homeowners could only refinance up to 80% of their home's value, which often left them short on funds for a major renovation.

Effective January 15, 2025, the federal government is introducing Insured Refinancing for Secondary Suites. Here is why this is huge:

• 90% Loan-to-Value: You can now refinance up to 90% of your property's "as-improved" value (the value after the work is done)

  
  

• 30-Year Amortization: You can amortize these new insured loans over 30 years. Note: If we calculated the table above using 30 years, your monthly savings would be even higher

  
  

How to Execute the "Refinance-to-Build"

This isn't a standard bank transaction; it requires a specific process to access the construction funds:

1. The "As-Improved" Valuation: We order an appraisal that determines what your house will be worth after the suite is built

   
   

2. Permits & Quotes: You will need to provide quotes from contractors and typically show proof of permits (or intent to permit) to ensure the suite will be legal

   
   

3. The Draw System: The lender manages the funds. Instead of giving you $100k cash upfront, they release the money in "draws" (stages) as the work is completed to verify progress

   
   

4. Calgary Bonus: Don't forget the Secondary Suite Incentive Program. The City of Calgary currently offers up to $10,000 to qualifying homeowners to help cover safety elements like egress windows and HVAC upgrades. Other Cities have similar programs designed to encourage LEGAL secondary suites.

Is Your Home "Suite-Ready"?

Not every basement is a candidate for a legal suite. Issues like ceiling height, separate entrances, and parking availability can be deal-breakers.

Your Next Step:

Before you call a contractor, call me. We need to run the numbers on your refinance eligibility under the new 2025 rules to see if you can unlock the capital needed to turn your basement into a monthly paycheck.