"Every renovation project and homeowner is unique, and so are homeowners' needs and preferences when it comes to financing their renovation,” says Peter Simpson, Chief Executive Office of the Greater Vancouver Home Builders' Association.

"Financial institutions offer a range of convenient options that can be tailored to suit particular circumstances," says Simpson.

Homeowners should arrange financing before finalizing their renovation plans. Visit your lender early in the planning stages to find out how much you can borrow, what it will cost and what your options are. You might want to consult with your lender even if you plan to pay cash from savings or the sale of assets, such as guaranteed investment certificates. If the income from these assets exceeds the cost of borrowing, your lender may encourage you to take out a new loan instead.

Your choice of financing generally depends on the cost of the renovation and how you prefer to repay the loan. Interest rates are linked to security. If your loan is secured by collateral, the rate tends to be lower.

One of the most popular loans for renovations is a personal line of credit. You and your lender agree to a credit limit and you can borrow up to that amount at any time. You can withdraw funds by using line-of-credit cheques and/or credit card access to your line of credit, which is convenient for paying contractors and suppliers and helps you to keep track of transactions. You only pay interest on the money you actually spend, which makes it ideal for financing ongoing or long-term renovations. Once the work is completed, most financial institutions offer you the choice of staying with your credit line or turning it into a conventional mortgage.

For smaller renovations, a personal loan may be your best choice if you prefer to make regular fixed payments over a relatively short time (up to five years). When you need to borrow a larger amount and want to spread your payments over a longer period, your lender might recommend a home equity loan or refinancing your existing mortgage.

Ask your lender for a pre-approved loan. That way you can enter into discussions with your renovator with confidence, knowing what you can afford. There is no cost for pre-approval, and it does not oblige you to go ahead with your project or loan.

Today's lenders are experienced in renovation financing and can offer helpful, practical advice. "We strongly suggest that you set aside a percentage of your funds to cover items that are not in your contract with the renovator," says Simpson.

"Homeowners often discover that they would like to add things once the renovation is underway -- extra features or new furniture or drapery. A separate fund gives you the means to make those decisions easily, without having to re-negotiate with your lender," he said.

Also talk to your renovator. Many professional renovators have a broad knowledge of financing issues and can provide you with general information and assistance. In order to increase their range of customer services, some have taken the extra step of partnering with a financial institution. These renovators will facilitate the loan process for you. In fact, for small amounts you may not even have to set foot on the lender's premises.

Search for a GVHBA member in your area.