How to Finance Home a Renovation Project

How to Finance Home a Renovation Project

Home Improvement


Whatever the reason is for renovating your home it’s always a good idea to make sure the project can be properly financed. Some remodeling tasks can be quite expensive and you may want to look into your options when it comes to financing the job. Depending on the size and complexity of the home renovation, you may need to borrow the funds to see it through.

It’s recommended that you have the funds in place before beginning the work. You may have a financial advisor who can help you out and there are various places to borrow money from these days. You should also consider bringing in a good contractor to provide some real world insights on the project so you understand the total costs better.  We found a great home remodeling contractor in Redwood City that showed us some hidden costs we did not take into account.

Credit Cards

If the renovation project is relatively small you may want to simply pay for it without having to apply for a loan. This means you can access the funds in your bank account or pay for the materials and/or labour via a credit card. Just remember to work out a payment schedule though so you don’t end up paying high-interest charges on the balance.

Line of Credit

A line of credit can be used for financing a home renovation and it allows you to access the money whenever you need it without having to apply for a loan. For example, if you have a $50,000 line of credit you can take whatever you need when you need it until you reach the limit. The interest rate is typically lower than a credit card and it’s only charged on the funds you have already accessed. In addition, you can pay off the loan of credit whenever you choose.


If you don’t like the option of paying cash or credit for the project or if it’s simply going to cost more money than you can readily access you may want to consider a personal loan. You’ll have to pay the principal as well as the interest during the period of the loan, but it will likely be lower than then interest charges on your credit card. The monthly payments will depend on the length of the loan and you may be able to choose from variable or fixed interest rates. If you find you need more funds for the project after the loan is paid off you’d need to apply for another loan.

Home Equity Line of Credit (HELOC)-Secured Line of Credit

A home equity loan and secured line of credit are similar to a personal loan or line of credit, the home’s equity is basically used as collateral or security. They usually include appraisal and legal fees as well as set-up charges, but also come with lower interest rates. In many cases, you may be able to borrow up to 80 per cent of the value of your home.

Refinancing your Mortgage

If you’re planning on a major home renovation you may want to consider refinancing the mortgage on your home. This allows you to pay the loan back over an extended period of time with the interest rates being the same as a mortgage. Like a home equity loan, there will be fees and set-up costs and you may be able to borrow up to 80 per cent of the home’s value.

Adding Renovation Costs to Mortgage

If you’re renovating a house that you’re about to buy you can inquire about adding the costs of the project to the mortgage. It’s a good idea to contact CMHC Mortgage Loan Insurance for more information on this option. They will let you know exactly how much you can borrow and how much of a down payment will be required.

When planning to finance your home renovation project you should always keep some extra funds aside for unexpected costs or if you decide on additional remodeling once you get started. If you already have these funds set aside it means you won’t have to apply for another loan or rearrange your existing financial plans. Also, the provincial and federal governments in Canada often offer rebates and grants for certain energy-saving remodeling tasks and Energy Star-rated appliances. It’s always a good idea to look into these as you could save money as well as help the environment at the same time.

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