Whether it’s a new roof, a kitchen, or a basement apartment, renovations in Ontario are expensive, and most homeowners don’t pay for a big project out of savings. The good news is that you have more financing options than you might think.
For larger projects, the lowest-cost money is usually secured by your home: a refinance, a home equity line of credit (HELOC), or a second mortgage. For smaller jobs, a personal loan or contractor financing can be quicker. And if you’re adding a rental suite, a newer federal rule lets you borrow up to 90% of your home’s value. Here’s how each option works, who it suits, and how to qualify.
Quick Comparison: 6 Ways to Pay for a Renovation
| Option | Typical cost | How much you can borrow | How you get the money | Best for |
|---|---|---|---|---|
| Refinance | Lowest | Up to 80% of home value | Lump sum | Large projects, especially at renewal |
| HELOC | Low | Up to 65% of home value (revolving) | Draw as needed | Phased or ongoing projects |
| Second mortgage | Moderate to high | Varies by lender and equity | Lump sum | Avoiding a break penalty, or bruised credit |
| Secondary suite refinance | Low | Up to 90% of as-improved value | Lump sum | Adding a rental unit |
| Personal loan | Higher | Usually up to about $50,000 | Lump sum | Smaller projects, little equity |
| Contractor financing or credit card | Highest after promos | Small amounts | At purchase | Small or urgent costs |
1. Refinance Your Mortgage
A refinance replaces your current mortgage with a larger one and gives you the difference in cash. In Canada, you can generally refinance up to 80% of your home’s appraised value, and because it’s a first mortgage, it usually carries the lowest rate of any renovation option.
Example: Your home is worth $750,000 and you owe $400,000. At 80%, your maximum mortgage is $600,000, so you could access up to about $200,000 for your renovation, before costs.
The catch is timing. If you refinance in the middle of your term, you’ll likely pay a prepayment penalty, which on a fixed-rate mortgage can be the interest rate differential (IRD). Refinancing at renewal avoids the penalty entirely. Read renew or refinance your mortgage for the full comparison, or talk to us about refinancing your mortgage.
Best for: Major renovations, additions, and homeowners near renewal.
2. Home Equity Line of Credit (HELOC)
A HELOC lets you borrow against your equity as you need it, pay interest only on what you use, and borrow again as you pay it down. That makes it ideal when you don’t know the final cost, or when you’re renovating one room at a time.
Federally regulated lenders cap the revolving HELOC portion at 65% of your home’s value. Combined with your mortgage, total borrowing usually can’t exceed 80%. HELOC rates are almost always variable, so your payment can change. See our HELOC rules guide and learn more about a home equity line of credit.
Best for: Phased projects, flexible budgets, and homeowners with plenty of equity.
3. Second Mortgage or Home Equity Loan
A second mortgage is a separate loan registered behind your first mortgage. You get a lump sum, and your first mortgage stays exactly as it is, so there’s no penalty for breaking it. That matters if you locked in a low rate a few years ago.
Rates are higher than a first mortgage, and terms are often one to two years. Because approval leans heavily on your equity, a second mortgage can also work if your credit has taken a hit. Learn more about getting a second mortgage, home equity loans, or getting a home equity loan with bad credit.
Best for: Keeping a low first mortgage rate, bruised credit, and fast funding.
4. Secondary Suite Refinance
If your renovation adds a rental unit, such as a basement apartment, garden suite or laneway home, a federal rule change that took effect on January 15, 2025 can help. According to the Department of Finance, eligible homeowners can now get an insured refinance of:
- up to 90% of the home’s value, including the value the new suite adds
- on homes worth under $2 million after the renovation
- with up to a 30-year amortization
- for up to four units in total, including your own
To qualify, you (or a close relative) must live in the home, the new unit must be fully self-contained and meet local zoning, it can’t be used as a short-term rental, and the financing can’t exceed the project cost. Not every lender offers it yet, which is where a broker helps. See also financing a garden suite with rental income.
Best for: Basement apartments, garden suites, and multi-generational homes.
