How To Budget for Your Home Remodel

Coming up with a budget for your home renovation might seem more strenuous than the actual project itself. Determining every goal of your remodel, estimating each cost, finding a contractor, and then hiring someone to carry out the plan takes a lot of time and energy. In your home renovation budget, you face a stressful balance of squeezing everything into your remodel so the project feels complete.

Dreaming Big

Before you make a budget for your home remodel, take a few moments to ignore the potential cost of the renovation and dream about everything you’d like to include in the project. Make a list of everything you’d like your remodel to include before you get the first contractor bid. Before you speak to any contractor about your home project, you need to know two things: the first is what you need, and the second is what you want. Get together with anyone else in your household involved in this, and reflect on the following questions:

• What do you need from all this?
• What are the requirements of each idea?
• What parts are you okay splurging on?
• What elements are potential areas of compromise?

Types of Renovations

The kind of renovation you do in your home determines your overall budget cost. Structural home renovations are the first category you plan for your project, influencing the kind of contractor you contact. The renovation work you complete here could include windows, doors, roofing, flooring, walls, and the foundation. A new roof can run from $5,000 to $12,000, and windows range between $150 to $2,000. Annual maintenance costs relative to the property value should be budgeted at a yearly cost of 1% to 4%. Your remodel is a great time to complete these.

The second category of project your plan might include is systemic or functional renovations. During this remodel, your contractor will deal with electrical wiring, HVAC, plumbing, and other subsystems. Installing new HVAC can cost your budget from $5,000 to $13,000. A complete plumbing renovation ranges from $2,000 to $5,000, depending on your home size.

Interior home renovation tasks are usually discretionary, so your budget can be flexible in this cost category. However, any project in this area might be the most exciting part of your remodel. How much you spend to complete a project in this part of your plan can vary drastically. You could have a contractor spend $200 on a new bathtub, but you could also pay $400,000 for a single chandelier.

Ballparking the Costs

Before getting to a line-item budget for your remodel, do a ballpark budget so you know how much money various projects might cost you. An average home remodel can run from $20,000 to $100,000 based on multiple factors, such as structural changes, the home size, how many rooms are involved, and the caliber of the materials. Entire-home renovations can range from $15 per square foot to $60 or more. If your remodel focuses on just a bathroom or kitchen, the average cost per square foot can run from $100 to $250.

A low-end remodel of $15,000 to $40,000 could feature cosmetic work that covers budget appliances, low-cost countertops, stock cabinets, painting, molding, flooring, trim, and landscaping. If your ambitions are higher, a mid-range remodel can cost you between $40,000 and $75,000, which involves a combination of budget options and above-average appliances and materials. Renovations to the kitchen and bathroom might be involved. To go all out, a high-end remodel can run from $75,000 to $200,000, involving custom work, layout alterations, roofing and HVAC replacement, and professional interior design.

Spending and Borrowing

In a perfect world, a home remodel would cost nothing. In some cases, you get a greater ROI on your renovation than what you put into it, but you still need to pay the contractor for every project they complete. That means you either need to have enough money to cover the plan’s cost or borrow the money for your renovation budget.

It can be tempting just to put your remodel on a credit card, but the size of the balance and the interest rates involved don’t usually make that your best long-term move. Talk to your contractor about any financing options that they offer. However, your home itself might be a source of financing via one of the following:

• Home equity loan
• HELOC
• Cash-out refinance

A HELOC, or home equity line of credit, is a loan you can secure with the equity you have in your home. That should mean lower rates than other loans, and you can probably deduct the interest from your yearly taxes. Since it’s not a loan, you get a checkbook to pull out money as necessary, up to the maximum loan amount. The catch is coming up with a repayment schedule; minimum payments are only monthly interest, so paying just that amount doesn’t reduce the principal.

Contractor Quotes

You probably already know that you should get multiple contractor bids for your project, but did you know you should plan every cost down to the smallest detail? Your budget should specify the fixtures, materials, and appliances you want to include in your home renovation. Every contractor bid should be identical so you can truly compare each quoted cost.

