Home Renovation Financing Options – By Daryl Harris

Home Renovation Financing Options

By on October 28, 2013



Whether you intend to finance your renovation yourself or borrow money, you should talk to a financial advisor and to your mortgage broker before you make firm plans. They can help you understand your options and advise on how much you can borrow. This information will help you plan realistically.


Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.

Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long as credit card interest rates can exceed 18%.

Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, once you pay off your loan you will have to reapply to borrow any new funds needed.

Personal line of credit: It is ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without having to reapply.

Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credits or loans, but are secured by your home’s equity.

Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance).

This provides an overview of financing options available to you. But also make sure to research grants and rebates offered by the federal and provincial governments and local utilities to help fund your next renovation project.

Rule changes for mortgages has changed the amount you can finance and what types of products listed above you can finance.  Good planning and exploring your options will ensure you have a smooth renovation process.  Don’t get into renovations and then try to finance after, you could be left with plenty of unnecessary headaches…pass the Tylenol please.

(Source: CMHC)

Source: Daryl Harris Mortgage Broker