Almost nobody pays for a renovation in one lump sum from a chequing account. A kitchen, a basement, or a bathroom that's priced right typically runs from the mid five figures past six, and most homeowners cover that with some form of borrowing. Which option you pick doesn't just change the interest bill, it changes what's on the line if a payment gets missed down the road. This is a general overview, not financial advice for your specific situation. A mortgage broker or your own bank can tell you exactly what you qualify for and at what rate. What follows is a plain comparison of what's actually available in Ontario right now.
Key Takeaways
- A HELOC is usually the cheapest way to borrow against home equity, priced close to prime, but the rate floats and your house sits behind the debt.
- A cash-out refinance can land a lower fixed rate than a HELOC, but breaking a fixed-rate mortgage term early to get one usually means a real penalty.
- Personal loans and 0% contractor financing plans don't touch your home title and arrive fast, at the cost of a higher rate once any promotional window ends.
- The federal Greener Homes Loan stopped taking new applications on October 1, 2025. It isn't a live option in 2026, whatever a general search might suggest.
- Interest on borrowed renovation money is only tax-deductible when the funds go toward earning income, an investment or rental property, not a personal residence. That's a CRA rule worth knowing before assuming a deduction applies.
How the options stack up
| Option | Typical use case | Rough rate range (source) | Approval speed | Main risk |
|---|---|---|---|---|
| HELOC | Ongoing project with staged draws (cabinets, then countertops, then appliances) | Roughly mid-4% to mid-5%, prime + 0 to 1% (WOWA) | Slower; needs an appraisal and equity room | Variable rate; secured against your home |
| Cash-out refinance | Large, single-draw project rolled into the mortgage | Roughly 4.0% to 4.9% fixed (Ratehub) | Slowest; replaces the whole mortgage | Prepayment penalty if breaking an existing term |
| Personal loan | Mid-sized project, little or no home equity available | Roughly 6% to 20%, average near 8% (Finder) | Fast; no appraisal | Higher fixed rate; shorter term raises the payment |
| Contractor / retailer financing | Smaller job, or a homeowner who wants to lock in 0% for a fixed window | 0% promotional, or a standard APR near personal-loan territory | Fastest; prequalify in minutes | Standard APR applies retroactively or going forward if the promo window is missed |
| Credit card | A deposit or a small overrun, not the renovation itself | Roughly 20% to 24% (Koho) | Instant | Highest ongoing cost of any option here |
What a lender is actually weighing
Before any of these products come into play, a lender is looking at four things: how much equity sits in your home, your credit score, your income against your existing debt, and how much you want to borrow. A homeowner with real equity and a clean credit file can pick from the whole table above at a competitive rate. Someone earlier into their mortgage, or with a thinner credit history, gets pushed toward the unsecured end, a personal loan, contractor financing, or a card, because the lender has nothing to fall back on if the payments stop.
Scale matters too, and not just in the obvious way. A bathroom renovation in Oakville that swaps a tub for a curbless shower and reworks the plumbing is a different borrowing decision than a full basement renovation in Hamilton that adds a legal secondary suite, permits, egress, fire separation, and all. The first might sit comfortably on a personal loan or a 0% promotional plan. The second is large enough, and often financed alongside future rental income, that the rate gap between a HELOC and anything unsecured is worth running the numbers on before you sign.
The five options, briefly
The table above covers the numbers. Here's what actually separates these products in practice, in enough detail to know which section of this decision applies to you, before the full mechanics.
A HELOC draws against home equity in stages, which suits a project billed as it progresses (cabinets, then countertops, then appliances) rather than one lump cost. The two loan-to-value caps, 65% alone and 80% combined with your existing mortgage, are what usually rule it out for anyone who bought recently. A cash-out refinance folds the renovation into a single new mortgage instead, often at a lower fixed rate than a HELOC's variable one, but breaking a fixed-rate term early to get one typically triggers a real prepayment penalty worth pricing out first. For the full rate breakdown, the appraisal process, and how the 80% cap actually plays out, our kitchen renovation financing guide walks through both in more depth using a real project-size example.
A personal loan skips the home title entirely, so it's faster and simpler on paper, at a materially higher rate than either secured option. It tends to fit a mid-sized job, say a kitchen renovation in Guelph swapping cabinets and counters without moving plumbing, where the amount doesn't justify a HELOC's appraisal cost but is too large for a card. Contractor and retailer financing, arranged through a third-party lender at checkout, is the fastest of all and can be genuinely free inside a 0% promotional window, but reverts to a standard APR the moment that window closes or the balance isn't cleared in time. A credit card belongs on a deposit or a small overrun, not the renovation itself, given rates that run 20% to 24% (Koho) with no ceiling on how much of that you carry.
