Home renovation financing in Ontario: every option compared

Canadians take renovations seriously. Re/Max Canada estimated that renovation spending topped $300 billion over the pandemic years, and many Ontario homeowners now renovate rather than move to avoid land transfer tax and today's prices.

This guide compares every realistic option with current 2026 numbers, shows the math on when borrowing against your home beats an unsecured loan, and covers what to do if a bank has already said no.

What Major Renovations Cost in Ontario in 2026

Before choosing a financing product, size the need. Borrowing $20,000 and borrowing $150,000 point you toward different tools. Here are typical ranges for the Greater Toronto Area, based on 2026 Toronto renovation cost guides; smaller Ontario markets often run 10 to 20 percent lower.

Two budgeting rules matter here. First, add a contingency of 10 to 15 percent, because older Ontario housing stock hides surprises behind the drywall. Second, confirm permits and, for secondary suites, zoning and fire-code compliance before you borrow; financing that arrives before approvals do is money you pay interest on while nothing happens.

Your Renovation Financing Options at a Glance

Rates below reflect August 2026 conditions. The Bank of Canada's policy rate sits at 2.25 percent, which puts the prime rate at 4.45 percent, steady since late 2025.

Borrowing Against Home Equity: HELOC, Refinance, or Second Mortgage

Equity-based options almost always carry the lowest rates because the lender holds security against your home. The trade-offs are setup time, qualification hurdles, and the house standing behind the debt.

Home equity line of credit (HELOC)

A HELOC is a revolving credit line secured against your home. Federally regulated lenders cap the revolving portion at 65 percent of your home's value, with total secured borrowing (mortgage plus HELOC) capped at 80 percent. You draw funds as invoices come due, pay interest only on what you use, and most lenders allow interest-only minimum payments.

For renovations specifically, the draw-as-you-go structure fits how contractors actually bill: deposit, rough-in, completion. You are not paying interest on month-six money in month one. The main risks are the variable rate and the discipline required to actually pay the balance down. For a full breakdown of rates, qualification, and how banks compare with alternative lenders, see our HELOC and home equity loan guide for the GTA.

Cash-out refinance

Refinancing replaces your existing mortgage with a larger one, up to 80 percent of appraised value, and hands you the difference in cash. It usually offers the lowest rate of any option and one simple payment.

The catch is timing. Breaking a fixed-rate mortgage mid-term triggers a prepayment penalty, which on a fixed rate is the greater of three months' interest or the interest rate differential, and that can run into five figures. Refinancing also means requalifying under the federal stress test, at the greater of your contract rate plus 2 percentage points or 5.25 percent. Refinancing makes the most sense at renewal, or when the penalty is small relative to the project.

Second mortgage or home equity loan

A second mortgage is a separate loan registered behind your existing mortgage. Your first mortgage, and its rate, stays untouched, which matters if you locked in a low rate years ago and refuse to give it up. Funds arrive as a lump sum with fixed payments over a set term.

Banks offer home equity loans to well-qualified borrowers at rates near mortgage pricing, but many are slow to approve second positions. Private and alternative lenders fill that gap at roughly 8 to 12 percent, qualifying primarily on the equity in the property. We cover positioning, costs, and exit strategies in detail in our guide to second mortgages in Ontario.

Private Renovation Loans: When the Bank Says No or the Clock Is Ticking

Bank financing assumes a tidy file: strong credit, salaried income, and a project that has not started yet. Plenty of real renovations do not look like that. Private renovation loans, usually structured as a first or second mortgage from a private lender or mortgage investment corporation, are underwritten primarily on the property and its equity rather than on your credit score and pay stubs.

They fit four situations in particular:

1. Credit blemishes. A past consumer proposal, late payments, or high card balances that push you below bank thresholds. If this is you, start with our overview of bad credit mortgage options in Ontario.
2. Self-employed or non-traditional income. Business owners who write down income legitimately often fail bank debt-service ratios on paper while carrying strong cash flow in practice.
3. Mid-project overruns. The renovation is half done, the budget is gone, and no bank wants to lend against a torn-open house. Private lenders will look at the as-is and as-complete values.
4. Speed. Contractor deposits and material orders will not wait six weeks. Private files can fund in days.