5. Personal Loan
A personal loan is unsecured, so your home isn’t used as collateral. Approval is based on your credit score, income and existing debts, and funds can arrive quickly. Amounts are usually smaller, often up to about $50,000, and rates are higher than any secured option.
Best for: Smaller projects like a bathroom refresh or new appliances, or homeowners who don’t have much equity yet.
6. Contractor Financing and Credit Cards
Some renovation companies offer financing through a third-party lender, sometimes with a promotional rate for a limited time. It’s convenient, but read the terms carefully. Rates after the promotion can be high, and fees or early repayment conditions may apply.
Credit cards often charge around 20% or more, so they only make sense for small amounts you can pay off quickly, or to bridge a gap while other financing comes through.
Best for: Small, urgent costs or short-term bridging.
How to Qualify for a Renovation Loan in Ontario
Credit
Major banks generally look for a solid credit history. If your score has slipped, alternative and private lenders focus more on your equity, though rates are higher.
Income
Lenders need to see that you can afford the payments. Salaried borrowers usually provide pay stubs and an employment letter. Self-employed borrowers typically need tax returns or business bank statements. See our self-employed mortgage options.
Equity and Loan-to-Value
Most secured options require equity. Banks generally cap total borrowing at 80% of your home’s value, with the secondary suite program as the exception. Use our home equity calculator for a quick estimate.
Your Renovation Plan
For larger projects, lenders may ask for contractor quotes, a scope of work, and permits. For suites and major additions, the appraisal may consider the as-improved value, meaning what your home will be worth when the work is done.
Rebates That Can Lower Your Renovation Costs
If your renovation includes energy upgrades, Ontario’s Home Renovation Savings Program, delivered by Save on Energy and Enbridge Gas, offers rebates on items like insulation, windows and doors, air sealing, heat pumps, and solar panels with battery storage. Some rebates require a home energy assessment and at least two upgrades, so check the details before you start.
If your mortgage is CMHC-insured, CMHC Eco Improvement can refund 25% of your mortgage insurance premium after energy-efficient renovations.
The federal Canada Greener Homes Grant and Canada Greener Homes Loan are now closed to new applicants. For more ideas, see financing heat pumps and solar with your mortgage.
Example: Financing a Basement Suite in Barrie
This is an illustrative example, not a real client.
A couple in Barrie owns a home worth $700,000 and owes $520,000. They want to spend $120,000 building a legal basement apartment.
A regular refinance at 80% of today’s value would only free up about $40,000. Under the secondary suite rules, their lender appraises the home’s as-improved value at $800,000. Their new mortgage of $640,000 (the existing $520,000 plus the $120,000 project cost) works out to 80% of that value, comfortably under the 90% limit.
Once the suite is rented, the income can help cover the higher mortgage payment.
Frequently Asked Questions
Can I get a home renovation loan with bad credit in Ontario?
Yes. Second mortgages and private lenders focus mainly on your home equity, so they can approve borrowers that banks decline. Rates are higher, so it’s worth having a plan to move back to a regular lender later.
What is the best loan for a small renovation?
For smaller projects, a personal loan or an existing line of credit is usually simplest. If you already have a HELOC, it’s often the cheapest option.
Do I need equity to get a renovation loan?
Only for secured options like a refinance, HELOC or second mortgage. Personal loans and contractor financing don’t require equity.
How much can I borrow for a renovation?
With a refinance, generally up to 80% of your home’s value, minus what you owe. A HELOC’s revolving portion is capped at 65%. If you’re adding a rental suite, an insured refinance can go up to 90% of the as-improved value.
Are there renovation grants in Ontario?
The Home Renovation Savings Program offers rebates on many energy upgrades, and CMHC Eco Improvement can refund part of your mortgage insurance premium. The federal Greener Homes Grant and Loan have closed.
How fast can I get approved?
It depends on the lender. Private lenders can often approve within 24 to 48 hours once your documents are ready. A bank refinance usually takes a few weeks.
Get the Right Financing for Your Renovation
The right renovation loan depends on your equity, your credit, the size of the project, and where you are in your mortgage term. LendToday compares options from banks, credit unions and private lenders to find the lowest-cost way to fund your project. Contact us for a free review.
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