Think about anyone you know among friends, family, and professional colleagues who have recently renovated their home. They might give you tips about your remodel plan and budget. Still, they can undoubtedly recommend contractors to get quotes from. Contact them for:

• Itemized bids
• References
• Examples of recent work

Interview the ones you feel good about, and that should include a tour of your home. Refrain from assuming that the cheapest bids are the best options; leverage competing bids for negotiations with the one you feel comfortable with. Online reviews can help you narrow down your choices.

Knowing Priorities

In the best cases, your renovation dreams and ability to budget every cost will align. Unfortunately, your home remodel might not cooperate, and you’ll have some tough choices to make with your contractor throughout the project. There may come a point in your renovation when you need to scale down a cost or two to stay within the budget you’ve laid out. If you want to keep your home improvements within your budget, consider the following possibilities:

• Scaling down goals by 20% when possible
• Leaving working appliances, fixtures, and lighting elements in place
• Opting for lower-cost alternatives
• Buying appliances and materials yourself

Scheduling the Renovation

The season when you do a remodel and hire a contractor to supervise the project can impact the cost of working on your home, so plan the right season when the work will happen. Your budget will thank you if you have flexibility in this regard.

• Summer: Contractors often see the highest demand for their services during this time of year. That drives up the potential costs.
• Fall: Labor demand and costs are lower, so many renovations are cheaper. The weather can still be warm enough to permit outside projects, but inclement weather could interrupt your schedule.
• Winter: Generally speaking, this is the cheapest time to work on your home. However, cold weather, short days, and precipitation might prevent outdoor activities.
• Spring: Many homeowners get the bug to make home improvements at this time of year, but shorter days and rising labor costs make it costly.

Room for Contingencies

While you can calculate or estimate the cost of any specific project within your broader renovation plan, your budget is only complete once you factor in unexpected expenses that might occur during your remodel. During your home project, many things can go wrong or off plan, including the following:

• Contractor errors
• Supply shortages
• Power outages
• Inclement weather
• Permit delays

One possibility is that you’ll change your mind about a particular product once you shop around and see all the options on the market. Leaving room in your budget to handle cost overruns is as essential as wiggle room dedicated to aesthetic changes. It’s impossible to predict the unpredictable, but leaving 10% of your budget unallocated leaves you with financial resources ready in case of what may come.

Temporary Accommodations

Contractor work on your renovation will cost you cash but also take time, so your budget needs to consider the potential cost of accommodations you and your family will need until the work is complete. Depending on the level and scope of renovation taking place, you might be facing one or more of the following scenarios:

• Not having access to your kitchen during the renovation
• Having to sleep in different parts of your home
• Spending your nights somewhere else until the work is complete

Talk to your contractor about when certain parts of your home can wind up unavailable for daily use so you can plan accordingly.

Renovations Are Special

Renovating your house is a vast project, whether you’re doing a single room or the kitchen and every bathroom. Saving money is crucial with such an expensive undertaking, and proper budgeting helps you avoid spending too much while planning for surprises. Even with all the best planning, remember that your home and its needs are unique. Surprises are bound to happen, and you could have a few additional inspirations come to mind after you get started. Always communicate with your contractors about what can happen, and have contingencies in place in case they do. Effective channels of communication also help you navigate what lies ahead of you.

If you’re renovating your house to sell the home and make money, think less about saving money and more about what projects can give you the best return on your investment. Find out what home shoppers in your market are looking for, and put an emphasis on your kitchen and every bathroom. New homeowners might only be looking for some rooms to be perfect. Still, they want to know they will only have significant expenses in their first few years of ownership.

On the other hand, if you’re renovating for yourself, consider what you want or need from each room in your house in the coming years. Saving money might mean investing in things that keep your bills down in the future, whether that’s durable kitchen appliances or low-flow bathroom fixtures. In any case, renovations are more straightforward, better, and more effective when you budget correctly.