If you’re a homeowner in Ontario, you might be wondering how to pay for those much-needed home upgrades — whether it’s replacing that aging roof, upgrading your kitchen, or finishing your basement. With rising renovation costs and fluctuating interest rates, many Canadians are exploring home improvement loans as a practical solution.
In this guide, we’ll explore the borrowing options available in Ontario, how to qualify for financing, and which type of loan might be right for your renovation goals.
Why More Ontario Homeowners Are Financing Renovations
Renovation spending is on the rise — and for good reason. According to Statistics Canada, Canadian homeowners spent over $80 billion on home renovations in 2022. With aging housing stock across Ontario, more homeowners are upgrading to improve comfort, increase property value, or accommodate growing families.
Inflation and rising contractor costs also mean that even small projects come with a hefty price tag. A typical kitchen remodel in Ontario ranges from $20,000 to $50,000, depending on finishes and scope.
Borrowing to fund these upgrades is becoming more common, especially for homeowners who want to preserve savings or take advantage of their home’s built-up equity.
Common Types of Home Improvement Loans in Ontario
There isn’t a one-size-fits-all solution. Here’s a breakdown of the most common home improvement loan options in Ontario:
Home Equity Loans
This loan allows you to borrow against the equity in your home. You receive a lump sum, repayable in fixed monthly installments, often with lower interest rates than unsecured loans.
Best For: Larger renovations like structural upgrades, additions, or full home remodels.
Learn more about home equity loans
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit based on your home’s equity. You can borrow, repay, and borrow again — like a credit card, but with better interest rates.
Best For: Ongoing or phased renovations, such as outdoor landscaping followed by interior upgrades.
Personal Loans
Personal loans are a popular borrowing option in Ontario for homeowners looking to finance home improvement projects without tapping into their home equity. These loans are unsecured, meaning you don’t need to use your property as collateral. Approval is typically based on your credit score, income stability, and debt-to-income ratio.
While personal loans offer flexibility and a fixed repayment schedule, they usually come with higher interest rates compared to secured options like HELOCs or home equity loans. The loan amounts also tend to be smaller, ranging from $5,000 to $50,000, depending on your creditworthiness.
Best For: Smaller renovations such as new appliances, bathroom updates, or a fresh coat of paint. If you’re in the early stages of homeownership or don’t have much equity built up, a personal loan may offer a fast and straightforward financing solution.
Credit Cards
While not ideal for large-scale projects, credit cards can be a short-term option for minor home improvements. Many Ontario homeowners use their existing credit cards to cover costs like new furniture, small tools, or materials for DIY projects.
However, credit cards come with some of the highest interest rates, often exceeding 20% annually. If the balance isn’t paid off in full within the interest-free grace period, the cost of borrowing can escalate quickly. For this reason, using a credit card for home improvement loans should only be considered when the amount is small and you’re confident in your ability to repay it quickly.
Best For: Cosmetic updates, emergency repairs, décor upgrades, or when you’re waiting for other financing to come through and need to cover initial renovation expenses.
Contractor Financing
Some licensed renovation companies in Ontario offer contractor financing, which allows you to spread the cost of your renovation over time through a payment plan. These are often arranged through third-party financing providers, sometimes even at 0% interest promotional rates for a limited period.
While this can be convenient — especially if you don’t want to deal with multiple lenders — it’s important to read the fine print. Contractor financing may include processing fees, penalties for early repayment, or restrictive terms that limit your flexibility. Additionally, the interest rates after the promotional period can be significantly higher than those offered by traditional lenders or alternative financing sources.
Best For: Mid-sized renovations where upfront payment isn’t feasible and when working with a contractor who has a trusted relationship with a financing provider. Always compare this option against home improvement loans or HELOCs to ensure you’re getting the most cost-effective solution.
Secured vs Unsecured Loans: Which Is Right For You?
Understanding whether a loan is secured or unsecured is key when choosing a financing option.
Secured Loans (like HELOCs or second mortgages) use your home as collateral, which typically leads to lower interest rates and higher loan amounts. However, failure to repay could put your home at risk.
