Financing Your Renovation: Line of Credit, Refinancing, Loan or Progress Payments?

Once the quote is in hand, one question almost always follows: how do I pay for the work? Savings, line of credit, refinancing or a loan: each option has its advantages. Here is an overview of the most common options in Canada, and the rules that protect homeowners in Ontario.

Home equity line of credit (HELOC)

A line of credit secured by your home is the most common way to pay for a major renovation. You only borrow what you need, as the work progresses, and only pay interest on the amount used.

• With federally regulated banks, the line of credit portion is capped at 65% of the home's value.
• All borrowing secured by the home (mortgage included) cannot exceed 80% of its value.
• Credit unions, which are provincially regulated, may apply different rules.

The rate is usually variable: leave a safety margin in case rates rise.

Mortgage refinancing

Refinancing means renegotiating your mortgage for a larger amount to unlock the equity built up in the home. The rate is often lower than a personal loan, but compare prepayment penalties, legal fees and appraisal costs.

Secondary suites

Since January 15, 2025, homeowners can refinance with mortgage insurance to add a secondary suite (basement, garden suite): up to 90% of the home's value after the work, for a property worth up to $2 million, with amortization up to 30 years. A good option if the future rent helps with repayment.

Personal loan

For a smaller project, a personal loan or personal line of credit avoids using your home as security. It is quicker to arrange, but the rate is usually higher. Compare the total cost over the life of the loan, not just the monthly payment.

The City of Toronto HELP loan

For energy-efficiency work (heat pump, windows, insulation, solar), the City of Toronto lends up to $125,000, repaid through your property tax bill over 5 to 20 years. Details are in our article on energy-efficiency rebates.

Progress payments

For most projects, payment is made in several instalments tied to the progress of the work: a deposit at signing, then payments at defined stages (end of demolition, end of plumbing and electrical, completion). This way, you pay for what has been done.

Your rights in Ontario

Ontario's Consumer Protection Act governs renovation contracts:

• Any renovation contract over $50 must be in writing. It must state the contractor, a description of the work and materials, the warranty, the total price, the payment schedule (including the deposit) and the start and end dates.
• For a contract signed at your home, you have 10 days to cancel without penalty.
• If an estimate is part of the contract, the final price cannot exceed it by more than 10% without your written agreement.
• The Government of Ontario recommends not paying a deposit of more than 10% of the price (a recommendation, not a legal limit).

In addition, Ontario's Construction Act provides for a 10% holdback on payments, released after completion if no lien has been registered. How it applies to residential projects can be complex: check with a lawyer if in doubt.

Frequently asked questions