Last updated
Written by:
Reviewed by:
What is a home renovation loan?
A home renovation loan provides funding specifically for home upgrades, repairs, or improvements. It allows homeowners to borrow a lump sum (or access funds as needed) and repay it through predictable, manageable installments.
Renovation loans are especially useful when:
• You want to increase your home’s resale value
• You’re preparing to rent or sell a property
• You want to upgrade outdated or worn-down areas
• You’re handling emergency repairs (roof, plumbing, electrical, foundation)
• You’re completing major projects like basement finishing or adding an extension
Depending on the loan type, homeowners may tap into existing equity or borrow based on credit and income.
Types of home renovation loans available in Canada
Homeowners use many different loan products depending on budget, credit, project size, and how soon funding is needed. Below is a high-level comparison.
Renovation loan comparison table
| Loan Type | Best For | Typical Amounts | Key Advantages | Considerations |
|---|---|---|---|---|
| Home Equity Loan | Large-scale renovations, additions, major upgrades | $10,000 – $500,000+ | Low interest rates, long terms | Must have home equity |
| Home Equity Line of Credit (HELOC) | Ongoing or multi-phase renovations | $10,000 – $400,000 | Borrow as needed, interest only on what you use | Variable rates |
| Personal Loan | Medium-sized projects or fast turnaround | $1,000 – $35,000 | Quick approval, no collateral | Higher rates than HELOC |
| Renovation-Specific Loans | Renovation-only use, contractor-tied projects | Varies | Tailored for construction projects | May require quotes or inspections |
| Government Programs | Energy upgrades, accessibility retrofits | Varies | Rebates, grants, low-cost financing | Eligibility criteria apply |
When should you use a home equity loan for renovations?
Home equity loans are one of the most popular ways Canadians finance major renovation projects. Borrowers often choose home equity lending when:
• Renovation cost exceeds $20,000
• They want the lowest possible interest rates
• They have significant equity built up in the home
• They need predictable payments over several years
You can explore secured borrowing options through the home equity loans category on Smarter Loans.
What are the most common renovation projects Canadians finance?
Homeowners across Canada use renovation loans for a variety of high-value improvements:
Kitchen renovations
Cabinet upgrades, flooring, countertops, appliances, lighting, plumbing updates.
Bathroom upgrades
Walk-in showers, tub replacements, tile work, fixtures, vanities, ventilation.
Basement finishing
Secondary suites, income units, entertainment rooms, home offices, gyms.
Exterior and structural improvements
Roofing, siding, decks, fences, insulation, windows, foundation repairs.
Energy-efficiency upgrades
Heat pumps, HVAC systems, better insulation, solar, weatherproofing — often eligible for rebates.
Accessibility retrofits
Ramps, widened doors, stairlifts, bathroom accessibility improvements, aging-in-place modifications.
How much can you borrow for a home renovation loan?
Loan amounts vary based on the financing product you choose:
• Personal loans: generally $1,000 to $35,000
• Home equity loans: $10,000 to several hundred thousand
• HELOCs: based on available equity and lender guidelines
• Government programs: depend on eligibility (energy programs, accessibility grants, first-time buyer upgrades)
To estimate monthly payments for a personal loan renovation project, many users rely on the personal loan calculator in the Smarter Loans tools section, which gives an instant breakdown of costs and loan scenarios.
What are the benefits of financing home renovations?
Renovation loans offer several advantages:
• Avoid draining savings or emergency funds
• Spread the cost over fixed monthly payments
• Increase home value and improve resale potential
• Complete repairs before they worsen or cause damage
• Add rental income through basement suites
• Improve energy efficiency and reduce utility bills
• Modernize aging spaces while keeping cash flow stable
What documents do you need for a renovation loan?
Most lenders will request:
• Government-issued ID
• Proof of income or tax returns
• Bank statements
• Mortgage details (for equity-based loans)
• A property valuation or assessment
• Contractor quotes (depending on lender type)
Some online lenders provide fast approvals for unsecured renovation loans, requiring only income verification and basic identification.
Can you get a renovation loan with bad credit?
Yes — many Canadians with lower credit scores still qualify, especially if they:
• Have home equity
• Provide stable income
• Apply for a smaller renovation loan
• Use a contractor with clear documentation
• Choose lenders specializing in credit-challenged borrowers
Borrowers exploring options like bad credit loans or personal loans for smaller projects can review lenders in the relevant Smarter Loans categories.
Are renovation loans worth it for home value?
Renovation loans often pay for themselves. Some of the highest ROI home improvements in Canada include:
• Basement suites (income-generating)
• Kitchen remodels
• Bathroom upgrades
• Exterior improvements (curb appeal)
• Window replacements and insulation upgrades
Financing allows homeowners to complete upgrades sooner, increasing both comfort and long-term property value.
Frequently asked questions about home renovation loans
Are renovation loans different from construction loans?
Yes — renovation loans are for improvements to existing structures, while construction loans are for building new property or extensions.
Can I use a renovation loan to build a basement apartment?
Yes, many homeowners finance legal secondary suites to generate rental income.
How long does approval take?
Unsecured loans may fund in 24–48 hours, while home equity loans may take several days depending on appraisal requirements.
Are renovation loan rates fixed or variable?
Both options exist — personal loans often use fixed rates, while HELOCs typically have variable interest.
Can I combine a renovation loan with rebates?
Yes — many energy and retrofit programs can be stacked with financing.
