Clover Mortgage Can Help Your Home Renovation Dreams Come True With A Quick And Easy Home Renovation Loan!
Whether you are interested in renovating your home to update it’s look, expanding your home by adding an additional section to it, or improving your home for the purpose of continuing to live in it, rent it out, or sell it, Clover Mortgage has you covered financially!
If you are like most Canadians, you might not have enough money saved up to pay for all of the renovations yourself. Luckily Clover is here to help by offering you a wide range of financing options to help you finance your renovation project at an affordable rate.
We can help you find the right financing solution to finance all of your renovation costs including renovating a bathroom, renovating a basement, adding side or rear extension to your home, adding a garage, refinishing the exterior of your home, repairing damages, or for any other renovation need that you might have. Since renovations can be very costly and sometimes required unexpectedly, it can be hard to save up enough money to cover the costs.
Here are a few financing options that Clover Mortgage can help you with!
How Can I Finance My Home Renovation?
Many people think that going to a home renovation centre such as Home Depot or IKEA and applying for their store credit card is a good way to pay for their home renovations. The reality is that many of those store credit cards come with interest rates that are significantly higher than those of more traditional financial lending institutions. Fortunately, Clover has better options for your that can help make paying for your home renovations easier and less expensive.
A Home Equity Line Of Credit (HELOC)
If you have enough equity in your home then you can leverage that equity in order to obtain a home equity line of credit, commonly known as a HELOC. A HELOC is a great option if you plan on pulling money in and out from your credit line. The more equity that you have available in your home, the larger the HELOC loan you can be approved for. If you have enough equity in your home, then you might be able to get a large enough HELOC to cover the costs of all of your renovations. A HELOC is a good option because of the low interest rates that are currently available to borrowers. A HELOC from a bank can start as low as 3% provided that you qualify for that rate.
A Home Equity Loan Or Second Mortgage
With today’s increasingly strict bank rules and mortgage stress test that banks have to follow, it has become increasingly difficult to qualify for a HELOC at a chartered bank. If you need the money quickly, or if your bank turns you down, then you can always apply for a home equity loan or second mortgage. Though the second mortgage rates tend to be higher than a HELOC from a bank, you will find it much easier to qualify for a higher loan amount and get approved with much less hassle and stress.
Even though the rates tend to be higher than the ones you might get through a HELOC at a bank, second mortgage rates and home equity loan rates are still much lower than the interest rates you would get through a store credit card.
Refinance Your Current Mortgage
Another option for financing your home renovation is to refinance your entire current mortgage for a higher amount at a lower interest rate than a HELOC or a second mortgage. This can be a great option if you are several years into your current mortgage or if the value of your home has increased since you took out your current mortgage.
A Draw Mortgage
Although this option is more popular among larger renovation or construction projects, a draw mortgage can be used as a form of renovation loan. If you qualify for a draw mortgage, your funds will be advanced to you in intervals based on completing various predetermined milestones throughout the renovation project. This helps reduce the risk to the lender as they are only lending money as it is needed and as previous renovation steps are completed.
In some cases, when the renovations are substantial enough and are expected to add significant value to the home, some lenders will approve you for a draw mortgage that exceeds 100% of your home’s current value.
What is a home renovation loan?
A home renovation loan can come in many forms including a home equity loan or second mortgage, a first mortgage refinance on your existing mortgage, contractor financing, personal term loans, personal credit lines, cards, and more. Some contractors are in the business of financing their own projects and others do their financing business through third party financing companies.
Many people in Canada cannot afford to pay for an entire home renovation service with cash. As a result, they usually opt for some kind of home renovation loan to help finance some or all of the renovation project. One of the best ways to finance an improvement project is by using the equity available in your property. This type of financing is called a home equity loan or mortgage refinance.
