Personal loan vs home loan for renovations

Home owners wanting to finance renovations often refinance their home loan to access equity and fund their improvements. That gives them funds at the low mortgage rate of interest. However, many lenders will offer home owners a personal loan at a reduced rate of interest for the purpose of home renovations.

The advantage of using a personal loan instead of refinancing the mortgage is that the personal loan will be paid off completely within a few years – usually between two and seven years, depending on the term you select. Refinancing more debts into the mortgage means paying more interest for the entire term of the mortgage – which could be up to thirty years – and therefore much more interest in total.