Refinance for Secondary Suites

This program helps qualified homeowners transform underutilized spaces into secondary unit(s), tailoring their homes to their individual needs. All this can be done while the homeowner benefits from insured progress draws during the construction of the secondary unit(s).

Acceptable Loan Purpose and Applicable Loan-to-Value Limits

Refinance Transactions

• 90% LTV of the property value
  • Any existing debt, secured by way of a standard or collateral charge on the property, may be consolidated into the insured first mortgage loan.
    • The refinanced loan may be increased up to $3,000 to cover related transaction costs such as penalties or fees.
  • Borrower must have intention to construct additional unit(s).

Loan Security

• First mortgages.

Eligible Properties

• 2-4 units (inclusive of existing and newly built unit(s)).
• At least one existing unit must be occupied by the borrower or close relative (i.e. related to the borrower by marriage, common-law partnership, or any legal parent-child relationship) on a rent-free basis.
• All newly built unit(s) must be legal, fully self-contained and meet municipal zoning requirements.
• Existing and newly built unit(s) must not be used as a short-term rental.

Maximum Property Value

• Property value must be less than $2,000,000.

Qualifying Terms and Interest Rates

• Fixed, standard variable, capped variable and adjustable-rate mortgages are permitted.
• The qualifying interest rate is the greater of the contract rate plus 2% or 5.25%.

Amortization Options

• Up to 30-year amortization.

Premium Rate

The premium payable will be the lesser of the premium as a % of the total new loan amount or the premium as a % of the top-up portion on the additional loan amount (if existing insured) based on the rates below:

*The above chart is for mortgages with an amortization that is 25 years or less. For mortgages greater than 25 years up to 30 years have an additional premium of 20 bps premium surcharge.

**For refinance transactions of existing Sagen-insured mortgages, the top-up premium will apply to new funds. 30-year amortization surcharge of 20 bps will apply to the top-up premium (for new funds) and to the outstanding loan balance.

The mortgage insurance premium is non-refundable, paid at the time of closing and may be added onto the mortgage.

Borrower Qualification

Income and Employment

• Standard income / employment verification requirements apply.
• Projected rental income from newly built units will be permitted for qualification purposes using fair market rents provided by an appraiser.

Credit

• >80% LTV: At least one applicant is required to have minimum credit bureau score of 600.
• ≤80% LTV: At least one applicant should have a minimum recommended credit bureau score of 680.

GDS/TDS Guidelines

Documentation Requirements

• Standard documentation requirements apply.
• Sagen may request that the Lender provide a copy of the required documentation on a case-by-case basis.
• For 3- and 4-unit properties Sagen requires that the Lender obtains a general assignment of rents and leases or include this requirement in the Standard Charge Terms.

Legality of the additional unit(s):

• The Lender must have a copy of the building permit (or municipal equivalent) on file at time of the initial closing (i.e. refinance of the secured debt); and,
• The Lender must have a copy of the occupancy certificate (or municipal equivalent) on file prior to the final construction draw.

At loan submission, Lender to provide to Sagen:

• Detailed list/contracts outlining the cost to construct.
• Plans and specifications.
• Borrower contact information (Sagen will complete a full appraisal, and appraiser will contact the borrower directly).

Inspection Requirements

• Single or multiple advance options are permitted and may be managed by Lenders. Improvements must be greater than 10% of the as-improved value to be eligible for draws managed by Sagen.
• Property value is based on the lesser of the “as improved” property value or the sum of the current property value (prior to improvements) plus direct costs of the improvements. Sagen will complete a full appraisal on all transactions.
• Initial advance to pay out any existing first mortgage and outstanding secured debt on the property.
• Post-initial loan approval, Sagen must be notified if there are any material changes to the cost to construct, construction plans, permits, etc. Any material change may result in advances no longer being approved (e.g., modifications to plans no longer result in a legal self-contained secondary unit).

Full Service:

• Sagen will pay for up to four (4) progress advance inspections. If more than four (4) advances are required, the customer is responsible for the cost of the additional inspections.
• Lender must submit the Sagen Inspection Request Worksheet directly to the assigned Sagen appraiser or to the National Underwriting Centre.
• The assigned appraiser will inspect the property, determine the percentage complete and inform Sagen.
• Sagen will calculate the authorized amount and advise lender.

Standard Service (inspection and disbursement management under the Lender’s control):

• Lender is fully authorized to make interim and final advances in accordance with their institution’s internal practices on progress draw.
• Sagen authorization is not required for any advances or calculations.
• Prior to any advances, Lender is responsible for verifying improvements have been completed as outlined in the inspection report.

Portability

• Mortgage insurance is portable, so homebuyers can take advantage of a Lender’s portability plan. For further details, refer to the Portability Feature product overview.

Assumptions

• Mortgage is assumable subject to meeting Lender guidelines.

Additional Terms

Sagen will issue a conditional Commitment for Mortgage Insurance based on the LTV of the lending value of the improved property provided:

• Coverage issued at the time of closing is for financing related to the existing mortgage outstanding balance only.
• Mortgage insurance coverage will be effective for any Lender-managed advances provided proper confirmation of work completed is documented and on file.
• Lender to obtain final occupancy certificate or equivalent document from the municipality.

Eligible Products*

• Business for Self (Alt. A) Program
• Family Plan Program
• Homebuyer 95 Program
• New to Canada Program

*For specific underwriting guidelines related to the above eligible products, please refer to the applicable product overview.

Ineligible Products

• Borrowed Down Payment Program
• Vacation / Secondary Homes Program
• Investment Property Program
• Second Mortgage Program