Know how much money you have to make renovations before you start your project, and research your options to get a better understanding of how much certain upgrades, materials and changes cost. Typical home renovation costs. Chances are, the budget you have in mind won’t get you as far in a project as you think. The Houzz report found that 77 percent of renovating homeowners started with a budget in 2017, but 46 percent of them ultimately spent beyond their planned total.
“Either homeowners are just surprised how expensive products and materials are or … a fraction of the homeowners actually choose more upscale products and materials for their remodel,” Sitchinava says.
Pallrand attributes much of the increase in spending and unrealistic expectations to the fact that houses are generally more expensive today than they were 10 years ago. The increased cost to buy a house as well as the cost to hire a contractor and buy materials outpace the average increase in income. “Inflation in the real estate market is what’s putting people behind the curve,” he says.
Plus, if your renovation project involves a part of the house that hasn’t been touched in a while, who knows what you’ll find. Tuttleman says it’s often hard to set a budget before demolition for a major renovation begins because there’s no knowledge of deferred maintenance or systems issues until they’re visible. “We can’t see behind the walls,” she says.
Cash.Most homeowners don’t want to take on additional debt to fund their home updates or renovations. In fact, 85 percent leverage their cash or savings, according to the Houzz report. Necessary renovations for system updates or, say, a water heater breakdown are often considered good reasons to tap a rainy day fund.
With cash, however, be sure to budget accurately from start to finish on the project. You don’t want to get halfway through a bathroom remodel and run out of money, leaving your bathroom unusable for the next six months while you save.
For major renovations and home rehabilitations, financing the updates will likely get you to project completion faster. You have the option to take out a home equity loan, which allows you to borrow an amount based on your home’s value – specifically, the equity you currently have in it based on how much of your mortgage you’ve paid off.
A type of home equity loan is a home equity line of credit, or HELOC, which serves as a revolving line of credit, allowing you to borrow and pay off the amount as needed. The preapproved limit by the lender is based on your equity in the home.
Home equity loans are a great option for home improvement projects because they lend to increasing the value of your property, but borrowing for frivolous spending can lead to financial problems down the line. Only borrow what you feel confident you can pay back over time.