Renovation Loans in Canada 2025

Updated March 2025 · 11 min read

Whether you're updating a decades-old kitchen, finishing a basement, or making your home more energy-efficient, renovation loans give Canadian homeowners a structured way to fund improvements. This guide covers every type of renovation loan available in Canada — from secured mortgage products to unsecured personal loans — so you can choose the right fit for your project and financial situation.

Types of Renovation Loans in Canada

1. HELOC (Home Equity Line of Credit)

For homeowners with at least 20% equity, a HELOC is typically the best and cheapest renovation financing. You access a revolving credit line at variable rates (Prime + 0.5% to 1%) and draw funds as needed. Under OSFI B-20, your HELOC can be up to 65% of your home's appraised value, with combined mortgage + HELOC capped at 80%.

2. Mortgage Refinance

Replacing your existing mortgage with a larger one delivers a lump sum for renovations. Fixed rates around 4.5–5.5% make this one of the cheapest options, but breaking your mortgage early triggers prepayment penalties. Best used at renewal time.

3. Purchase Plus Improvements Mortgage

If you're buying a home that needs work, a Purchase Plus Improvements mortgage rolls renovation costs into your mortgage at purchase. Typically allows $20,000 to $100,000 in renovations added to the purchase price. CMHC, Sagen, and Canada Guaranty all insure these products for buyers with less than 20% down.

How it works: You get quotes from contractors before closing. The lender adds the renovation budget to the purchase price for mortgage purposes. Funds are held in trust and released to contractors as work is completed and verified.

4. Secured Personal Renovation Loan

Some banks and credit unions offer secured personal loans specifically for renovations, using your home equity as collateral. These typically carry rates from 5.5% to 8% and come in fixed amounts with set repayment terms.

5. Unsecured Personal Loan

For smaller renovations or homeowners who don't want to tie borrowing to their property, unsecured personal loans provide a fixed amount at fixed rates. Rates range from 7% to 15%+ depending on your credit score. Applications are faster and simpler than secured products but come with higher rates.

6. Contractor / Retail Financing

Companies like Financeit and GreenSky partner with contractors to offer point-of-sale renovation financing. Promotional periods of 0% interest for 6–24 months are common, but the full interest accrues if you don't pay within the window. After the promo, rates jump to 15–29%. Read terms carefully.

How to Qualify for a Renovation Loan

For Secured Products (HELOC, Refinance)

• Minimum 20% equity in your home after borrowing
• Credit score 650+ (680+ preferred by major banks)
• GDS ratio under 39%, TDS ratio under 44%
• Pass the OSFI mortgage stress test (rate + 2%)
• Verifiable income (T4, pay stubs; 2 years NOA if self-employed)

For Unsecured Personal Loans

• Credit score typically 660+ for competitive rates
• Stable employment or income
• Debt-to-income ratio below 40%
• No recent missed payments or collections

How Much Can You Borrow?

Borrowing limits vary by product:

• HELOC: Up to 65% of home value, minus existing mortgage balance
• Refinance: Up to 80% of home value total (mortgage + refinance proceeds)
• Purchase Plus Improvements: Usually $20,000–$100,000 in renovation costs added to purchase price
• Personal loan: Typically $5,000–$50,000 unsecured; more with collateral

The Application Process

1. Get renovation quotes: Lenders want to see contractor quotes for the work planned
2. Order an appraisal: Needed for secured loans; lender usually arranges this
3. Submit application: Income documents, ID, property information
4. Stress test / qualification: Lender verifies you can service the debt
5. Legal work: For secured loans, a lawyer registers the charge on title
6. Funds released: May be lump sum (loan) or accessible on demand (HELOC)

Tips to Get the Best Renovation Loan

• Shop multiple lenders — rates and terms vary significantly. A mortgage broker can compare 20+ lenders for you at no cost
• Improve your credit score before applying — even 20 extra points can save 0.5–1% on your rate
• Get multiple contractor quotes — lenders want to see competitive pricing
• Apply for government grants first — free money reduces the amount you need to borrow
• Time to your mortgage renewal if refinancing — avoids prepayment penalties

Renovation Loan vs Saving and Paying Cash

For smaller renovations ($100–$30,000), consider whether saving up over 12–24 months is viable. A HELOC at 6.5% costs about $542/month in interest on a $100,000 balance — but a $20,000 renovation only costs about $108/month, and paying cash avoids this entirely. For urgent repairs (roof, HVAC failure), borrowing makes sense. For discretionary upgrades, weigh financing cost vs. saving time.