Thinking about revamping your bathroom? Maybe you’re anxious to get started adding that extra bedroom. Whatever the renovation project, the easy part is knowing what your goals are. It’s fun contemplating the outcome. What isn’t fun, however, is figuring out how to do it without breaking the bank.
Before you begin picking out paint chips and carpet swatches, be sure you have a good idea of how much it’s going to cost to renovate your house. Below are four ways to help you estimate your home renovation budget so you can get the things you want without any surprises.
1. A Good Rule Of Thumb
A good rule of thumb to follow in home remodeling is to spend no more to renovate a room than the value of that room as a percentage of the overall home’s value. For example, the kitchen accounts for approximately 10-15 percent of a home’s value. This means if your home is worth $200,000, you’ll want to spend no more than $30,000 on a kitchen renovation.
2. Considering Your Options
Most homeowners don’t have the money necessary just lying around to renovate their homes. Getting a loan is usually the only way to finance the projects. Luckily, as a homeowner, you have several loan options.
Refinancing – You may be able to refinance your mortgage at a lower interest rate or for a longer term to lower your payments, so you can save money to renovate.
Cash-out Refinance – If you have enough equity in your home, you can refinance your mortgage for more than you owe and get the difference back in cash to make those renovations.
HELOC – A home equity line of credit is another option. It works somewhat like a credit card in that you have a set limit you can borrow against.
Home Equity Loan – Also called a second mortgage, a home equity loan gives you a lump sum payment, similar to your first mortgage.
3. Hiring Contractors
When it comes to hiring contractors to complete the renovation, it’s important to spell out exactly what you want in the contract. From how you want it done to what materials to use, you have to include everything, so the contractor doesn’t have to guess, and you know almost to the penny what to expect to pay.
Take the time to get quotes from several contractors. Toss out the one from the lowest bidder since these contractors tend to take short-cuts that end up costing you more in the long run.
4. Expect The Unexpected
One of the main reasons homeowners end up spending more for a renovation than anticipated is because problems can, and do, pop up. In fact, it’s very rare that a home remodel goes off without a hitch. Rather than scramble for extra cash to fix problems that arise, plan for a cushion of 10-20 percent more than what you estimate the cost for the renovation to be. This way, you won’t have to worry, and the project can continue without interruption.
Renovating a home can be fun and exciting, but it can also be costly. Before heading out to buy materials, take a moment to plan ahead by estimating the cost of the project. The four tips above can help you estimate your home renovation budget.