Q: What is the TDS ratio used in this calculator?
Total Debt Service (TDS) ratio is the percentage of your gross monthly income that goes to all debt payments — mortgage (principal, interest, taxes, heat), plus car loans, credit cards, and other obligations. Canadian lenders use a TDS maximum of 44%. This calculator uses TDS to estimate how much room you have for a renovation loan payment.
Q: Should I use savings or financing for my renovation?
The optimal approach is usually a combination: use cash for the first portion to reduce financing costs, then HELOC or renovation loan for the rest. Most financial planners suggest keeping 3–6 months of expenses in liquid savings even after funding your renovation. Never drain your entire emergency fund for a renovation.
Q: What's the best loan term for a renovation?
Shorter terms (5–10 years) mean higher monthly payments but significantly less total interest. Longer terms (15–20 years) lower your monthly payment but cost more overall. Match your term to your payoff horizon — if you plan to sell in 7 years, a 10-year term is fine. If you're staying 20+ years, a longer term gives you cash flow flexibility.
Q: Can I use a HELOC instead of a renovation loan?
Yes — a HELOC is often a better option than a personal renovation loan if you have equity. HELOC rates (7–8% in Canada 2026) are significantly lower than personal loan rates (10–14%). The tradeoff is that HELOCs are variable rate. If you want payment certainty, a fixed-rate home equity loan is a middle ground.
Q: What credit score do I need to qualify for renovation financing?
For HELOCs and home equity loans at competitive rates, Canadian lenders typically require a minimum credit score of 650–680. For the best rates, aim for 720+. Personal loans are available with lower scores (580+) at higher rates. Check your credit score for free through Equifax or TransUnion Canada before applying.
