Have you fallen in love with a house in Quebec that you need to renovate but don’t want to dip into your savings? Do you want to renovate your home to increase its value before putting it up for sale? Or simply to gain in comfort?

Turn to a renovation loan! Our brokers will help you with your renovation loan.

Things to consider before applying for a renovation loan

Before taking out any type of mortgage for a renovation loan, there are several things to consider.

Why renovate?

Here are 3 reasons why you may want to consider a home improvement project.

Investing in your home

Renovations to your home allow your property to increase in value on the Quebec real estate market. This is notably the case when you renovate a bathroom or a kitchen.

Gain in comfort

Renovating your home also allows you to gain in comfort in addition to bringing an additional value at the time of the sale. This is the case, for example, by installing a heater or air conditioning. These improvements allow you to gain in comfort, however the money invested will not always allow you to realize a higher value on the resale.

Save energy

Some renovation work allows you to save energy. This is the case for work related to the replacement of old doors, windows or the roof. Keep in mind that doors and windows must always be in good condition. This type of work can only be considered up to 40% of the future value of your home. The interest is to allow you to improve the energy efficiency of your house and to lower your heating budget. The same is true for the heat pump, air conditioning and heating, but this work will not necessarily increase your future value.

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Renovation Loan Amount and Financing

The amount depends on the lenders and the policies of each financial institution. The amount requested to carry out the renovation work must be supported in the market.

So, for a property valued at $500,000 and you have already paid $250,000, we could refinance at 80%, or $400,000, from which we subtract the $250,000 to be paid. You could therefore withdraw an equity of $150,000 for the payment of the work or something else.

Financing options for your renovation loan

Our brokers offer 9 options for financing your home improvement loan.

Use your savings

Use your personal savings for your renovation loan, especially if you are doing small jobs (painting, laying parquet…). This will allow you to lower your down payment and keep control of the work and the duration.

Use a credit card to finance the renovation

You can also use your credit card to finance renovations. However, be very careful to pay off credit accounts in full to avoid interest rates that exceed 18%.

Apply for a personal loan

It is possible to use a personal loan to finance your renovations.
The interest rate will often be lower than that of a credit card but higher than that of your mortgage.
You can repay this loan on a regular basis over a period of 1 to 5 years and pay it off early without penalty.

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Financing your renovation loan with your Personal Line of Credit

Another option would be to finance your home improvement loan with your personal line of credit. We recommend that you use a line of credit to finance your long-term projects. This type of financing allows you to borrow when you need to without having to re-apply and pay interest only on the amount borrowed, however the rate will be higher than your mortgage or home equity line of credit.

Use your line of credit to finance your renovation

The line of credit can be a one-time solution, the interest rates are higher than the rate of your mortgage or line of credit, but it allows flexibility in its use, repayments are possible at any time.

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Get a renovation loan by refinancing your property

If you decide to refinance your home to finance your renovations, you benefit from a lower interest rate than a regular credit card or loan, or a personal line of credit,
. This type of financing is recommended if you are thinking of doing more extensive renovations and the repayment of this loan is done over a longer period.

For example, if you decide to refinance your home, it is possible to obtain an amount for your renovations based on your current mortgage balance. It is possible to obtain a refinancing up to 80% of the value of your property (fair market value).

Financing the renovation loan with your mortgage at the time of purchase

If the house you are about to buy needs some work or renovations, then we advise you to include them in the mortgage amount. In any case, the interest rate will remain lower than all other options.

Government grants and tax credits for energy-efficient renovations

There are various government grants and tax credits that you can use to finance your renovations. The government, provinces, municipalities and local utilities make grants available to reduce energy consumption, however it is important to understand that you will need to do the work and finance it first, then if you qualify the tax credits or grants will be paid to you.

The CMHC Green Home program provides a premium rebate of up to 25%. You are eligible if you buy, build, or renovate a home to make it energy efficient using a CMHC insured mortgage.

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Is an interest-free renovation loan possible?

Since 2021, the federal government of Canada, through CMHC, has put in place a subsidy program for greener homes allowing Canadian households to have access to a loan for energy renovations at 0% interest for a period of 5 years.

The purpose of these mortgages is to make the property more energy efficient. Thus, the loan amount is to be used only for renovations concerning :

  • Airtightness of the walls
  • Replacement of old doors and windows
  • Replacement of inefficient heating systems

For more details, do not hesitate to contact us. We will do our best to present you with the most suitable financing options for your situation.

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