Building a detached ADU (also called an ARU or garden suite) is one of the most practical ways London homeowners are adding rental income, housing an aging parent, or creating a private space for adult kids. But once you've fallen in love with a floor plan, the next question is always the same: how do I pay for it?
This guide breaks down the three most common ways to finance an ADU in Ontario: CMHC-insured refinancing, a HELOC or mortgage refinance, and a construction mortgage, with honest pros, cons, and rough payment math so you can start a real conversation with your lender.
A quick note on numbers: program limits, interest rates, and grant amounts change regularly. Every figure below is an illustration, not a quote. Always confirm current terms with your lender, mortgage broker, and the official program page before you count on them.
First, know what you're financing
A detached ADU is a full construction project: foundation, framing, mechanical, finishes and connection to services. Costs vary with size, site conditions and finishes. At Kuzyn Builds, our pre-designed detached models publish fixed starting prices so you have a realistic anchor from day one: for example, The Paul starts from $148K. You can compare all three (The Paul, The Maria and The Henry) to see which footprint fits your lot and budget.
Knowing a firm starting price matters for financing, because every option below is sized around your total project cost and your home's equity.
Option 1: CMHC-insured refinancing (and what happened to the Secondary Suite Loan)
If you've been reading about ADU financing for a while, you've probably seen the Canada Secondary Suite Loan Program: low-interest federal lending, widely reported at up to $80,000 at 2% over 15 years. It's worth being direct about this, because a lot of guidance still describes it as though you can apply today.
It was never launched. The program was announced in Budget 2024, expanded to the $80,000 limit in the 2024 Fall Economic Statement, and then cancelled in Budget 2025, which confirmed it was not yet operational and would not be implemented, largely because it overlapped with financing routes that already existed. If a builder or blog is still pointing you at it, that page hasn't been updated.
What's live instead is CMHC-insured refinancing for secondary suites, effective 15 January 2025. It lets you refinance against your home's value after the suite is built rather than its value today, which is the part that matters when you don't yet have the equity to fund the build. The federal announcement set it at up to 90% of post-renovation value, on homes valued under $2 million, amortized up to 30 years. In practice CMHC lends against the lesser of the post-renovation value or your current value plus the build cost, so ask your broker which one applies to you. That distinction matters most for exactly the project this option suits best, where the suite adds more value than it costs to build.
Why homeowners consider it:
- It's underwritten on the post-renovation value, so the new unit helps pay for itself in the qualification math.
- Rates are mortgage rates, not unsecured-loan rates.
- It's built around legal, permitted units, which is what you want anyway for insurance, resale and Tarion-backed builds.
Things to watch:
- Eligibility, maximums and loan-to-value limits change, and lenders apply them differently. Confirm current terms with CMHC and your broker before planning around any number, including the ones above.
- Get the financing approved before you break ground. CMHC requires insured financing to be approved prior to the start of construction, so starting the build first can disqualify you. You'll need permitted plans and a firm construction price in hand.
- Default insurance premiums apply, and they're a real cost. Ask your broker to quote the all-in number, not just the rate.
Provincial and municipal support moves separately from all of this. London has offered grant support for qualifying additional units in some years, so it's worth asking the City what's open at the time you apply rather than assuming last year's program still exists.
Option 2: HELOC or mortgage refinance
If you have meaningful equity in your London home, tapping it is often the simplest route.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving credit line secured against your home. You draw funds as you need them and pay interest only on what you use, which is handy when a build releases costs in stages.
Refinance / mortgage add-on
Refinancing rolls the ADU cost into a new, larger mortgage, usually at a lower rate than a HELOC. You get a single predictable payment, but you may face penalties for breaking your current mortgage early.
