Which home renovations are worth financing with home equity?

Home renovations can improve comfort, functionality, and property value, but larger projects often come with significant costs. As a result, many homeowners explore home renovation financing options, including borrowing against their home equity to fund renovations. 

A home equity loan for renovations allows eligible homeowners to access the equity they’ve built in their home, with the available loan amount typically based on factors such as home equity, income, and the loan-to-value (LTV) ratio. 

This article explores which renovations are most worth financing using home equity financing and how to determine whether borrowing makes financial sense. 

Key takeaways 

• Prioritize renovations that protect your home, improve resale value, reduce long-term costs, or create income potential.  

• Home equity financing options, including a home equity loan, HELOC, or second mortgage, can help fund larger renovation projects.  

• Before borrowing, compare the expected value of the renovation with the total cost of financing and your budget. 

Renovation ROI ranking: which projects are most worth financing?

The strongest home improvement projects often fall into three categories: repairs that protect structural integrity, upgrades to high-use spaces, and renovations that reduce ongoing costs. 

To help you visualize where your project fits, here is a quick breakdown of common renovations, their main financial benefits, and when it makes sense to utilize your home equity: 

Remember that a renovation that performs well in one market may not produce the same return in another. For this reason, renovations that increase home value should be evaluated based on both financial return and practical value.

High-priority repairs that protect property value

Major repairs often deserve attention before cosmetic upgrades. Problems such as roof leaks, water damage, foundation issues, electrical deficiencies, plumbing problems, mould, or heating failures may affect both safety and long-term property value. 

In most cases, homeowners may want to address these issues before focusing on aesthetic upgrades. Maintenance-related repairs may not immediately improve visual appeal, but they often help prevent larger expenses later. 

This is particularly important when financing a renovation project with borrowed funds. Spending on visible upgrades may offer limited value if major structural problems remain unresolved. 

During resale, unresolved repair issues may also reduce buyer confidence. A real estate agent may point out that buyers often view water damage, unsafe wiring, or foundation movement as significant risks during inspections. 

Kitchen and bathroom renovations 

Kitchen and bathroom renovations are often cited among the strongest resale-focused upgrades because buyers tend to pay close attention to these spaces. They are heavily used areas and are also among the most expensive rooms to renovate after a home purchase.

However, bigger budgets do not always produce better returns.

A targeted refresh may offer stronger value than a luxury remodel. For many homeowners, practical upgrades may include:

• cabinet refacing

• new countertops

• updated fixtures

• improved lighting

• flooring replacement

• better ventilation

Before using a renovation loan, homeowners may want to compare the cost of a full remodel against smaller upgrades that improve function and appearance.

Basement finishing or suite conversion

Basement renovations can increase usable square footage and improve how a home functions. A finished basement may create a recreation room, home office, guest area, or additional living space for family members. 

For some homeowners, basement renovations may also create rental income through a legal secondary suite. This makes basement projects unique because they may improve both livability and financial return. 

However, rental potential depends on more than renovation quality. Homeowners may need to confirm: 

• municipal bylaws  

• permit requirements  

• fire separation rules  

• egress requirements  

• parking rules  

• insurance requirements  

A legal suite may improve income potential, while an unpermitted suite may create compliance or resale concerns. Before financing home renovations for rental purposes, it may help to compare expected rental income with projected monthly payments, interest, and total borrowing costs.

Energy-efficient upgrades

Energy-efficient renovations may improve comfort while reducing long-term household costs. These projects can be particularly appealing when utility costs continue rising.

Common energy efficient upgrades include:

• insulation improvements

• air sealing

• heat pumps

• HVAC upgrades

• smart thermostats

• energy efficient windows and doors

These upgrades may provide value in several ways. They may lower energy consumption, improve indoor comfort, and reduce strain on heating and cooling systems.

Canadian homeowners should also review available rebate programs before finalizing renovation budgets. Federal programs, utilities, and provincial governments may offer rebates, grants, tax credits, or other forms of financial assistance. These programs may reduce the amount homeowners need to borrow. 

Curb appeal, decks, patios, and smart-home updates

Exterior improvements can improve first impressions and help a property appear well-maintained. Projects such as landscaping, siding repairs, exterior paint, front-entry upgrades, decks, and patios may improve both functionality and visual appeal.

These upgrades are often more market-dependent than structural repairs or kitchen renovations. Their value usually depends on neighbourhood expectations and buyer preferences.

Smart-home improvements may also appeal to some buyers, particularly when they improve efficiency or safety. Practical upgrades such as leak detection systems, security devices, and smart thermostats often provide more lasting value than highly customized technology systems.