With a home equity loan for the purposes of conducting home renovations, homeowners can select to dip into their available home equity. This typically comes in the form of a second mortgage loan, a full first mortgage refinance, or a HELOC (Home Equity Line of Credit). The homeowner would then use those funds to put towards their home renovation. This is one of the most cost-effective types of home renovation loans, since the interest rate and monthly payments tend to be smaller than with many of the other types of home renovation loans, making it easier for borrowers to service.
In the case of a first mortgage refinance, rates can start as low as 1.40%* as of April 2021 when this information was added to this page in Canada. These starting rates can change at any time, so it is recommended to check in with your mortgage broker or financial advisor for the most up to date information. As of today, April 2021, HELOC rates start as low as 2.90%**, and second mortgages or home equity loans start as low as 6.99%***. Second mortgages are also great tools for consolidation of debts. HELOC’s can also be used for consolidation purposes.
What type of loan is best for home improvements?
Due to the lower monthly payments and interest rates, borrowing by taking out a HELOC or doing a first mortgage refinance are typically the most cost-saving options when it comes to a home renovation loan. If someone needs a loan to perform their home renovations urgently, or if they cannot qualify for a HELOC or an increase in the amount of your first mortgage through a mortgage refinance, then the next best choice is often a home equity loan or second mortgage. This too tends to come at significantly lower interest rates than some of the other forms of renovation financing including home and building improvement cards, contractor provided loans, and other third-party home renovation financing companies and credit granting cards.
Home renovation financing options in Ontario
In a province like Ontario, and other parts of Canada, where the real estate markets are usually stable, if not booming, homeowners often dream of improving and upgrading the homes they live in. Since property values tend to be stable or growing suburbs outside of major cities like Toronto, London, Mississauga and Vaughan, people have an easier time to take out equity from their homes for a variety of reasons, including home renovations.
As a result, there are several home renovation financing options in Ontario. Here are a few:
A second mortgage is a type of home equity loan debt that is a quick and easy way to find money and funds out of your house using the equity that is available. Whether you need or want a large loan or a small one, a second mortgage can be obtained relatively quickly. This type of borrowing for home renovation financing gets registered on to the title of your home and comes in second position of priority behind your current first mortgage lender. Hence the name, second mortgage.
Since a second mortgage is typically funded by a private mortgage lender, the application process tends to be simple and faster than applying for a mortgage refinance or home equity line of credit (HELOC) through a bank. Because private mortgage lenders tend to have much less strict qualifying requirements, and since they are often times asset-based lender, their primary concern is typically the property itself rather than the credit worthiness of the mortgage borrower. As a result, in many cases, we can get you approved for a second mortgage within a few hours and can even have your loan funded in as little as 2 days in some circumstances. That’s right, you can receive your funds in as little as 48 hours in some cases.
Because of the ease and speed of getting a second mortgage for the purpose of renovating a home, this is one of the most popular forms of home improvement financing in Ontario.
Another type of home equity loan is a full mortgage refinance with the purposes of increasing the principal balance of the first mortgage to take advantage of some or all of the available equity in your home. If your home has risen in value since you bought it, and/or if you have paid down a fair amount of the original mortgage balance, then you will have extra equity available in your home that you might be able to draw from. Refinancing through a AAA lender can also help you save on interest payments.
The challenge with refinancing a first mortgage can sometimes be that it may take much longer and be more difficult to qualify for than a second mortgage, especially when trying to refinance your first mortgage through a bank or more traditional lending institution. The advantage, however, is that this will likely be the least expensive option both in the short term and long term.
HELOC (Home Equity Line of Credit)
Another great type home renovation loan in Ontario that you should know about is the HELOC, also known as a home equity line of credit. This type of equity loan uses the principle of lending based on the equity in your home to pay for your renovation. When going through a bank, this can be a longer process similar to refinancing your first mortgage with a bank. The advantage here is that this is an open and reusable loan which allows you to use whatever amount of the available balance you want and need to at the time and then pay it back as you please, as long as you make the minimum monthly payments which are usually interest-only. You only pay interest on money that you use when you use it, and there is no penalty to pay down a portion or your entire HELOC whenever you want. Although the interest rate tends to be a bit higher than a regular mortgage, this is a great way to add a flexible financing tool that you can use anytime.
