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Best ways to finance home renovations in Canada

Best ways to finance home renovations in Canada

Home renovations can be expensive projects, so before you start, it will be a good idea to discover some of the best ways to finance home renovations in Canada.

Canadians understand that financing home renovations is usually a loan from a bank or an alternative lender.

Before you start, you’ll need to know which kind of financing is right for your financial situation and renovation project.  

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Getting home improvement financing 

A home renovation project is most likely going to require a significant amount of financial support. You can get the money from a major financial institution or an alternative lender. Home improvement financing is usually straightforward and comes in the form of a loan. You can use the loan to hire contractors or to buy materials and equipment.   

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3 best ways to finance home renovations in Canada 

Getting funding for your home improvement project can come from many sources. Your savings account, unsecured personal loans, home equity lines of credit and home equity loans are all options for your home renovation. 

Personal savings

Generally, you can use your own savings if you are making smaller improvements like repainting, changing furniture, and replacing flooring. If you have funds saved, using them for small renovations may be a good choice as interest rates have increased significantly over the past 18 months. 

You can also divide your ideas into smaller projects, which allows you time in between the renovations to save up. Not only does this make the projects more manageable, but it also helps you organize your finances more effectively.  

Unsecured loans

Unsecured or personal loans are commonly used for bigger renovations, such as replacing cabinetry or redoing the kitchen or bathroom. The cost can easily accumulate to $10,000 or more, so borrowing money from the bank or alternative lender may be a better option. 

Getting an unsecured loan means meeting the lender’s expectations, including a strong credit score and regular income. Without doing so, you may face higher interest rates or other application process challenges.

Home equity loans

Home equity loans are one of the best ways to finance home renovations because you would be using the property’s equity and investing back into it. Normally, from alternative lenders, home equity loans allow homeowners to access their equity in the form of cash. The more equity you have built up, the higher the loan amount you could potentially get. 

Instead of using your financial history to determine if you will be approved for a loan, home equity loan lenders like Alpine Credits only look at how much equity you have. Since they are a secured loan, your house acts as collateral, which leads to comparatively lower interest rates. You can calculate your home equity by subtracting your outstanding mortgage from the appraised home value.

home equity loan equation from Alpine Credits

How to use renovation financing 

The money you receive from renovation financing can be used for any purpose you prefer, as long as it’s towards the property’s overall improvements. Some of the more common uses include:  

  • Basement renovation—many homeowners convert their basements into new living spaces to rent out to tenants or provide additional living space for a growing family.   
  • Kitchen renovation—with improvements in the kitchen, you can enjoy a new look and more efficient appliances.
  • Bathroom improvement—much like the kitchen, improving it gives a refreshing feeling while improving water usage. 
  • Full-scale home renovation—changing all the above is something many homeowners want to accomplish.  

Conclusion: home renovation financing with home equity loans

To finance your home renovations, consider applying for a home equity loan from Alpine Credits. Unlike traditional financial institutions, your credit score, income statement, and employment status aren’t the main decision drivers in getting approval for a loan. If you have at least 25% home equity in your property, you are eligible for a home equity loan. 

You can apply for a home equity loan directly on the website or chat with a Financial Solutions Specialist. Each member is an expert in home equity and will help you with any questions you may have. At the end of the day, Alpine Credits will help you find a solution to your financial needs.

Frequently asked questions

Loans and savings are the most common ways to pay for home renovations. People tend to use their own money for smaller improvements. The more expensive a renovation is, the more likely a loan is needed. 

Home equity loans make an excellent option for financing your home renovations. You may be able to borrow a significant amount if you’ve owned your property for several years.  

You can borrow as much as you need, depending on the type of loan and the renovation. Personal loans tend to be smaller than home equity loans, but you may need a large amount if you are making major changes to your house.