As of late October 2026, the Bank of Canada's policy rate is 2.25% and the big banks' prime rate is 4.45%. That puts a typical bank HELOC around 4.95%. Rates have been flat for a year, so for most Ontario homeowners the better question is which financing tool fits the way a renovation actually gets paid for: in stages, over months, with surprises behind the walls.
- Policy rate 2.25%, prime 4.45%. Both have been unchanged since October 2025. The next decision is October 28, 2026.
- HELOCs and variable mortgages follow prime. Fixed rates follow bond yields, and those have moved even while the Bank held.
- A HELOC suits staged payments. A refinance suits big projects and people who want a fixed payment. Cash avoids interest but leaves you short if something goes wrong.
- Get your financing approved in writing before you sign a renovation contract or pay a deposit.
Where rates stand this fall
On September 2, the Bank of Canada held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%. Governor Macklem said growth had picked up, but that uncertainty about the sustainability of the rebound has increased with new US trade actions.
Prime follows the policy rate. Canada's prime rate is 4.45% and has also remained unchanged since the Bank last moved in October 2025.
The next announcement is October 28, alongside a Monetary Policy Report, and forecasters disagree. RBC, TD and BMO forecast a hold through the end of 2026, while Scotiabank and National Bank forecast an increase by year-end. We won't guess. The point is that you should plan a renovation budget that still works if prime moves a quarter point either way.
Fixed rates move on their own
A Bank of Canada hold doesn't freeze fixed mortgage rates. Those track Government of Canada bond yields. The 5-year yield set a new 52-week high of 3.729% on September 28, and in October, according to the Bank of Canada, it has closed between 3.53% and 3.63%. If you're refinancing at a fixed rate, the quote you got in August may not be the one you get now.
What a rate change does to a renovation budget
HELOCs reprice within days of a prime change. A rate preview notes that on a $50,000 balance, each 0.25-point change in prime adds or removes about $10 of interest per month. Here's the same arithmetic using our own published price ranges, assuming interest-only payments on the full amount drawn:
| Amount drawn | Example project (Gracia range, before HST) | Monthly interest at 4.95% (prime + 0.50) | Monthly interest at 5.20% (prime + 0.25 pt) |
|---|---|---|---|
| $40,000 | Kitchen, low end ($40,000 to $140,000+) | $165 | $173 |
| $100,000 | Basement, upper end ($25,000 to $100,000+) | $413 | $433 |
| $250,000 | Whole-home, upper end ($100,000 to $250,000+) | $1,031 | $1,083 |
A quarter point matters, but it's rarely what breaks a budget. Scope changes and underestimated contingency do far more damage. A $10,000 change order costs more than a year of quarter-point moves on most balances.
Your four financing options compared
| Option | Rate type | Best for | Main trade-off |
|---|---|---|---|
| HELOC | Variable, prime-based | Staged payments, projects up to roughly $150,000, owners who'll pay it down fast | Payment rises if prime rises. Interest-only minimums make it easy to carry debt for years. |
| Mortgage refinance | Fixed or variable | Large projects like additions and whole-home renos, people who want one predictable payment | Penalty if you break your term early, plus legal and appraisal costs. You pay interest on the whole amount from day one. |
| Cash / savings | None | Smaller projects, owners with a large cushion | Drains your emergency fund. Hard to cover a surprise mid-project. |
| Builder-arranged financing | Varies, often a third-party lender | Convenience, smaller jobs | Rates and terms vary a lot. Promotional periods can end with high rates. |
HELOC
Federal rules cap the revolving line. A HELOC can reach 65% of your home's value on its own, and up to 80% combined with your mortgage. You can still borrow in the gap between 65% and 80%, but that portion has to sit in a term loan with set payments, not the revolving line.
Example: a $1,200,000 house with a $500,000 mortgage. 80% of value is $960,000. Subtract the mortgage and the room is $460,000, before the lender looks at your income. Equity isn't approval. Debt-service ratios can cap the actual offer well below what the equity math says.