When securing a HELOC through an alternative lender or private lender, you will be paying higher interest rates and additional fees and costs, but this can provide you with a much quicker and easier to access HELOC for time sensitive purposes. You can also control how much you take out and how much you pay back. Even a small repayment to principal will save you interest costs in the long run.
Some HELOC’s give you bank cards to access your money in cash form whenever you’d like directly from ATM’s that support these types of debit cards.
Credit cards and home improvement store cards
The benefit here is that it’s easy to obtain such financing, but the interest rates can be very high. As a result, it can be hard to pay off in a reasonable period of time preventing you from being free of this debt.
In some cases, certain larger contractor companies will offer their own renovation financing, which in many cases are obtained through a third party. This too can come with extremely high interest rates and fees making it difficult for some to afford to service the costs of the monthly payments and can take a long time to pay off before you become debt free.
Best Home Improvement Loan rates in Ontario.
When you try to look for the best home improvement loan rates in Ontario, refinancing first mortgages or getting a HELOC through a bank or “AAA” mortgage lender will usually provide you with the lowest rates. However, second mortgages, home equity loans, and private first mortgage refinancing are great lending and borrowing options when you want or need the funds as soon as possible and/or you cannot qualify with a “AAA” lender.
When it comes to getting the best home renovation loan rates in Ontario, it is important to understand what the qualification policy requirements are for the different types of renovation loan solutions and products, what the application and approval process is, and what kind of repayment terms will you be bound to. Getting into the wrong financing options and products when it comes to your home renovation can have you paying too much for too long. This is why it’s crucial that you pick a financing solution to meet your specific individual needs.
When you search online, you will find a plethora or interest rates. The table below illustrates some of the best rates for current home renovation and home improvement loans in Ontario using your home equity:
|Type of Renovation Loan
||Lowest Interest Rate*
|First Mortgage Refinance (Prime Lenders in Canada)
||Variable rate. Open with 3 months interest penalty. Fixed terms available, interest rate will differ.
||Fixed rate. Closed for 1 year. Open options and shorter terms available.
|1st Mortgage Refinance (Private Lenders in Canada)
||Fixed rate. Closed for 1 year. Open options and shorter terms available.
||Fixed rate. Closed for 1 year. Open options and shorter terms available.
What are the benefits of home renovation loans?
The benefits of home renovation loans include being able to build towards your dream home now rather than put it off until later, being able to complete a larger renovation project now and pay for it over time, being able to accomplish more without dishing out a lot of cash funds up front. You need to make sure that you select the best solutions for your needs.
For example, if you would like to improve and renovate your kitchen, bathrooms, finish your basement, fix the roof, and put a hot tub into your backyard, a project like that can easily cost you upwards of $100,000. Like many Canadian people, you might not have $100,000 laying around, but you might have enough equity available in your home that you can access as cash in order to pay for these renovations. The right kind of improvement can add tremendous value to your home.
Let’s consider that you bought your house in London, Ontario, Canada 3 years ago for $700,000 and now it’s worth $820,000. Let’s also consider that you took out a mortgage of $560,000 (80% of the original purchase price of your home. 3 years into it, you may have paid down approximately $30,000. Let’s say you wish to refinance your current mortgage up to 80% of the current value of your home. This will free up an additional $96,000 that you can access. Add the $30,000 that you already paid towards the principal of your mortgage and you can potentially take out a home equity loan of up to $126,000. So now, you can select to take out $100,000, or go for some of the fancier finishes for your kitchen and bathroom, or upgrade some of your flooring, by taking out the full $126,000 to put towards your home renos. You can also use any excess cash as a debt consolidation loan if needed to free yourself of unwanted debts.