Be clear-eyed about cost. Beyond the 8 to 12 percent rate, expect lender and broker fees of roughly 2 to 4 percent of the loan, plus legal and appraisal costs. Private money works best as a bridge, typically one to two years, with a defined exit: refinance with a bank once the renovation lifts the home's value, sell, or repay from income. How the underwriting, terms, and exits actually work is covered in our plain-language guide to private mortgages in Ontario.

One boundary worth drawing: if your project is a full gut, a top-up storey, or a teardown-rebuild, lenders treat it as construction rather than renovation, with staged draws and inspections. That world is covered separately in our guide to construction financing in Ontario.

Buying a Fixer-Upper: Purchase Plus Improvements

If you have not bought the house yet, a purchase plus improvements mortgage folds renovation costs into the mortgage on closing day. Under CMHC's improvement program, insured buyers can finance the purchase and the improvements together with as little as 5 percent down, based on the as-improved value of the property.

The mechanics matter: you submit contractor quotes with your application, your lawyer holds back the improvement funds, and they are released only after the work is completed and verified. Because you or your contractor carry costs in the interim, it suits defined, quote-able projects such as a kitchen, flooring, or a roof, usually completed within 90 to 180 days of closing.

Government Programs That Still Exist in 2026

Government renovation incentives change quickly, and much of what ranks online is out of date. Here is the current picture.

Canada Secondary Suite Loan Program

If your renovation adds a legal secondary suite, such as a basement apartment, laneway home, or garden suite, this is the cheapest capital in the country. The federal program offers up to $80,000 at 2 percent interest over 15 years, after the government doubled the original $40,000 limit. The suite must be a new, legal unit that meets municipal requirements, and program funding is delivered through CMHC.

Since full suite conversions in Ontario commonly run $80,000 to $180,000, many homeowners pair the program loan with an equity-based loan for the remainder. The blended cost still lands far below financing the whole project privately, and the finished suite adds rental income that helps you requalify with mainstream lenders later.

Ontario Home Renovation Savings Program

Ontario's Home Renovation Savings Program, delivered through Save on Energy and Enbridge Gas, offers rebates on energy-efficiency upgrades, including cold-climate heat pumps, insulation, air sealing, windows, and smart thermostats. Rebates reduce project costs directly, so apply the program first and finance the net amount.

What is gone

The Canada Greener Homes Grant closed to new applicants in 2024, and the interest-free Canada Greener Homes Loan stopped accepting applications on October 1, 2025. If an article or a contractor pitches either as available, the information is stale.

When Equity-Based Financing Beats an Unsecured Loan (and When It Does Not)

Here is the decision most homeowners actually face: use the house, or take an unsecured personal loan and leave the title alone. The honest answer depends on the amount, the payoff timeline, and your equity.

Suppose, as a purely hypothetical example, you own a home in Mississauga worth $1,000,000 with $600,000 remaining on the mortgage, and you need $80,000 for a kitchen and basement project. At 80 percent loan-to-value, up to $200,000 of equity is accessible, so all secured options are on the table.

On identical five-year payoffs, the HELOC saves roughly $14,000 in interest versus the unsecured loan on this project. That is the core case for equity-based borrowing: on renovation-sized amounts, the rate gap compounds into real money.

But secured borrowing carries setup costs the tables hide: appraisal (roughly $300 to $600), legal and registration fees, and potentially discharge or penalty costs. Spread over a large loan they are trivial; on a small one they are not.

So the practical rule: unsecured loans win for projects under roughly $20,000 to $25,000 that you can repay within two or three years, when you have limited equity, or when you simply do not want a charge on title. Equity-based financing wins for anything larger or longer, and it is the only realistic path for five-figure and six-figure renovations. The private second mortgage row is not a rate winner; it is a speed and access winner, priced between bank money and unsecured debt, for borrowers the first two rows are not available to.

