Planning a $30,000 kitchen renovation or a $100,000 home makeover? The way you finance it could affect your mortgage payments for years.
How can you finance home renovations in Ontario? Common choices include mortgage refinancing, a home equity line of credit (HELOC), a second mortgage, a personal renovation loan, savings or purchase-plus-improvements financing when buying a fixer-upper. The best fit depends on how much you need, available home equity, your income and whether you need the money all at once or in stages.
Table of Contents
Compare Ontario Renovation Financing Options
The way the funds are released—and the amount you repay over time—can matter as much as the interest rate.
| Financing | Often useful for | Important trade-off |
|---|---|---|
| Mortgage refinance | Large, planned renovations | Possible mortgage penalty, setup costs and longer repayment |
| HELOC | Contractor payments in stages | Usually variable-rate debt; principal can linger |
| Second mortgage | Keep an existing first-mortgage rate | Additional fees and often a higher borrowing rate |
| Unsecured loan or credit line | Smaller projects or limited equity | Often a higher rate or shorter repayment period |
| Purchase-plus-improvements | Renovate a home you’re buying | Work estimates, valuation and lender-controlled advances |
See CMHC’s overview of renovation financing options. Not every option is available to every borrower.
Using Your Home Equity
Home equity is the difference between your property’s value and the amount you owe against it. If your home is worth $800,000 and your mortgage is $400,000, you have $400,000 in equity. That does not mean you can borrow the full amount.
For example, 80% of an $800,000 home is $640,000. Subtracting the existing $400,000 mortgage leaves a theoretical $240,000 borrowing capacity before fees and lender restrictions. Your income, credit, appraisal and the type of loan still matter. The federal home-equity borrowing guide explains the risks.
Refinancing Your Mortgage
Refinancing replaces your existing mortgage with a larger one. A homeowner owing $350,000 might refinance to $425,000 to access $75,000 before expenses for a kitchen, flooring and bathrooms.
Example of refinancing a home to pay for renovations: If a lender accepts your home’s value as $700,000 and you owe $400,000, an 80% loan-to-value limit would allow up to $560,000 in total secured debt—a theoretical $160,000 above your existing mortgage before penalties, fees and lender approval. Borrowing $60,000 for renovations would increase your mortgage balance to $460,000. You still need to qualify for the larger loan, and interest over a longer amortization may outweigh the benefit of a lower monthly payment.
Compare the new interest rate, any penalty for breaking your current mortgage, appraisal and legal costs, and total interest over the repayment period. Understanding your loan-to-value ratio is a useful starting point.
Home Equity Lines of Credit
A home equity line of credit (HELOC) can suit renovations paid in stages. You draw approved funds as contractors require them, rather than taking the entire budget at once. Interest is generally charged on the amount borrowed.
HELOC rates are usually variable, and interest-only minimum payments can allow debt to linger. Under the federal bank framework, the revolving HELOC portion is generally limited to 65% of the property’s value, while combined secured borrowing is generally capped at 80%; the actual available credit also depends on your existing mortgage, income, credit and lender approval. Review the government’s HELOC guidance and set a plan for repaying principal after contractors have been paid.
Second Mortgages
If you have a favourable rate on your first mortgage, a second mortgage may let you access equity without replacing that loan. However, second mortgages often cost more than first mortgages and can involve additional lender, broker and legal fees.
Short-term private financing might also be considered when you need funds quickly and have a credible repayment plan within a year. The total cost can be substantial. Learn about private mortgage lenders before committing.
Buying a Home to Renovate
Buying a home that needs a new kitchen or bathroom? Some purchase-plus-improvements financing programs may allow eligible renovation costs to be included in the mortgage, subject to lender and insurer approval.
Ask your mortgage professional about a purchase-plus-improvements mortgage before you waive financing conditions or begin work. You may need a detailed contractor quote, renovation budget, permit information and lender-accepted valuation of the home after improvements. Under programs such as CMHC Improvement, the insurer and lender assess the proposed improvements and eligible lending value; the lender controls whether funds are released after completion or at approved stages.
Cash-flow warning: Your contractor may request an upfront deposit before your lender releases renovation funds. Ask exactly what you’ll need to pay out of pocket, what receipts or inspections are required and when each advance could be made.
Planning Your Renovation Budget
Ask for a written estimate covering materials, labour, permits, taxes, payment milestones and possible overruns. Older homes may reveal plumbing, electrical or structural issues only after demolition begins.
Make sure the contractor’s payment schedule matches when your lender will release funds. The federal borrowing guidance is also useful when comparing secured borrowing risks.
What If You Don’t Have Enough Home Equity?
Not having enough equity for a conventional refinance does not necessarily mean your renovation plans must stop. Depending on your property’s value, income, credit history and existing mortgage, alternative or private mortgage lenders may offer secured financing solutions that traditional banks cannot.
These options can carry higher interest rates and additional fees, so it is important to compare the total borrowing cost and have a realistic repayment or exit strategy. For some homeowners, delaying the renovation until more equity is available may be the better decision. Learn more about private mortgage lenders and the risks before committing.
Can You Get a Home Renovation Loan Without Using Equity?
Yes. An unsecured personal loan or line of credit may help pay for a kitchen renovation or other improvements without registering another mortgage against the home. Unlike a HELOC or second mortgage, unsecured borrowing does not use the property as collateral, but its interest rate may be higher and the lender will still assess your income, credit and existing debts. Compare the total cost and repayment schedule, not just the monthly payment.
Are Renovation Grants or Rebates Available?
Rebates can reduce the amount you borrow for energy-saving projects, but do not budget around a program until you confirm you qualify. The federal Canada Greener Homes Grant and Loan are closed to new applications as of October 2026; previously approved loan recipients may still proceed under their terms. See Natural Resources Canada’s official program status.
For any available Ontario, municipal or utility rebate, check the current eligibility rules, required energy assessments, approved contractors and application timing before paying for the work. A rebate is not a substitute for having sufficient cash to cover scheduled construction costs.
Choose Financing Before Construction Begins
A HELOC may fit a project paid in stages, refinancing may suit a substantial renovation, and a second mortgage may help preserve your existing first-mortgage terms. The right option depends on your finances and the project’s timeline. To estimate how a larger mortgage could change your payments, use my mortgage payment calculator and compare the payment and total interest at the proposed rate and amortization.