If you qualify well for a full mortgage refinance up to 80% of your home’s current value, your new mortgage balance will be $656,000. Let’s say you go with a variable rate of 1.5% amortized over 30 years and you will be paying approximately $2,263.95 a month for the new mortgage amount. If you are only looking at the cost of that incremental $126,000 that you will be using as a home renovation loan, the monthly cost on that would be $434.84 per month. This can free up your current cash for other purposes.
Now let’s say you cannot qualify for a new increase in your first mortgage and would like to explore borrowing a second mortgage on your property to pay for this home renovation. Let’s consider the same purchase price and current value for your home. Here’s what this scenario might look like:
2nd mortgage amount = $126,000
Interest rate = 6.99%***
Lender and broker fees = $2%***
Legal fees = $2,500
Mortgage term = 1 year, interest only payments
Monthly payments = $733.95
Total fees due upon funding: $5,020
The challenge with a 2nd mortgage is that your monthly payments are usually interest-only payments, so you are not paying down the principal of the loan. This will typically require you to either make larger lump sum payments, or payoff the second mortgage loan in the future by refinancing it into a larger first mortgage. If you would prefer to factor in paying down some of the principal with each monthly payment, there are second mortgage lenders who can accommodate that.
What are the drawbacks of home improvement loans?
Like with many financial products, especially with products like loans and other forms of debt, it is important to thoroughly understand some of the potential drawbacks that can come along with it. Like with other debt, you should know that the drawbacks of home improvement loans depend on the type of loan that you end up getting.
Firstly, as with any loans, one drawback is that there is interest that you will have to pay. A portion of your monthly payments, and in some cases your entire monthly payment, you will have to make payments that will be going towards interest. This is true for home renovation loans such as many second mortgages loans and even some credit card loans.
Another potential setback is that if your credit score is too low or your credit history is not great or good, or needs improvement, then you might not qualify for the lowest rates when it comes to using your home equity to pay for your renovations and home improvement project. If your credit is not strong enough to get you financing through a bank lender for your renovations, then you might only be able to qualify well for home equity loan products through a private mortgage lender. Those come at higher interest rates and fees than if you were able to qualify for a new or existing mortgage refinance through a more traditional prime institutional lender. The goal is to try to receive your loan from the best possible lender offering you the best rates available to you. Our mortgage brokers can provide you with services geared to also help advise you through your journey of credit improvement.
There are other potential disadvantages to financing your renovations, but they depend on a variety of factors. Your mortgage broker or financial advisor will be able to walk you through the potential downsides of various financial tools that can help you pay for your renovation and provide you with useful information and tips to help you learn along the way. Some might even be able to provide you with tips regarding how to find the right contractors and more.
Here is a comparison chart highlighting some of the common potential advantages and disadvantages to a home renovation loan:
|Type of Home Renovation Loan
|First Mortgage Refinance or New First Mortgage (Prime Lender)
- Lowest interest rates are available with this type of loan which can help provide peace of mind to the borrower
- Paying down principal with each monthly payment
- Repayment options over longer or shorter periods available
- Potential to save a lot on interest
- If the mortgage is a closed mortgage, pre payment penalties might be hefty
- Harder to qualify, based on minimum credit score, good credit history, and income to debt ratios matter
|HELOC (and HELOC debit cards)
- Low interest rate options available if you qualify
- Pay interest only on the portion of the HELOC that is being used
- Minimum monthly interest only payments can be more affordable
- Open to pay off in full at any time without penalties
- HELOC's from private lenders do not place much importance on your current debt situation
- Interest rate may be slightly higher
- With the minimum monthly payments being interest only, it can take a long time to pay down
- You might be tempted to spend more that you need and go over budget
- Debt to income ratios play a role in qualify for a HELOC with many institutional lenders
|1st Mortgage Refinance (Private Lender)
- Can be quick and easy to obtain. Shorter approval process
- Interest-only payments can help make it more affordable
- Short one-year terms are standard, but other term options are available with certain lenders
- Can be structured as open mortgages
- Higher interest rates
- Monthly payments are typically interest only and not paying down the principal of the loan
- Can be difficult to payoff
- Origination fees can add up quickly (broker fee + lender fee)
- Quicker approval process. Can be approved in as little as 1 hour and funded in as little as 48 hours
- Like the 1st mortgage refinance, this is also Interest-only payments can help make it more affordable
- Short one-year terms are standard, but other term options are available with certain lenders
- Can be structured as an open mortgage loan
- Even higher rates that a private 1st mortgage
- Usually no portion of the monthly payment goes towards principal
- Can be difficult to pay off in full or refinance out of unless your credit and/or income situation improves
- Upfront fees can be costly
|Credit Card or Home Improvement Store Credit Card, other revolving Cards
- Can be easy to obtain
- Only pay interest on what you owe
- Can pay off at any time without penalties
- These usually come with the highest interest rates
- Can take a really long time to payoff
- Annual dues can be expensive
- Can tempt you to overspend unnecessarily
- Can be spread over several years
- High interest
- High fees
- Can be challenging to pay off
Why work with us?