How to Choose: A Short Decision Framework

Home renovation financing in Ontario comes down to four questions:

1. How much do you need? Under about $25,000 with a quick payoff, compare unsecured loans against a HELOC you may already have. Above that, equity-based options almost always cost less.
2. How much equity do you have? Total secured borrowing generally caps at 80 percent of appraised value. Thin equity points to unsecured borrowing, phasing the project, or the Secondary Suite Loan Program if a suite is the goal.
3. Would you have to break a good mortgage? If your first mortgage carries a rate you cannot replace, a HELOC or second mortgage protects it. If you are at renewal anyway, a refinance is usually cheapest.
4. Will a bank approve you in time? If credit, income documentation, or an in-progress renovation gets you declined, or your timeline is measured in days, a private renovation loan bridges the gap while you build toward a bank exit.

Whatever the product, collect any government money first, finance the net cost, and keep your contingency inside the approved amount.

Frequently Asked Questions

How much can I borrow against my home for renovations in Ontario?

Most lenders allow total secured borrowing up to 80 percent of your home's appraised value, minus your current mortgage balance. On a $900,000 home with a $550,000 mortgage, that leaves up to $170,000 in accessible equity. HELOCs specifically cap the revolving portion at 65 percent of value.

What credit score do I need for a renovation loan in Ontario?

Banks generally look for scores of roughly 650 to 680 or higher, along with provable income that keeps debt-service ratios inside their limits. Private and alternative lenders qualify primarily on your equity, so meaningful credit issues do not automatically end your options.

Can I get renovation financing if I am self-employed or have bad credit?

Yes. Private lenders and mortgage investment corporations underwrite on the property's equity and value rather than pay stubs and credit scores, typically at 8 to 12 percent plus fees. These loans work best as one-to-two-year bridges with a planned refinance or sale as the exit.

Is a HELOC or a refinance cheaper for a renovation?

A refinance usually carries the lower rate, but breaking a fixed mortgage mid-term can trigger a penalty that erases the savings. A HELOC costs slightly more, charges interest only on what you draw, and leaves your existing mortgage untouched. At renewal, refinancing tends to win; mid-term, the HELOC often does.

Is the Canada Greener Homes Loan still available?

No. The interest-free Greener Homes Loan closed to new applications on October 1, 2025, and the Greener Homes Grant closed in 2024. Current options include the Canada Secondary Suite Loan Program, up to $80,000 at 2 percent for legal secondary suites, and Ontario's Home Renovation Savings Program rebates.

How fast can I get renovation financing?

Unsecured loans and credit lines can fund within days. HELOCs and refinances typically take two to six weeks because they require an appraisal, underwriting, and legal registration. Private renovation loans are the fastest secured option and can close in as little as a few days when equity is clear.

Funding Your Renovation When Timing and Flexibility Matter

Most of the options above run through banks, and for borrowers with clean files and flexible timelines, that is where they should start. But renovations have a habit of not waiting for bank timelines, and plenty of strong projects belong to owners whose files banks decline.

Richview Capital is a Canadian mortgage investment corporation that provides alternative mortgage financing secured by real estate, including second mortgages and private loans that Ontario homeowners use to fund renovations when speed, equity access, or qualification flexibility is the deciding factor. We lend on the strength of the property and structure terms with a clear exit in mind, whether that is a bank refinance after the work lifts your home's value or a sale.

If you are weighing renovation financing options, or a lender has already said no, contact us and we will walk through what your equity supports and whether a private structure makes sense for your project.

• Home Renovation Financing Ontario
• Renovation Loan Ontario
• HELOC Renovation
• Private Renovation Loan
• Secondary Suite Loan Program
• Home Equity Renovation
• Richview Capital Borrowers
• Ontario Renovation Costs 2026

Richview Capital MIC is a licensed Mortgage Investment Corporation (Mortgage Administrator License #13171). This article is educational information for Ontario borrowers — not legal, financial, or tax advice. See About and Disclaimer.