Home Renovation Loans in Canada

Which way of paying for a renovation fits?

Four structures, and choosing the wrong one is the most common expensive mistake in renovation borrowing.

A home equity loan or second mortgage. A lump sum with fixed payments, registered behind your existing mortgage, which it leaves alone. Suits a written quote with a known total. Five of the seven lenders listed finance renovations this way, from 4.09%.

A home equity line of credit. A limit you draw as the project progresses, interest only on what is out. Suits a staged renovation with an uncertain final cost, which is why contractors see it used so often. Capped at 65% of the home's value on its own.

A refinance. Replacing your mortgage with a larger one at the best rate of the four, and triggering the penalty on the mortgage it replaces. Worth it on a project large enough that the rate saving beats the penalty; the mortgage refinancing page runs that arithmetic.

An unsecured personal loan. No appraisal, no charge on the home, fast, at a higher rate and a smaller amount. Suits a small job with a known cost; the personal loans page lists seventeen lenders.

The rule: staged and uncertain wants a line; known and one-time wants a fixed loan; large enough to justify a penalty wants a refinance; small and quick wants a personal loan.

What does each cost?

Show chart data

$40,000 renovation	Monthly payment	Total interest
Home equity loan at 4.09% over 10 years	about $406	about $8,725
Home equity loan at 6% over 10 years	about $443	about $13,112
Personal loan at 12% over 5 years	about $890	about $13,387

Use the figures to price the structure against the project. On $40,000 the equity route at the lowest published rate costs about $4,700 less in interest than a personal loan and less than half the monthly payment, because the home is the security and the term is longer. The personal loan clears in five years and puts nothing at risk; the equity loan is cheaper every month and registers a charge on your home. Both are honest choices; the amount usually decides.

The 4.09% floor is 8Twelve's published renovation rate. One lender listed publishes a lower figure, 4%, but it is a reverse mortgage for homeowners over 55 with no monthly payments, and it is not a renovation product; the honest floor for a renovation borrower making payments is 4.09%. The mortgage payment calculator runs any amount, rate and term.

Which lenders listed finance renovations?

Five of the seven publish a renovation product or name renovations as a use of their equity products. 8Twelve Mortgage publishes a dedicated renovation mortgage and a purchase-plus-improvements mortgage that finances the home and the work in one loan. Spring Mortgages publishes home renovation financing against up to 80% of the home's value. Lotly, Nuborrow and Canadalend each name renovations as a use of their home equity and refinance products. Homewise publishes no renovation use, and Bloom's product is a reverse mortgage.

Our application asks what the project is, whether the cost is fixed, and how far along it is, and routes on the answers.

Does the renovation pay for itself?

Sometimes, and the borrowing should not assume it. Kitchens, bathrooms and anything correcting a deficiency, a roof, a foundation, a furnace, tend to return the most of their cost at resale. Highly personal finishes, pools, and over-improvement relative to the street tend to return the least.

That is not a reason not to do the work. It is a reason to size the borrowing to what you can carry rather than to what the house might be worth afterwards. On our platform, homeowners borrowing against equity ask for $48,393 on average, and personal-loan applicants borrowing for home improvement ask for $7,925: the equity route is for the kitchen, the personal loan for the bathroom.

How do draws and holdbacks work?

On a larger project the money does not arrive at once, and two mechanisms shape the cash flow.

Progress draws. The lender releases funds as defined stages complete, usually with an inspection before each release. Budget for the gap between paying a trade and the draw arriving; that gap is what a contingency is for.

The construction lien holdback. Provincial legislation requires you to hold back a percentage of each payment, 10% in Ontario, for a set period after substantial completion, protecting your title against a subtrade who was not paid registering a lien. A contractor who asks for full payment upfront is asking you to carry the risk the holdback exists to manage.

What should you have before you borrow?

A lender will ask for most of this, and a contractor who cannot supply it is telling you something. Five things, and the contingency is the one most people skip.

• Permits. Unpermitted work complicates a sale and can void insurance.
• A written fixed-price contract with scope, schedule and a change-order process.
• The contractor's insurance and WSIB or provincial equivalent, in hand.
• A contingency of ten to fifteen percent, held outside the loan.
• A lien search on your own title after completion.

Before you apply

• Match the structure to the project: line for staged, loan for a quote, refinance for a large one, personal loan for a small one.
• Know the appraised value and what you owe, because the equity route is a percentage of the gap.
• Borrow the quote, not the equity. The ceiling is the lender's; the payment is yours.
• Get the penalty in writing before choosing a refinance.
• Apply once. Our application reaches every lender listed and is sent to the five that finance renovations.

Every way of borrowing against a home is on the home equity loans page, and borrowing against other assets on the secured loans page.

Reviewed by Rafael Rositsan, Co-Founder and CEO, Smarter Loans. Last reviewed 16 September 2026. Lender figures are the lenders' published terms as checked August 2026. Platform figures cover applications from 1 January to 30 June 2026.