How to Refinance Your Alberta Home to Add a Legal Suite with CMHC-Insured Financing
Renee Huse, founder of Spire Mortgage Team in Alberta, has helped dozens of homeowners unlock hidden value in their properties by refinancing to create legal rental suites — all with CMHC-insured mortgage options that most people don’t even know exist.
If you’ve got a basement that could become a separate unit or a detached garage ready for a laneway suite, this strategy could give you the financing you need without selling or pulling equity from other investments.
We’ll show you how it works, what it costs, who qualifies — and a real Alberta case study that proves it can be a game changer.
What We'll Cover
- What is CMHC’s Refinance Program for Legal Suites?
- Alberta Case Study: Basement Suite in Red Deer
- Understanding CMHC Premiums
- Glossary: Mortgage Terms You Need to Know
- FAQs: Who Qualifies and What’s Allowed
- Next Steps: Apply for CMHC-Backed Financing
What is CMHC’s Refinance Program for Legal Suites?
This is a niche refinance option through CMHC (Canada Mortgage and Housing Corporation) that lets you:
- Tap into up to 90% of your home’s as-improved value
- Use the funds to build or legalize a self-contained secondary suite
- Keep your mortgage insured — which can mean better rates and lower risk
This isn’t a HELOC. It’s a full refinance that’s underwritten and insured by CMHC, with built-in rules that make sure your project is compliant, long-term, and sustainable.
Who It’s For
- Alberta homeowners who live in the property
- Anyone with space to add a legal suite (basement, garage, laneway, etc.)
- Borrowers with a credit score of 600+
- Clients who plan to rent the unit for 90+ days at a time (no Airbnbs)
Quick Program Facts
- Up to 90% loan-to-value
- Maximum amortization: 30 years
- No short-term rentals
- One CMHC-insured property per borrower
- Suite must meet all municipal codes and zoning
- Stress test rate applies: contract + 2% or 5.25%, whichever is higher
Alberta Case Study: Basement Suite in Red Deer
Clients: Mid-30s couple living in Anders Park, Red Deer
Goal: Turn their unfinished basement into a legal suite for long-term rental income
| Item | Details |
|---|---|
| Original mortgage | $315,000 at 3.99% |
| Home value before reno | $470,000 |
| Renovation budget | $70,000 |
| New appraised value | $540,000 |
| New mortgage amount | $385,000 |
| Monthly payment | ~$1,951 (30-year at 3.99%) |
| Rental income | $1,300/month |
Understanding CMHC Premiums
CMHC charges a one-time mortgage insurance premium on these refinances, and it’s important to know how it works.
How It Works
- Premium is based on either the total new mortgage or just the increased amount — whichever costs less.
- Premium is usually added to your mortgage balance.
- Surcharges apply if you go over 25 years amortization (+0.20%) or blend amortizations (+0.60% on increase).
Example: Red Deer Case
- New mortgage: $385,000
- Increase for reno: $70,000
Option 1 (total loan): 1.70% of $385,000 = $6,545
Option 2 (increase only): 5.90% of $70,000 = $4,130
CMHC selects the cheaper option — $4,130 in this case — and adds it to the mortgage balance.
Why It Matters
Even with the premium, many Alberta clients come out ahead because of the lower insured rate and rental income added to their monthly budget.
Glossary: Mortgage Terms You Need to Know
- CMHC – Canada Mortgage and Housing Corporation
- Loan-to-Value (LTV) – Mortgage balance vs. property value
- Secondary Suite – A legal, self-contained rental unit on your property
- Owner-Occupied – You must live in the home to qualify
- As-Improved Value – Your property’s estimated value after renovation
- GDS / TDS – Gross and Total Debt Service ratios
- Progress Advance – Construction funds released in stages
- Short-Term Rental Restriction – Minimum 90-day leases; no Airbnbs
- Amortization – How long you’ll take to pay off your mortgage
- CMHC Premium – One-time fee added to your mortgage when insured
FAQs: Who Qualifies and What’s Allowed
Can I use this program to legalize an existing suite?
Yes — as long as it becomes fully code compliant and meets CMHC’s rules.
Is this allowed in every Alberta city?
It depends on zoning. Calgary, Edmonton, Red Deer, and Lethbridge all support legal suites in many zones.
Can I use rental income to qualify?
Yes — projected or actual rent can be included in your mortgage approval, once the suite is legal.
What if I’m self-employed or have past credit issues?
If you’re under 600 credit score, we’ll explore alternative lenders. Learn more about self-employed approvals.
Can I refinance again after this?
Yes — as long as you still live in the property and meet updated CMHC guidelines.
Ready to Add a Legal Suite to Your Alberta Home?
Give us a call or fill out an application at this link: https://spiremortgage.ca/apply-now and our team will get in touch with you to start building a plan that suits you.
Written by the Spire Mortgage Team, Alberta’s strategic mortgage planning experts.
Learn more: https://spiremortgage.ca