How to decide if a renovation is worth borrowing for

Before using home equity to fund renovations, it helps to evaluate whether the project supports your financial goals. Since a home equity loan for renovations is secured against your property, the renovation should ideally provide value beyond short-term preferences.

A simple way to assess a renovation is to rate the project across six factors:

Projects with several high-value scores may present stronger reasons for borrowing. 

When reviewing financing options, homeowners may also want to compare the interest rate, expected repayment period, and total borrowing costs. 

Depending on the financing product, costs may include appraisal fees, legal fees, and closing costs. These costs affect how much a renovation ultimately costs over time. 

Ask whether the renovation increases resale value

Resale-focused renovations generally appeal to a broad range of buyers rather than reflecting highly personal preferences. Neutral kitchen upgrades, functional bathroom improvements, layout changes, and added living space often improve market appeal.

Before committing to expensive upgrades, reviewing comparable homes in the neighbourhood may help determine whether the renovation aligns with local buyer expectations. 

Ask whether the renovation reduces future costs

Some renovations may be financially worthwhile even if they do not dramatically increase resale value. Repairs such as roofing, waterproofing, insulation, drainage improvements, heating, ventilation, and air conditioning (HVAC) replacement, and electrical upgrades may help prevent more expensive repairs later. 

Reducing future maintenance costs may provide meaningful long-term savings.

Ask whether the renovation creates income

Income-generating renovations often require more detailed financial planning. Projects such as basement suites or secondary units should be evaluated based on realistic rental demand and expected income. 

Before borrowing, homeowners may want to review local regulations, permit requirements, insurance implications, and projected rental revenue. 

Ask how long you plan to stay in the home

Time horizon matters when evaluating renovation value. Homeowners planning to sell in the near future may prioritize essential repairs and broad resale appeal. Those planning to stay longer may place more value on comfort, accessibility, or energy efficiency. 

Long-term ownership may make certain lifestyle-focused renovations easier to justify.

Using home equity strategically for phased renovations

Some homeowners prefer completing large renovation plans in phases instead of funding every project at once. This approach may make renovation costs easier to manage while reducing financial pressure. 

A phased approach often works best when projects are prioritized in the following order: 

1. urgent structural or safety repairs  
2. high-use rooms such as kitchens and bathrooms  
3. income-generating improvements  
4. optional lifestyle upgrades  

Phasing renovations may also reduce the risk of overspending. Large projects often uncover unexpected costs, which may increase the need for additional funds after construction begins. 

Each phase should ideally have: 

• a clear budget  

• contractor estimates  

• contingency savings  

• a defined completion target  

This approach may help reduce scope creep and improve budget certainty.

Using home equity financing may be a practical way to fund major home improvements, but not every renovation offers the same financial value. The strongest borrowing decisions are often tied to projects with a clear purpose and measurable long-term value.

Alpine Credits: Fast, flexible home equity loans for renovations

Alpine Credits specializes in helping homeowners access financing based on their home equity. Whether you have excellent credit or have experienced credit challenges, we can help you explore your options and determine whether a hom is the right fit for your home renovation goals.

Since 1969, we have proudly helped thousands of Canadians secure the funding they need in just three, straightforward steps:

1. Apply online— the application with Alpine Credits is simple, allowing you to finish it within minutes.
2. Get approved— if you own your home and have at least 25% in equity, you are eligible for a home equity loan from Alpine Credits. Get approved in minutes.
3. Receive funding— Alpine Credits will directly deposit the money in your bank account within a few days of your approval.

Contact one of our Financial Solutions Specialists for a free, no-obligation quote today. 

Apply Now

FAQs

Can I finance home improvements using my property’s equity?

Yes, if you have sufficient home equity, you may be able to borrow against it to fund renovations, with options like a home equity loan from lenders such as Alpine Credits, depending on factors like equity, income, and LTV ratio.

Which home renovations are most worth financing with home equity?

Renovations that are often worth financing include essential repairs, kitchen or bathroom upgrades, basement finishing, legal suite conversions, energy-efficient improvements, and exterior upgrades that improve curb appeal.

Is it smart to borrow against home equity for renovations?

Borrowing against home equity may make sense when the renovation serves a clear financial purpose and the payments fit comfortably within your budget. Projects with limited resale value or weak cost-saving benefits may require more caution.

Should I fix major repairs before cosmetic renovations?

In most cases, yes. Addressing structural, water, electrical, plumbing, or heating issues first may help protect property value and reduce the risk of larger repair costs later. 

Are energy-efficient renovations worth financing?

They may be worthwhile when they reduce utility bills, improve comfort, and support long-term savings. Homeowners may also benefit from rebates, grants, or tax incentives that lower overall renovation costs.