Benefits of a Legal Rental Suite in your new home

November 30, 2023

One of our most popular homes in The Meadows is our Laneway Homes which allow for the option to build a legal rental suite with a separate entrance.

Whether your vision involves generating rental income, establishing a comfortable space for in-laws or a nanny, there are numerous advantages to opting for this addition at the point of purchase.

Here are some of the advantages of doing so.

(1) Help qualify for a mortgage or a larger mortgage

With the introduction of the stress test on June 1st, 2021, all Canadian homebuyers are required to undergo a stress test at a rate of 5.25% or 2.00% higher of the 5 yr rate at your preferred lender.  The stress test means that your borrowing power will be less which in turn means a lower priced home. However, a legal rental suite in your new home can help you qualify for a larger mortgage, as outline in our last blog.

For example: 5 yr mortgage rate is 5.64% (As of Nov. 17th, 2023), you have to qualify for a mortgage at 7.64%.  Basically, you have to prove to your lender that you can afford the mortgage payments at the higher rate.  Your monthly mortgage payment is based off the 5.64% rate.  Add in the development of a legal basement suite on the mortgage application, you are then able to apply the monthly rental income to help qualify for a large mortgage.

There are other parameters on qualifications for a mortgage ie: debt service ratio and beacon score.  A mortgage professional will be able to provide the directions you need to follow as there are rules and regulations for a Legal Suite.

(2) Help lower your monthly mortgage payment

First time home buyers are usually the clients who are most effected by rising interest rates.  When you incorporate a legal suite into your mortgage, the rental income will help offset the monthly mortgage payments and help to pay off your mortgage sooner.

(3) Increase the value of your home

With the development of a legal suite the value of your home should increase the market value of your home. But keep in mind your property taxes could also rise if your home gets reassessed at a higher amount. To know exactly the increase of value on your property from a legal suite development, you could contact a licensed appraiser for a market or cost evaluation.

(4) Exclude your property tax and heating

If you are going to develop a legal basement suite with your new home purchase, your property tax and heating can be removed from a Mortgage Application if your beacon score is above 700, depending upon your lenders guidelines. The removal of these numbers can also assist in qualifying for a mortgage.

(4) Coverage under the New Home Warranty if your legal suite is built by Arbutus Properties at time of purchase

One of the benefits of purchasing your new home through Arbutus Properties and the development of a legal suite, at the time of purchase, is it would be covered under our New Home Warranty.  Arbutus’s program is a 5-year New Home Warranty, and we will warrantee any construction deficiencies in the first year, i.e. nail pops, doors don’t close properly. The remaining 4 years is Structural and Foundation from the warranty company.

If you would like to learn and discuss more about purchasing one of our Laneway Homes and developing the rental suite, please do not hesitate to contact us at any time.

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