Renovation financing in Mississauga and the GTA

There are three sensible ways to fund a renovation against a home, and one that costs far more than most people realise.

When each option fits

• You are buying a home that needs a kitchen, bathrooms or a roof before you move in.
• You are renovating and have been quoted contractor financing at a rate you do not like.
• You are adding a basement suite or a garden suite and want to fund it against the property.
• You want to draw in stages rather than borrow the whole budget on day one.
• You are renovating to sell and want the cheapest short-term money available.

How to fund it cheaply

• If you already own, a refinance folds the renovation budget into the mortgage at mortgage rates.
• A HELOC lets you draw in stages as the work progresses, which suits a budget that is still moving.
• Buying a home that needs work? A Purchase Plus Improvements mortgage lends against what the home will be worth after the renovation, not what it is worth today.
• Purchase Plus Improvements funds are held by your lawyer and released once the work is complete and verified. Plan to float the cost until then.
• Contractor financing and store credit plans often run at credit card rates. With equity in the home you are paying two or three times what the same money costs through a mortgage.
• Get written contractor quotes before you apply. Lenders fund against quotes, not estimates.

Documents to gather

• Written quotes from licensed contractors covering the full scope of work
• Government photo ID for each applicant
• Income confirmation for each applicant
• Current mortgage statement and property tax bill
• Purchase agreement, if this is a Purchase Plus Improvements file
• Permits or drawings where the work is structural

How the money is released

1. 01 Price the work properlyLenders advance against written quotes, not estimates. Underquoting is the most common reason these files run short.
2. 02 Choose the structureRefinance, HELOC, or Purchase Plus Improvements. Each suits a different situation and we will say which fits.
3. 03 Appraisal on the as-improved valueFor Purchase Plus Improvements, the appraiser values the home as if the work were already done.
4. 04 Work, verify, releaseFunds are held by your lawyer and released once the work is complete and inspected.

Questions we get asked

How does Purchase Plus Improvements work?

You borrow against the home's value after renovation. The improvement funds are held by your lawyer and released once the work is finished and verified. You need to be able to pay the contractor before the release, or arrange terms with them.

How much can I add for improvements?

Programs vary, and both a percentage of value and a hard dollar cap usually apply. Get the specific limit confirmed before you sign a purchase agreement based on it.

Do I need licensed contractors?

For Purchase Plus Improvements, yes, with written quotes. Do-it-yourself work is generally not eligible because there is no invoice to verify.

Refinance or HELOC for a renovation?

A refinance fixes the rate and suits a known budget. A HELOC suits staged work and uncertain totals, but the rate is variable and the minimum payment is interest only.