Refinancing to Renovate Your Home in Alberta: What to Know

Short answer: You can refinance up to 80% of your home’s value to fund renovations, usually at a much lower rate than a personal loan or credit card. If you’re adding a secondary suite, some insured programs allow up to 90% since January 2025. Weigh the prepayment penalty if you’re mid term, and compare with a HELOC for phased projects.

Why Homeowners Refinance to Renovate

• Lifestyle: kitchen, open concept, bathrooms, flooring
• Function: finished basement, extra bedroom or bath, office or gym
• Income: legal basement suite, garden suite or carriage home where allowed
• Resale: updating a tired home before selling

How It Works

1. Estimate your home value and remaining mortgage
2. Work out available equity
3. Apply to increase your mortgage
4. Use the extra funds for the renovation
5. Your old mortgage is replaced by a new one with a new rate and term

Step 1: Know Your Plan and Budget

Rough ranges: $20,000 for cosmetic updates, $50,000 to $80,000 for a kitchen or main floor refresh, $100,000 or more for a full suite or structural work.

Step 2: Know How Much You Can Borrow

Lenders look at value, the loan to value limit, income, credit and debts.

→ Read more: How Much Can I Borrow When Refinancing?

Step 3: Count the Cost of Breaking Your Mortgage

Variable: usually three months’ interest. Fixed: often IRD, which can be higher. We compare penalty, legal and appraisal costs with alternatives.

Step 4: Compare the Options

• HELOC: revolving credit, interest only on what you use, variable rate. Good for phased projects if you’re disciplined.
• Blend and extend or add on: some lenders let you increase the mortgage without fully breaking it.
• Unsecured loan or line: may suit smaller projects when penalties are steep.

Pros

1. Lower interest than cards or personal loans
2. One main payment
3. More comfort and potentially more value, especially with a legal suite

Cons

1. A higher balance and payment
2. Costs to break your current mortgage
3. No guarantee the renovation adds equal value

Legal Suites: The 90% Rule

Since January 15, 2025, homeowners refinancing to build a secondary suite may access up to 90% of value on an insured mortgage, up from 80%. Eligibility rules apply and the unit can’t be a short term rental. Also check zoning and permits, how lenders treat the rental income, expected rent vs cost, and insurance.

How We Help

We discuss your plan and budget, review your equity, compare refinance, HELOC and other options, and coordinate with your contractor, REALTOR® and lawyer. Book a call.

This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed and powered by Mortgage Connection Inc.