Budgeting for Home Improvements

August 26, 2020 by Justin Weinger

Are you ready to renovate your kitchen? Maybe you’re anxious to remodel your bathroom. The simple part of this is knowing what your goal is for your renovations – whether it’s trying to keep up with the growth of your family, to add a bit of space, or just to increase the value of your home. Figuring out how to do it without going head over heels in debt can be a bit trickier. Here’s a quick look at some steps you can take to prevent that from happening.

Estimate Costs

When you’re talking to local general contractors, get an idea of how much your project will cost. As a rule of thumb, no more should be spent on any single room than the value of that particular room, viewed as a percentage of the value of the entire house. For example, your kitchen will typically account for around 15% of the total property value, so don’t spend more than this amount on any improvement project for the kitchen.

Consider Loans

If you plan to borrow a bit of money to help pay for the renovations to your home, there are a few different types of loans that might be able to help you. If interest rates are attractive enough, you might need to refinance your mortgage. You may also look into a cash-out refinance if this is an option. There are also home equity loans that people use for renovations. This is a significant decision, though, and it can be challenging deciding which one is a better option. Find a lender you trust and go over your options so that you can make the best decision for yourself and your family.

Get Quotes

Some contractors will give you detailed estimates based on their understanding of the home improvements you want to make. The thing is, work that’s completed under circumstances such as these typically costs more. Be very specific when it comes to what you want to have done. Spell everything out in your contract – up to and including the materials you want to use. Get quotes from multiple contractors and throw out the lowest bid. Go with the one in the remaining ones that you feel the most comfortable with.

Stick to the Plan

As your project moves along, you may be tempted to tack on another “tiny” project or use a new design right at the last minute. However, one easy home improvement tip is to remember that each time you have a change of heart, there will be a change order, and even minor ones can cost quite a bit. If it’s at all possible, you need to stick to the original plan.

Account for Hidden Costs

Yes, your home may appear perfect when viewed from the outside, but there’s a good chance that issues are lurking out of sight. These hidden issues are a major reason home improvement projects cost quite a bit more than initially anticipated. Instead of scrambling to find the additional money after the renovations have been completed, you should build a bit of cushion into the renovation budget as soon as you make it. Factor in as much as 20% of the budget you contracted to be used for any sort of unforeseen expenses. These expenses are a fact of life. Keep in mind that it’s a rare thing for an entire project to go as planned.

Before you begin choosing paint chips and tile, make sure that you know just how much your home renovations will cost – and how you’ll pay for them.

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