A program that keeps coming up but isn't live anymore
The Canada Greener Homes Loan offered interest-free financing up to $40,000 for eligible energy-efficiency retrofits. It stopped accepting new applications on October 1, 2025, once its allocated funding ran out (Ecohome's coverage of the program's closure; Natural Resources Canada's own program page). It shows up in enough renovation-financing searches that it's worth ruling out directly: applications already submitted before the deadline are still being processed, but there's no new intake in 2026. A renovation that happens to add a heat pump or new windows might still qualify for a smaller provincial or utility rebate, worth a quick check, but the federal loan itself is gone.
When the interest might actually be deductible
Interest on money borrowed for a renovation is not deductible against your personal income just because the loan is secured by your house. The CRA's rule, laid out in its Income Tax Folio on interest deductibility, ties the deduction to what the borrowed money is used for, not what secures it: interest is deductible when the funds are used to earn income from a business or property (Canada Revenue Agency). In practice, that means a HELOC draw used to renovate a rental unit or an income-producing secondary suite can qualify, while the same draw spent on your own kitchen or primary bathroom doesn't, regardless of which property secures the line of credit. Mixing personal and rental draws from the same HELOC muddies that tracing and can put part of the deduction at risk. This is exactly the kind of detail worth confirming with an accountant against your own situation before you assume it applies, general information here isn't a substitute for that conversation.
The ratios every lender runs, regardless of product
Two numbers do most of the qualifying work behind any of these options. Your Gross Debt Service ratio measures housing costs against income; your Total Debt Service ratio adds every other debt payment on top, including whatever new financing you're about to take on. Conventional lending generally caps these at 39% GDS and 44% TDS (Ratehub's explainer on debt service ratios). A new HELOC draw, loan payment, or contractor financing installment moves your TDS the same way any other debt would. For a homeowner already close to that ceiling on their existing mortgage, it's often that ratio, not the renovation's actual price tag, that decides how much they can realistically borrow.
Financing decided, cost still isn't
None of this matters much if the number you're financing against isn't the real number. A contractor's low bid that turns into change orders once the walls are open borrows the wrong amount, and the financing math falls apart along with it. Our piece on why an itemized quote matters more than a low price walks through why getting the actual, fixed scope in writing has to come before the financing conversation, not after. And if you're still choosing who does the work, our guide to picking a renovation contractor in Ontario covers what to ask before you sign anything, financing terms included.
Once you know the real cost, a written, itemized quote from a measure at the actual site, we're happy to walk through what that number looks like against your specific financing options. Get in touch and we'll start with the on-site measure, not a guess over the phone.
Frequently asked questions
Is a HELOC or a personal loan better for financing a renovation?
It depends mainly on how much home equity you have. A HELOC is usually cheaper if you qualify, since it's secured and priced close to prime, and it lets you draw funds in stages as the job runs. A personal loan is faster, skips the appraisal, and makes more sense for a smaller project or a homeowner without much equity built up. Actual offers vary by lender, so it's worth comparing more than one before deciding.
Can I roll a renovation into my mortgage?
Yes, through a cash-out refinance, as long as the new mortgage stays at or under 80% of your home's appraised value. If you're partway through a fixed-rate term, breaking it to refinance usually triggers a prepayment penalty, so it's worth weighing that cost against what a lower blended rate would actually save, especially if your renewal date is already coming up.
Does 0% contractor financing really cost nothing?
Only if the balance is paid off inside the promotional window, typically 12 to 24 months. Miss that deadline, or the plan offered wasn't a true promotional term, and a standard APR applies instead, one that's generally comparable to a personal loan rather than free.
Is the Canada Greener Homes Loan still available in 2026?
No. It stopped accepting new applications on October 1, 2025, once its funding was allocated. Existing applications submitted before that date are still being processed, but there's no new intake this year.
Is interest on a renovation loan tax-deductible?
Generally not, if the renovation is on your own home. The CRA ties interest deductibility to what the borrowed money earns income from, not what secures the loan, so a HELOC or loan used to renovate a rental or income-producing property can qualify where the same draw spent on your primary residence doesn't. Confirm the specifics with an accountant before assuming a deduction applies.