At Clover Mortgage we try to make your experience as pleasant and smooth as possible through our commitment to exception customer service. Our knowledgeable and experienced mortgage brokers put the needs of our customers first. We take the time to understand your needs, your current financial situation, and your goals when it comes to your home in order to be able to find the right home renovation loan solutions option for you. With our access to over 50 different lenders, we can find a lender who will get you approved and funded for your home renovation quickly and easily, avoiding a lot of the hassle that you would face working directly with your bank or other lender.
We can take your application once, then search and shop it around to several different lenders to get see what offers are best. This way we can ensure that we secure the best solutions with the lowest rate option and terms that are available to you from the offers we receive. That way we can find you the solution that best fit your goals in order to meet all of your needs. Whether you are looking to upgrade your property in order to sell it, or you want to turn you home into your dream home, we will help you with whatever you need.
Our mortgage brokers have a fiduciary duty to you, our client, and not to the lenders. Our mortgage agents are standing by to help answer any questions that you may have.
Frequently Asked Questions
Different home renovation loans work in different ways depending on your point of view and needs. If you are seeking to tap into your home equity in order to pay for your home renos, then you will have the benefit of lower interest rates. Since the lenders lending you the money for your renovations will have the security of your home as a form of secured collateral, their loan is less risky and therefore they pass on lower interest rates to you than an unsecured credit card, store card, or unsecured personal line of credit. Lenders are in the business of earning interest on the money they lend out. So, a more secured investment with less risk is better for their business and does stimulate the lender to offer lower rates.
After you get your loan you will be responsible to making the minimum monthly payments until you are able to either pay off your loan in full, or until you can refinance it out with another mortgage loan.
As we’ve seen, there are many ways that you can borrow money to renovate a house. Some of these ways include a home equity loan, which comes in the form of a first mortgage refinance, a second mortgage, or a HELOC (also referred to as home equity line of credit).
Some other ways consist of traditional credit cards, home renovation store credit cards, personal lines of credit, contractor loans, personal term loans, and other third-party loans, but all of these options often times come at higher interest rates that a home equity loan would.
If you don’t have any money to renovate, but you have available equity in your property, you can use this equity to pay for the renovations. Then you would simply pay down the home equity loan based on the terms agreed on by you and the lender.
To qualify for a home improvement loan using your home equity, we recommend that you contact us online, call us, or email us to speak with an experienced licensed mortgage broker and seek out their helpful services. They will be able to help guide you towards the best options that are available to you when it comes to using your home equity to finance your renovation project.
Apply now by phone or online today. Call or contact us by email any time.
If you don’t have any equity available in your home to offer as collateral, you can always try to use a credit card, home improvement store card, apply for a personal line of credit or term loan, or ask you contracting company about potential financing options that are available through them. Although these will tend to come with higher interest rates and fees, they might be able to help you get closer to your dream home. A professional mortgage broker will provide you with services that can help you determine whether or not you can qualify for a home equity loan. You never want to get into the wrong kind of loan.
