Tips On How To Budget For Home Renovations
Whether it is a full renovation or just some minor updates, it is always important that you budget for your home remodel. The rule of thumb is that most upgrades or renovations increase your home’s value but this is not always the case if you do not stick to your budget and renovation plan. Here are five things to do when determining your budget for the project.
Estimate home renovation costs
Just like any other investment you do not want to put more money into the project than you can get in return. First, determine the value of your home. If you are updating specific rooms, you will want to determine the percentage of worth of the room.
A kitchen accounts for 10 to 15 percent of the home’s total value. For example, if your home is worth $200,000 you will want to spend no more than $30,000 on the total kitchen project. If you are looking for the biggest bang for your buck, then a mid-range bathroom remodel will get you the best return on your investment.
Consider home remodeling loan options
It can take a lot of cash to do a big renovation and this can sometimes detour homeowners. There are many loans that are available for this specific purpose.
One option is to refinance your home. Right now mortgage rates are at an all-time low, so you have the option of refinancing for an amount higher than you currently owe. You will be able to pay off your current loan and have cash left over for your home improvements.
Another option is to Cash-out refinance by taking your existing loan and refinancing it for more than you currently owe. You will then have enough money to pay off your original mortgage and make your renovations.
Many homeowners do not want to take the refinancing option, but they still have options. A home equity line of credit (HELOC) that works like a credit card is a way to go. You are given a set limit that you can borrow against.
A home equity loan can also get you the money you need for your projects. With this option, you take out all of the cash at one time. This will be in addition to your original mortgage.
Get home renovation quotes from contractors
It is always a wise decision to go into a project with some sort of estimate on how much the project will cost. A contractor will be able to give you an estimate based on your project. You will want to allow for more cost because a project usually costs more than what the estimate states. The more information you are able to give a contractor the closer the estimate can be to the true cost.
Just like shopping around for the best price or best product, it is always wise to get several quotes from several different contractors. Never just take the lowest bid, make sure you know what materials are being used and the process the contract will take to complete your project. Lower bids tend to be a sign that the contractor cuts corners.
Stick to the home remodeling plan
Just like a trip to the grocery store, to stay on budget you have to stick to your grocery list. It is always a temptation to add little projects here and there to your current remodeling project. These last-minute additions can add up. Remember that every time you change your mind even little changes can be costly to your budget.
Account for hidden home renovation costs
As mentioned before an estimate is only an estimate. The project might look like an easy fix, but there might be other issues lurking beneath the surface. Always give yourself a cushion upfront. Every contractor can agree that most renovation projects usually cost more due to hidden imperfections. Add 10 to 20 percent to your estimated project cost.
Home improvements are in most homeowners’ reach, the trick is figuring out how to plan a home renovation that doesn’t break the bank. It is best to consult with professionals such as a mortgage lender and contractor to help with estimated cost and obtaining the money to give the go-ahead.
