The 90% As-Improved Refinance: The Closest Thing to a Garden Suite Mortgage
Since January 2025, insured refinancing lets qualifying owners borrow against up to 90% of their property’s value with the suite already built in. Here’s how it works.
What Changed on January 15, 2025
Since January 15, 2025, federal mortgage insurance rules allow qualifying homeowners to refinance using insured mortgage financing against up to 90 percent of their property’s as-improved value, specifically to help fund the construction of a secondary suite, with amortization extended up to 30 years and eligibility covering properties of up to four units. This is a meaningful change from conventional refinancing, which typically caps borrowing at 80 percent of a property’s current, as-is value. For garden suite construction, the extra borrowing room and the longer amortization together make this the closest thing currently available to a purpose-built garden-suite mortgage product.
As-Improved Value: The Concept That Makes This Work
The mechanism behind this program is “as-improved” valuation: rather than lending against what your property is worth today, the lender bases the loan on what the property will be worth once the garden suite is complete, based on an appraisal that accounts for the planned construction. This matters enormously for homeowners who don’t have a huge equity cushion sitting in their current home value but whose property, once the suite exists, will be worth substantially more. In effect, the suite’s own future value becomes a meaningful part of what funds its construction, rather than requiring the equity to already exist before you can borrow against it, which is precisely the gap that made garden suite financing so difficult for so many owners before this rule existed.
The Details: 90% LTV, 30-Year Amortization, Up to 4 Units
The core terms are specific and worth confirming directly with your lender since program details evolve: borrowing up to 90 percent loan-to-value against the as-improved appraisal, amortization extended up to 30 years to keep monthly payments manageable, and eligibility for properties of up to four total units, which comfortably covers a house plus one or two additional legal units. Compared with an 80 percent conventional refinance and a shorter typical amortization, these terms can meaningfully increase both how much you can borrow and how manageable the resulting payment is, which is exactly the combination construction financing needs, since a lower monthly payment leaves more room in your budget while the suite is being built.
The No-Short-Term-Rental Condition
A key eligibility condition is that the suite cannot be used as a short-term rental; it needs to be intended for long-term residential use, whether that’s a long-term tenant, a family member, or the owners themselves. This aligns with the broader reality across Toronto and most GTA municipalities, where short-term rental rules generally restrict Airbnb-style operation to a host’s principal residence, meaning a detached garden suite generally isn’t eligible for short-term rental use regardless of financing anyway. For anyone whose plan already involves a long-term tenant or a family member, this condition simply confirms an intention most garden suite owners already have from the start, rather than closing off an option they were counting on.
Worked Example: How Much This Can Actually Fund
Consider a property currently worth $1,100,000 with a $600,000 mortgage remaining, planning a $320,000 garden suite. If the appraiser estimates the as-improved value at roughly $1,350,000 once the suite is built, 90 percent of that figure is $1,215,000, leaving up to $615,000 in new borrowing capacity after paying off the existing mortgage, comfortably covering the suite’s full cost with room to spare in this example. Actual numbers depend entirely on your specific property, appraisal, and lender, but the mechanism is exactly this: valuing the finished result rather than the current, as-is property, and lending against that future value today rather than waiting years for the equity to build up on its own.
Why Not Every Lender Offers This Yet
This program is still relatively new, and not every lender or mortgage insurer has fully built out the appraisal and underwriting processes needed to offer it smoothly, which means the experience can vary considerably depending on who you approach. A mortgage broker who has actually closed as-improved refinance files for garden suite clients will know which lenders are genuinely set up for this product versus which ones are still catching up, and that knowledge is worth more than a generic rate comparison when the product itself is this specialized and this new to the market for most brokers and lenders alike.
Getting Ready to Apply
Before approaching a lender for an as-improved refinance, it helps enormously to already have a realistic construction budget and floor plan in hand, since the appraiser needs a specific project to value, not a vague idea. Our free feasibility assessment produces exactly that: a realistic all-in cost estimate and a concept design for your specific lot, which gives your mortgage broker a concrete project to bring to a lender rather than a hypothetical one. We are builders, not mortgage professionals, so pair this article with advice from a broker experienced in this specific product before you commit to a plan.
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