If you are not a Canadian citizen and are planning on moving to Canada or are new to Canada and wish to purchase a home and renovate or improve it, there are lenders who we work with that offer mortgages to newcomers as part of their new to Canada programs.
If you are a Canadian and you are moving back to Canada, we have several mortgage options available for you that we can explore in order to be able to offer you the best options for your needs. We can even chat with you online or through email to help facilitate the conversation. Connect with us by online video chat, by phone, or by email today for help with your mortgage.
Call us to apply now, or apply online.
As a student working part-time, in many cases you will be able to qualify for a home renovation loan. If not through the bank, then likely through a private lender based on its requirements. Reach out to a mortgage broker and we can help you determine what type of financing you can qualify for in order to accomplish your renovations.
Today’s low rates can be reserved for a specified period of time in some cases depending on the lender that you qualify with. Click on one of the links to our home renovation content or home equity loan blog posts for more information and to learn more.
There are many online tools available to help you examine and view a property before purchasing it. Once you are ready to buy, buying a home remotely is not a new concept. Many real estate agents are experienced in using various technologies and services to help foreign buyers find their dream home without ever having to view it in person. In some cases, you might feel comfortable to skip the viewing process. Some real estate brokerages have special services for foreign buyers based on its location and target demographics. Before choosing a realtor to work with, ask about their abilities to showcase the home to you remotely.
Protecting our client’s privacy rights is an integral part of a mortgage broker’s job. Once we pull your credit bureau to check your credit, our policy is that we only share the details of that information with potential lenders. Your privacy is one of our top priorities.
Call or email us to learn more about how you can qualify for a quick and easy home renovation loan. At Clover Mortgage we believe that in helping our clients learn about the different borrowing options available to them so that they have the right information needed to make the right decision. We’re here to give you all the info you need.
We have home renovation loans for people with all kinds of different credit profiles. While financing your home improvement project, we can help advise and guide you on your way to credit score improvement too.
When it comes to upgrades and renovations for investment purposes, determining what improvement will benefit you by adding the most value to your home depends on a variety of factors. It’s advisable that you speak to a mortgage broker or real estate agent in your area to get the most suitable answer to this question.
At Clover Mortgage we customize all of our mortgage solutions to ensure that they meet the specific individual needs of our clients. Our goal is to please each one of our clients and get them the right loan for their needs.
Our website has several mortgage calculators including a monthly mortgage payment calculator and a home equity loan calculator for your convenience. We also provide other educational content on our mortgage blog.
Depending on the lender and type of renovations, there may be business loan options that you can obtain, but these typically come with higher costs than a commercial mortgage would. Speak with your mortgage broker before committing to any type of business loan that might be adding unnecessary costs and debt to you. A qualified mortgage professional will be able to help ensure that you are getting the best solution for your needs and situation.
* Mortgage refinance rates are subject to change at any time without notice and may vary from borrower to borrower in Canada based on qualification criteria, geographical location of the property, and more. Borrower must qualify with the lender as per the lender’s guidelines and terms and conditions will apply. 1.40% can equate to 1.58%APR on average
** HELOC rates are subject to change at any time in Canada without notice and may vary from borrower to borrower based on qualification criteria, geographical location of the property, and more. Borrower must qualify with the lender as per the lender’s guidelines and terms and conditions will apply. 2.90% can equate to 3.29%APR on average
*** Second mortgage and home equity loan rates are subject to change at any time without notice and may vary from borrower to borrower based on qualification criteria, geographical location of the property, and more. Borrower must qualify with the lender as per the lender’s guidelines and terms and conditions will apply. With minimum broker fees, lender fees, and legal fees 6.99% can equate to 8.99%APR
**** Interest rate and fees are subject to change at any time without notice. These are the starting interest rates as of April 2021. Interest rates, fees, and terms are subject to the borrower qualifying based on the lender’s qualification criteria. Terms and conditions apply. These are only valid on properties in Ontario, Canada.