Unsecured Loans (like personal loans) don’t require collateral but have higher interest rates and stricter qualification criteria. They’re ideal for borrowers with good credit and smaller loan needs.
If you’re uncertain about the risk, talking to a mortgage professional can help you evaluate which route offers the best combination of cost and flexibility.
How to Qualify for a Home Renovation Loan in Ontario
Every lender is different, but these are general factors you’ll need to meet:
1. Credit Score
Most traditional lenders look for a score above 680. However, if your credit is bruised, alternative lenders or private lenders may still approve your application — especially if you have equity.
2. Income Verification
Lenders will assess your ability to repay based on your income. Self-employed borrowers may need to show multiple documents, including tax returns or business bank statements.
3. Equity or Collateral
If you’re applying for a home equity loan, second mortgage, or HELOC, you’ll need to have at least 20% equity remaining in the home. Most lenders won’t exceed an 80% Loan-to-Value (LTV) ratio.
Example:
Angela, a homeowner in Mississauga with credit challenges, used her $600,000 home (with a $300,000 mortgage balance) to secure a second mortgage of $75,000. She used it to renovate her basement into a rental suite, increasing her monthly cash flow.
Government Programs and Incentives for Renovation Projects
In Ontario, several government-backed incentives can help reduce your renovation costs:
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Canada Greener Homes Initiative: This offers grants up to $5,000 for energy-efficient upgrades like insulation or heat pumps.
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CMHC Green Home: Offers mortgage loan insurance premium refunds when purchasing or renovating an energy-efficient home.
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Enbridge Home Efficiency Rebate+: Offers Ontario homeowners up to $10,000 in rebates for energy-saving renovations.
If your renovation includes eco-friendly components, these programs can help offset costs while increasing long-term value.
Choosing the Right Loan for Your Renovation Goals
Different projects call for different financing solutions:
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Large Projects: Like room additions or foundation repairs? Go for a home equity loan or second mortgage for fixed payments and lump-sum access.
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Phased Renovations: Like updating one room at a time? A HELOC offers flexible borrowing.
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Quick Fixes: Painting or replacing lighting? Personal loans or credit cards may suffice.
Always weigh the total interest cost, payment structure, and repayment timeline when choosing a loan.
Real-Life Case Study: How One Ontario Couple Financed Their Home Renovation
James and Eliza, homeowners in Barrie, ON, needed $75,000 to finish their basement and install a separate entrance for a rental unit.
They approached LendToday and were approved for a second mortgage based on their home equity. The new rental suite now brings in $1,600/month, helping them pay off the loan while increasing their home’s value by over $100,000.
Apply online for home renovation financing
FAQ: Home Improvement Loans in Ontario
Can I get a home improvement loan with bad credit in Ontario?
Yes, equity-based solutions like second mortgages or private lending options are available.
What is the best loan option for small renovations?
Personal loans or lines of credit can be ideal for smaller projects.
Do I need equity in my home to qualify for a renovation loan?
Only if applying for secured loans like HELOCs or second mortgages.
Are there government grants for renovations in Ontario?
Yes! The Canada Greener Homes and Enbridge programs are great resources.
Can I increase my home’s value with a renovation loan?
Absolutely — especially with kitchen upgrades, basement finishes, or adding a rental unit.
How long does it take to get approved?
Many private lenders can approve financing within 24–48 hours if the documents are ready.
Final Thoughts: Building Your Dream Home Starts with the Right Loan
Renovating your home is one of the most rewarding investments you can make — but it doesn’t have to strain your finances. With the right home improvement loan, Ontario homeowners can upgrade their living space, increase property value, and, in many cases, create new income opportunities, such as adding a rental unit or energy-efficient enhancements.
Whether you’re planning a full remodel or a few key upgrades, the right borrowing option can help bring your vision to life without delay.
Connect with the team at LendToday for fast, reliable, and tailored financing solutions that work for your home and your budget.
Apply For A Home Improvement Loan
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