How to finance a condo remodel that pays off in the long run

By Sophia Lockhart

Property prices and average household debt has reached record highs in recent years. With this in mind, Canadians looking for a better living space are turning to renovating their current properties, rather than purchasing a new home.

Whether homeowners are remodelling simply to address ‘wear and tear,’ hoping to increase the value of their home or looking to make their home look nice, the average they were spending on renovations went up last year to $21,000.

So how are they planning to fund these renovation projects? According to a poll by CIBC, 67% will fund it with cash or savings, while a quarter will use a loan, credit card, or a line of credit.

Here, we take a closer look at the different ways you can finance a condo remodel that will pay off in the long run.

Refinance your mortgage

If you’ve got enough equity in your home, then you may be able to finance your home loan with a cash-out refinance. In this case, you refinance your existing loan while also pulling out equity, usually up to 80% of the home’s value if you own the property outright.

This is a popular route for homeowners looking to renovate their homes. The good thing about it is that you’re refinancing your primary mortgage, rather than taking out a second mortgage, which means you still only have one payment to worry about.

If you choose to refinance your mortgage, remember that you don’t necessarily have to opt for the lender who you initially got your mortgage from. Just like when getting a home loan, be sure to shop around and compare different options and rates from multiple lenders.

For example, in Australia, you can compare multiple rates online fairly simply these days with home loan specialists. The good thing is that you can apply for several loans and even request a pre-approval without damaging your credit. It’s an easy way to find the best terms and lowest interest rate.

Home equity line of credit (HELOC)

A line of credit home loan could be another option if refinancing isn’t right for you either because you’re already paid off your loan or already have a low rate on your existing mortgage.

Instead of refinancing, a HELOC allows you to draw on the equity you have in your property. You have a set limit you can borrow against, typically 80% of your loan-to-value ratio (LTV). This type of loan could be well suited to long-term or on-going renovations, but you will need to be disciplined to avoid spending money on frivolous purchases.

Construction home loan

With this type of loan, the lender will take into account the property’s predicted value following the renovation. The benefit with this is that borrowers have access to large sums of money, but the loan amounts are staggered over a period of time, rather than being given the full amount upfront.

Personal loans

If you don’t have much equity in your home or you are only planning on making minor renovations, then it may be worth taking out a personal loan. The downside is that the interest rates tend to be much higher on personal loans than on HELOC or construction loans.

Is it worth the money?

Renovating a home isn’t cheap, and financing a remodel isn’t always an easy or straightforward process. That’s why you need to carefully consider your options and only undertake a project if it makes sense.

For instance, if you’re hoping to add value to your home when selling, then you need to be sure that you’re making a good investment. Those renovations that tend to offer the best return on your investment include adding living space in underused areas, such as garages or attics, or updating a bathroom or kitchen.

You may be tempted by the latest trends in interior design, but it’s best to go for something that won’t seem outdated in a few years time. For modern condos, hardwood floors are always a good choice, along with granite countertops.

If you want to improve the look of your home without spending a fortune, then even just updating your hardware or adding a fresh coat of paint can make a big impact, while adding value to a sale.

When planning a renovation, particularly if your main goal is to increase the value of your property, it’s best to speak to your financial adviser, your realtor, and a trusted contractor. Obtaining expert advice will help you better understand your options, what budget you have to work with, and what type of project would best suit your needs.


Sofia is a passionate writer from Sydney. She also enjoys decorating houses and engaging in home renovation projects. That is why she loves sharing her experience and advice with other people through her writing. Besides this, she loves technology and gadgets which can help us get through a busy workday. Facebook Twitter