🛠️ Home Renovation Through Your Mortgage in Canada: A Smart Way to Finance Your Dream Space
If you've ever fallen in love with a fixer-upper or realized your current home needs a serious facelift, you're not alone. Many Canadians face the same dilemma: how do you pay for renovations without draining your savings?
Fortunately, Canada offers several smart ways to finance home renovations through your mortgage—either when you're buying a home or improving one you already own. Here's what you need to know.
🏡 1. Purchase Plus Improvements Mortgage
This option is perfect if you're buying a home that needs upgrades right away—think new flooring, windows, kitchen, or bathroom renos.
With a Purchase Plus Improvements mortgage, you can add renovation costs directly into your mortgage. Lenders like CMHC, Sagen (formerly Genworth), and Canada Guaranty allow this, often up to 10–20% of the home’s value.
How It Works:
You get contractor quotes before closing.
Your mortgage is approved for the purchase price + renovation cost.
The reno funds are held in trust and released after the work is complete and inspected.
You typically have 90 to 120 days to finish the reno.
🛠️ Example: Buy a home for $400,000 and need $40,000 in renos? You can get a mortgage for $440,000 if approved.
This is a great way to roll reno costs into one monthly payment at a mortgage rate, rather than using a higher-interest personal loan or credit card.
🔁 2. Refinance to Renovate
Already own your home? You can refinance your mortgage and tap into your home equity to fund improvements.
You’re allowed to borrow up to 80% of your home’s appraised value, minus your existing mortgage balance.
💡 Example: If your home is worth $600,000 and you owe $400,000, you could access up to $80,000.
The bonus here is lower interest rates compared to unsecured borrowing. However, you’ll need to qualify for the new loan, and there may be closing costs or penalties if you're breaking your current mortgage early.
💳 3. HELOC (Home Equity Line of Credit)
If you want flexibility, a Home Equity Line of Credit (HELOC) might be the right tool. It’s a revolving credit line secured by your home’s equity.
You can:
Borrow what you need, when you need it
Only pay interest on what you use
Often get better rates than a personal loan
Some banks offer readvanceable mortgages (like RBC’s Homeline or Scotiabank’s STEP), which combine a mortgage and HELOC for added flexibility.
⚠️ Just be aware: HELOCs usually have variable interest rates and require discipline to avoid overspending.
🧱 4. Construction or Renovation Loans
Planning a major renovation, like a home addition or gut job? A specialized construction or renovation loan might be available through certain lenders or credit unions.
These loans involve:
Detailed project plans
Staged funding (called "draws")
Inspections at various phases
While they offer structure and control, they’re more complex and require thorough documentation and planning.
