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How to finance your home renovations

August 17 2017 by Multi-Prêts Hypothèques
What you'll learn
  • Self-financing
  • For small projects
  • For large projects

There comes a time when a little change can do a world of good. If minor aesthetic changes aren’t enough, and you don’t want to go through the hassle of moving, a renovation project may be in order.

If you’re looking to borrow in order to renovate your new home, you should read this article instead.

Renovations can be carried out for many reasons: realize a new design, increase resale value, convert a room, save energy, install a pool, etc. Regardless of the reason for your project, contact a Multi-Prêts broker to find out more about your available options.

Without external financing

If you have the means or the patience to save up the required amount, you may do so. However, if your credit card has a rewards program, use it and repay it immediately to gain points.

stacked credit cards

Financing with a credit card, loan, or home equity line of credit

Although they have relatively high interest rates, especially when it comes to credit cards, these types of financing options are easily accessible. You probably already have a credit card, and most financial institutions allow you to apply for a personal loan online.

For renovations that could stretch out over many months, a home equity line of credit is the better suited financing option of the three. Unlike a loan, for which interest is calculated on the entire balance from the start, a home equity line of credit only generates interest on the amount used over the month. It does, however, require you to be more disciplined in your reimbursement habits, unlike a loan which usually comes with a set repayment timeline of 12 to 60 months.

Here are some apps that can help you manage your budget.

house and a piggy bank in hands

Financing large-scale projects

For projects that require a greater investment, you must consider mortgage refinancing, a secured line of credit and a home equity loan.

Refinancing holds the huge advantage of monthly payments, as the cost of the project is spread out over a long period of time and the interest rate is lower than on a personal loan.

On the other hand, secured lines of credit and home equity loans are similar to their regular equivalents, but the collateral generally allows you to get a lower rate.

With a line of credit, you can borrow up to 65% of the property’s market value. The combination of a line of credit (65% maximum) and a loan (fixed or variable) can bring it up to 80%. This can be subjected to certain conditions and require you to present certain invoices. Read our article to find out more.

Interest rates are lower than previously mentioned financing methods. If a chartered appraisal is required, the lender covers the costs. Many lenders will offer to cover a portion of notary fees through a cash back. It’s best to consult a broker to compare each lender’s offers and determine the best option.

Key takeaways
  • If you are financing the project yourself and your credit card has a rewards program, use it and repay it immediately to gain points.
  • Credit cards, personal loans, and lines of credit all have the advantage of being easily accessible.
  • For projects that require a greater investment, you must consider mortgage refinancing, a secured line of credit and a home equity loan. Under certain conditions, they can allow you to borrow up to 80% of your property’s value.