Budgeting for Your Home Renovation

Project planning
November 02, 2018

Welcome to part two of our four-part series, designed to take you through your home renovation from start to finish.

In part one, you got the inspiration you needed and picked your must-have home improvement projects, but now it’s time to figure out how these projects align with your budget.

You’ll learn about budget creation, some helpful financing options, and tips to help you set priorities—and that’s just for starters.

Figuring out a home renovation budget that doesn’t break the bank is easy—you just need the right tools!

Creating Your Budget

When it comes down to it, crafting a renovation budget can feel a bit like completing a puzzle. Remember that list of must-haves and would-likes you made in part one? Those are the puzzle pieces.

Start with the must-haves, and list them in order of importance. Can you afford to complete all of those projects in one round of renovations? If not, consider going through one-by-one with project estimates in mind, and determine which should be shelved to complete in another year or two.

Writing out your budget

You can create your renovation budget using pen and paper, fill out an Excel or Google spreadsheet, or even try out some budgeting software designed for home renovations.

Look up estimates on your desired projects in your area by collecting information found online, from neighbors, and from local service companies. With the numbers in front of you, you’ll be able to make a more accurate budget decision and set realistic goals for all your projects.

Watch out for scope-creep

As renovations get underway, you may be tempted to add in “just one more project” or switch to a new backsplash tile. Beware! This is a phenomenon known as scope-creep.

Scope-creep can have some pretty scary consequences for your wallet. Scope-creep refers to mid-project changes that end up affecting the scope of your renovation—and costing you more than you budgeted for.

Even the smallest changes made mid-renovation can add up in the long run (and extend the renovation timeline), so try to stick to your original agreement as closely as possible.

Allow for a little wiggle room

All the planning time in the world can’t stop unanticipated costs from popping up during the renovation process.

Plan to expect the unexpected, and leave a little bit of wiggle room in your budget.

When your contractor starts working, they may run into some unexpected issues that could result in what is called a change order. This is an alteration to project plans, and generally these changes will raise your home remodeling costs.

Consider a roof replacement project: if your contractor starts pulling off the old roof and finds severe damage underneath, you’ll likely need to spend a little bit more repairing the damaged portions.

You can minimize any potential for stress by giving your budget a bit of wiggle room to cover any unexpected discoveries. If you don’t have to use it, then that’s even better—you’ll come out of the renovation with more cash in your pocket than you thought.

Budgeting - Financing Options

Assess Your Financing Options

Once you’ve got a ballpark range for your home improvement project, consider how you’ll pay for your remodel.

Fixed rate vs. variable financing terms

As you assess your payment options, it’s also a good idea to consider the differences between variable and fixed-rate terms.

Fixed-rate financing means the interest rate is constant, and won’t change over the life of your financing. If your financing method comes with fixed rates, you’ll know what your interest will be ahead of time. If you want prefer consistency in your payments, you might prefer fixed rates.

Variable rate financing is different. The interest rate on these types of financing options can change based on a the key index rate set by the Federal Reserve; that means your interest rate (and your monthly payment) could go up or down.

Benji is a traditional financing option that can be used for almost any type of home improvement that is affixed to the property. Benji offers competitive fixed rates, and comes with multiple term options. This type of financing can be used to finance projects from $2,000 to $50,000, which makes almost every type of renovation possible, whether you’re completing a small landscaping project or a big kitchen remodel.

Learn more about financing for home renovations with Finance of America Home Improvement, and take an in-depth look at the different payment options that are available to fund your project.

Get Quotes from Contractors

You’ve got your budget planned out and financing method in-hand—now it’s time to start collecting quotes from local contractors.

Interview several contractors and get quotes from each. Talking to different contractors will help you compare your options, and give you a realistic idea about how much your desired renovations will actually cost.

Whether you’re planning a massive landscaping remodel in your backyard or you simply want to get new shutters installed on your home, it’s important to arm yourself with the knowledge you need to make an educated decision.

After all, if you only talk to one contractor how can you be sure you’re getting the value you deserve from your home renovation project?

While a high-quality quote doesn’t necessarily guarantee a prospective contractor as a sure bet, it can help you make a more confident decision.

If you need more help deciding between contractors, make sure to read part three of our four-part installment, which covers assembling your renovation dream team.

Also, be sure to check out our tool to browse contractors in your area.


Setting Priorities: What to Do if You Need to Trim Your Renovations

If you find your dream renovations aren’t in line with your budget after receiving quotes, it’s time to trim down your options. This isn’t always the most fun task during the budgeting process, but it’s an important one.

Here are a few tips for trimming home renovation costs:

Take a look at lower-cost alternatives

If you’re having trouble fitting all of your desired projects into your budget, consider whether or not you can compromise using lower-cost alternatives.

Some projects have a range in price. If you’re interested in adding a kitchen island to your cooking space but the marble countertop blows your budget out of the water, don’t knock it off your project list quite yet.

Would you be willing to install a laminate countertop instead? If opting for a less expensive countertop material could help you save, this compromise could make it possible to keep the kitchen island on your renovation list. (Plus, who’s to say you can’t upgrade your countertop material a few years down the line?)

Wait to take on renovations for home features that are still working

If you’ve got upgrades on your list that are more about fashion than function, consider cutting back in these areas. Take the bathroom, for example. If you want to upgrade your shower tile inlay, but the shower itself is still working properly, this could be one project you can table—at least for the time being.

That money can then be used towards fixing the broken deck in your backyard that might not have made the project list otherwise. Funnel your home renovation budget where it will improve day-to-day life for you and your family members the most.

Focus on function and efficiency

If you’re still deciding how to remodel your kitchen, bathroom, or bedroom, factor functionality into the decision-making process.

There are plenty of home renovation projects that can improve the function and efficiency of your home. Water and energy-efficient projects can help you conserve precious resources, and may result in savings down the line. Functional home improvements aren’t always flashy, but they may prove to be the most useful.

Opt for timeless, not trendy

Home renovation has gone through its fair share of trend cycles, and many of us are certainly guilty of investing in one (or several) of them.

In the 60s, open shelving and shag rugs reigned supreme. In the 70s, linoleum and avocado-hued refrigerators had their heyday. By the 80s, homeowners were rushing to include etched shower doors in their master bathroom. Once the 90s rolled around, it was time for brass accents, and by the early 2000s, it was all about industrial kitchens.

Did any of these designs make it into your home in the past few decades?

It seems every decade had their own must-have home features, but that’s the thing with trends—they’re here today, gone tomorrow.

If you’re making aesthetic upgrades in your home, whether it be new flooring, a new kitchen backsplash, or a bathroom cabinet overhaul, it’s important to focus on timeless upgrades. Opting for classic looks may help you avoid changing your home again in 10 years, and save you money in the long run.

Once Your Budgeting is Complete

Renovating your home can be a big investment, but the right upgrades can add value to your home as well as comfort and enjoyment to your life.

Now that you’ve learned about Budgeting and Financing, it’s time to move onto part three of our four-part series: Assembling Your Renovation Dream Team.