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Home renovations can be unpredictable and anxiety-laden at the best of times. But soaring costs, rising interest rates, cooling home prices and uncertainty about Canada’s economic outlook are increasing the financial risks associated with a major property uplift, some real estate experts warn.

Homeowners with large mortgage balances should “be careful with renovations right now,” said Nasma Ali, broker and founder of One Group Toronto Real Estate.

On top of sky-high materials and labour expenses driven by supply chain snarls and worker shortages, another squeeze on some home renovators’ budgets is coming from rising borrowing costs. Home equity lines of credit (HELOCs), which homeowners often rely upon to finance major improvements, generally come with variable interest rates, which have been climbing as the Bank of Canada has raised its benchmark rate to help fight inflation.

Those changing real estate and economic trends have caught some Canadians by surprise, mid-reno.

In Toronto’s east end, Hillary Strack-Cheng and her husband embarked on a sweeping home makeover September. They wanted to add two bedrooms and a bathroom to their small two-storey home to make room for their growing family. The couple had decided to renovate after calculating that a home extension would cost them less than selling the house and buying a bigger property in what was then a red-hot market.

But some nine months later, the project, which was temporarily derailed by a dispute with a contractor, is continuing. Delays and unexpected costs forced the couple to refinance their mortgage, which has a variable rate, and max out their HELOC.

While the family expects to move back home in August, Ms. Strack-Cheng said rising interest rates are adding a layer