5 Ways to Finance a Home Renovation in Canada (2026)

A renovation can add real value to your home — but how you pay for it decides whether the project builds equity or just adds expensive debt. These 5 ways to finance a home renovation in Canada are ranked from lowest cost to last resort for 2026, so you can match the option to the size of the job.

The short answer

The cheapest renovation financing usually comes from your home's equity — a refinance or a HELOC — because the rates are lowest. Purchase Plus Improvements works when you're buying and renovating at once, a second mortgage covers you when a refinance isn't possible, and an unsecured personal loan or line of credit is the last resort for small jobs. See renovation financing options.

• Mortgage refinance (with improvements)
• Home equity line of credit (HELOC)
• Purchase Plus Improvements (at purchase)
• Second mortgage
• Personal loan or line of credit (last resort)

1. Mortgage refinance

Refinancing replaces your existing mortgage with a larger one and gives you the difference in cash to fund the renovation. Because it's secured against your home at first-mortgage rates, it's usually the cheapest way to finance a major project — and it folds the cost into one predictable payment.

You can typically access up to 80% of your home's value, minus what you still owe. Breaking your current term early may trigger a prepayment penalty, so it works best at renewal or when the equity gain justifies the cost. See how mortgage refinancing works.

2. Home equity line of credit (HELOC)

A HELOC is a revolving credit line secured against your home equity. You draw only what you need, when you need it, and pay interest only on the balance you've used — which makes it ideal for phased renovations where costs trickle in over months.

Rates are higher than a refinanced first mortgage but far lower than unsecured credit, and you can reuse the limit as you repay. Estimate your costs with the HELOC payment calculator, or learn more about a home equity line of credit.

3. Purchase Plus Improvements

Purchase Plus Improvements rolls the cost of renovations into the mortgage when you buy a home, so you finance the purchase price and the upgrades together at one low rate. It's built for buyers taking on a fixer-upper who don't have separate cash for the work.

The lender approves a budget based on quotes, advances the funds after the work is verified, and you only need the down payment on the improved value. It's the best option when the renovation and the purchase happen at the same time.

4. Second mortgage

A second mortgage sits behind your existing first mortgage and lets you tap equity without touching the original loan — useful when your first mortgage has a great rate or a steep prepayment penalty you don't want to break.

Rates are higher than a first mortgage because the lender is in second position, but it's still secured against your home and cheaper than unsecured borrowing. It also helps when a full refinance won't qualify on income or credit. See how a second mortgage works.

5. Personal loan or line of credit

An unsecured personal loan or line of credit needs no equity and funds quickly, which makes it fine for small jobs — a bathroom refresh or new appliances. But it carries the highest rates of any option here, so it's strictly a last resort for renovations you can repay fast.

For anything large, the interest cost of unsecured borrowing usually outweighs the convenience. If you have equity, one of the secured options above will almost always cost you less over the life of the project.

Frequently asked questions

What's the cheapest way to finance a renovation in Canada?

Tapping your home equity is usually cheapest, because secured rates are well below unsecured credit. A refinance gives the lowest rate for a large project; a HELOC is best when costs come in stages.

HELOC or refinance for a renovation?

Choose a refinance for a single large lump sum at the lowest rate, especially at renewal. Choose a HELOC for flexible, phased spending where you draw and repay as the work progresses.

Can I finance renovations when I buy a home?

Yes. Purchase Plus Improvements rolls renovation costs into your mortgage at the time of purchase, so a fixer-upper is financed at one mortgage rate instead of a separate, more expensive loan.

Should I use a personal loan for a renovation?

Only for small jobs you can repay quickly. Unsecured loans and lines of credit carry the highest rates here, so for anything major an equity-based option will cost you far less.

Not sure which option fits? Ask Maya a quick question any time, or talk to an advisor who will compare the costs against your equity and term so you pick the cheapest route for your project.