We like HELOCs for renovations because you draw money as each payment comes due and only pay interest on what you've used. The risk is behaviour, not rate. An interest-only line with no end date needs a payoff plan from the start.
Refinance
A refinance rolls the renovation into your mortgage. A standard cash-out refinance lets you borrow up to 80% of the home's as-is value. It makes sense when the number is big (a home addition at $120,000 to $350,000+ is a good example), when your term is close to renewal anyway, or when you want the certainty of a fixed payment. If you're mid-term on a fixed mortgage, ask for the exact penalty in writing before anything else. It can wipe out the savings.
The secondary suite exception
If you're building a legal second unit, there's a specific insured option. CMHC's refinance program allows up to 90% LTV for owner-occupied homes with up to 4 units, based on the as-improved value. It applies when the maximum lending value or as-improved property value is below $2,000,000. There's an insurance premium. At 85.01% to 90% LTV, it's 3.10% on the total loan. Approval timing matters too: one mortgage brokerage warns that debt service and the approval-before-construction rule trip up more files than the 90% cap does. The separate federal suite loan people still ask about is not available, and it never was. If this is your plan, start with our legal basement apartment page.
Cash
Paying cash means no interest, no appraisal and no lender schedule. We'd still keep a contingency of 10 to 15% of the contract set aside and untouched, and more in a house built before the 1970s. If paying cash would empty your savings, a small HELOC sitting at a zero balance as backup costs little and buys real peace of mind.
Builder-arranged financing
Some contractors offer financing through a third-party lender. It's convenient. Read the actual credit agreement, not the brochure: the rate after any promotional period, whether interest is deferred or waived, prepayment terms, and whether the loan is secured against your home. Compare it line by line with what your own bank offers.
What to confirm with your lender before you sign a contract
- Approved amount, in writing. A pre-qualification isn't an approval.
- Appraised value. Find out whether it's as-is or as-improved, and what happens if the appraisal comes in low.
- When the money is released. Lump sum at closing, or staged draws after inspections? Line that up with the contractor's payment schedule.
- Holdbacks. Some lenders hold back funds until the work is complete. You'll need to cover that gap.
- Rate and payment. Fixed or variable, the spread over prime, and whether the HELOC payment is interest-only or amortizing.
- Rate hold expiry. Permit delays can push your start date past it.
- Penalties and fees. Prepayment penalty, legal, appraisal, title insurance, and any CMHC premium.
- Documents the lender wants from us. Usually a signed quote, a scope of work, and sometimes permits or drawings.
What we see on site
The financing problems we run into are almost never about the rate. They're about timing and scope.
- Signing before approval. A homeowner signs, pays the deposit, and then the appraisal comes in $60,000 lower than expected. Now the scope gets cut halfway through design. Get approved first.
- Draw schedules that don't match the work. Cabinets for a kitchen renovation get ordered and paid for weeks before they're installed. If your lender only releases money after an inspection, plan for that gap.
- Behind-the-wall surprises. Opening walls in older Halton and Hamilton homes can turn up knob-and-tube wiring, galvanized supply lines, undersized beams or missing insulation. That's what the contingency is for. Borrow it or set it aside up front. Don't plan to find it later.
- Upgrades mid-job. A $3,000 tile upgrade here and a $4,000 appliance change there add up. Decide finishes before you borrow, and borrow for the version you'll actually build.
- Interest during the build. With a refinance, you pay interest on the full amount while the work happens. On a four-month whole-home renovation, budget for those months.
What we'd do this fall
If your project is under about $100,000 and you can pay it off within a few years, a HELOC at or near prime + 0.50% is the simplest fit. Shop the spread, because lenders price differently. For an addition or whole-home project, talk to your lender or broker about a refinance, especially if your mortgage renews within a year. For a legal second unit, look at the CMHC refinance before anything else. Whatever you choose, build the budget so a quarter-point move in either direction doesn't change your decision.
A firm, detailed price makes every one of these lender conversations easier. If you want real numbers to take to your bank, book a consultation with our team. We'll give you a scope and a payment schedule your lender can work with. To see what local projects involve, visit our Oakville home renovation and Burlington home renovation pages.
