What is Home Renovation Loan?

The idea of moving out to another location is quite inconvenient to many families. Once settled in a house, members of the family take a while to get used to the surroundings and the new school and several other amenities like the grocery store, etc. With the cost of real estate reaching sky high, a lot of Canadians are resorting to retaining their current residence and spending on its improvement.

This way, they need not take the trouble of relocating, hence saving a lot more. They can use up this saved money for expanding their current house by constructing a couple more master bedrooms or by developing a brand new garden.

In order to finance any type of renovation in oneís house, he or she cannot apply for a home loan, simply because, home loans are meant for purchasing new ones and not for renovating existing homes. Obtaining a personal loan for this cause will invite high rates of interest, so it isnít advisable to do so. The best source of finance for renovating your house would be a home renovation loan. This type of loan is specially created for people who wish to remodel houses they already own.

There are three ways by which one can obtain a home renovation loan. The least advisable option would be to use your credit card to finance the renovation cost. Credit cards have extremely high interest rates which are compounded every month. With interest rates soaring above 20% per month, it is highly foolish to use a credit card when you are sure you wonít be able to pay them back by the end of the month.

However, certain credit card companies provide a package with a minimal interest rate of 2% for the first few months after taking the loan. Only if one feels he or she can pay back the loan within the stipulated introductory interest rate period, he or she can consider taking this loan.

The best and smartest way to get a home renovation loan is to refinance your home loan. This is possible through most Canadian banks. If you have already taken a home loan from the bank by mortgaging your house, you can strike a deal with your bank to extend your loan amount and consequently your loan period. The rate of interest for this home renovation loan is quite low and is calculated only semi annually.

Several Canadians are also opting for home renovation loans in the form of line of credit. Secure line of credit loans have low interest rates which are calculated every month. The advantage of line of credit loans is that, you arenít forced to withdraw a large sum at once for your renovation costs. You can withdraw an amount according to your needs. Thus, you cannot be charged interest on any funds that you havenít withdrawn. Even the monthly payments can be made according to your wish. Though, you will still have to pay up for a minimum amount each month. TD Canada Trust is one of the Canadian institutions to provide such a home renovation loan.

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