Rough payment math (illustration only):
| Amount borrowed | Rate (illustrative) | Amortization | Approx. monthly payment | |---|---|---|---| | $150,000 | 5.5% | 25 years | ~$915 | | $200,000 | 5.5% | 25 years | ~$1,220 | | $150,000 | 6.5% (HELOC-style) | interest-only | ~$810/mo interest |
These are simplified estimates to show scale, not offers. Your actual rate and payment depend on your lender, credit and equity.
Pros: Fast, flexible, familiar. Good when you already have equity and want control over draws.
Cons: You're borrowing against your home. HELOC rates are variable and can rise. Refinancing may trigger penalties.
Option 3: Construction mortgage
A construction (or "draw") mortgage is built for ground-up projects. Instead of one lump sum, the lender advances money in stages tied to completed work, typically after foundation, framing, lock-up and completion. An appraiser or inspector often verifies progress before each draw.
Why it fits an ADU well:
- You only pay interest on funds advanced so far.
- Draws align with a builder's real payment schedule.
- The lender's oversight adds a layer of accountability.
Things to watch:
- More paperwork: detailed plans, fixed-price contracts, and permits up front.
- Draw inspections can cause short delays if scheduling slips.
- Some lenders convert the construction loan to a standard mortgage at completion. Confirm the conversion terms.
Construction mortgages pair naturally with a fixed-price, pre-designed model. Because a build like The Maria or The Henry comes with a defined scope and a published starting price, it's easier to hand your lender the firm numbers they need to approve draws.
Which option is right for you?
There's no single best answer: it depends on your equity, timeline and risk comfort.
- Little equity today, but the finished suite adds real value: Ask your broker about CMHC-insured refinancing on post-renovation value, which is the route that effectively replaced the cancelled Secondary Suite Loan.
- Strong equity, want flexibility and speed: A HELOC lets you fund staged costs without breaking your mortgage.
- Want one clean payment and a lower rate: A refinance may work if the penalty math makes sense.
- Financing a full ground-up build with a fixed-price contract: A construction mortgage is often the cleanest structure.
Many homeowners combine two: an insured refinance plus a HELOC top-up for overruns, say. A good mortgage broker will model the total monthly cost against your expected rental income.
How London's rules affect financing
Financing is only half the picture: your unit has to be permitted to be a legal secondary suite, which is what lenders and grant programs expect. London has been actively broadening where and how additional residential units are allowed, and there's been public debate over related items like parking and unit caps. Because these rules are actively evolving, confirm current zoning, permitting and parking requirements for your specific lot before you finalize financing.
If you're still comparing builders and options, our ADU builders buyer's guide and the complete ADU guide walk through the full process. You can also see everything we build on our Services page.
Frequently asked questions
Can I use rental income to help qualify for financing?
Often, yes. Many lenders will factor a portion of projected rent into your qualification, especially for a legal, permitted unit. The exact percentage varies by lender, so ask your broker how they treat ADU rental income.
Do I need permits and fixed plans before applying?
For a construction mortgage and most refinancing routes, yes. Lenders want permitted plans and a fixed-price contract. This is one reason a pre-designed model with a published price simplifies approval.
How much does an ADU cost in London, Ontario?
It depends on size, site and finishes. Our detached models publish fixed starting prices (The Paul begins from $148K), so you have a reliable number to build your financing around rather than a vague range.
Does a detached ADU come with a warranty?
Kuzyn Builds provides Tarion warranty coverage on our detached ADU models, which many homeowners (and some lenders) view as added assurance on a new build.
Ready to put real numbers together?
The smartest first step is pairing a fixed project price with the right financing mix for your situation. Kuzyn Builds is a family-owned London company building custom homes, ADUs, multi-unit developments and renovations across London, St. Thomas, Woodstock, Stratford and Strathroy, and we're happy to help you scope a realistic budget before you ever talk to a lender.
Call us at (519) 694-4776 or book a free consultation and we'll help you match a model to your lot and financing plan.
This article is general information, not financial or legal advice. Confirm all program terms, rates and municipal rules with the relevant authorities before making decisions.