How to Budget for Home Remodeling

Home remodeling usually starts with a simple fantasy. You may be browsing the pages of a magazine and come across an article or picture that sparks your imagination, and before you know it, you have dreamed up an entirely new look for your home. Unfortunately that’s where the fantasy ends and reality steps in to snap you out of it.

Remodeling is not cheap. It also doesn’t happen instantaneously. Instead, it will cost a significant chunk of your money, and most likely turn your home into a construction site for a good while. But having your home covered in construction dust isn’t a bad problem to have, so to speak, since this means that you are only weeks away from enjoying your home’s new look. So, how do you get from daydream to construction? Here are a few tips for budgeting for your home remodel.

Estimate the costs

To know what you can afford to spend on your home remodel, it helps to have a rough idea of what it will cost. In order to make alterations that will give your house good resale value, it helps to estimate a budget as a percentage of your home’s current value, for example:

● Kitchen: 10-15%

● Master bathroom: 10%

● Second bathroom: 5% 

● Attic/Basement: 10-15%

● Other rooms: 1-3%

● Outside areas: 2-5%

Figure out how much you can spend

Once you know what you should spend, the next step is to find out what you can spend. If you have been saving up, that amount may be enough to cover all or part of what you want to do. If that’s not the case, you will have to apply for some kind of loan.

Request quotations

You need to find out what the job will actually cost, and therefore you need to ask the people who will actually be doing the job. You should get quotations from several contractors. Be sure to vet them properly to make sure they do good work. It will probably be best to ignore the lowest estimates, since you are almost guaranteed to pay more in the end due to overoptimistic costing.

Don’t add more things to your plan

When the job is underway, it may be tempting to think that you might as well add one or two small little changes. These changes can end up costing you a lot, and may cause a budget overrun.

Have a contingency plan

However well you plan, there’s always a chance that things will run over time or over budget. In order to provide for these unforeseen mishaps, it’s best to always add around 20% of the project cost to the budget. But if you are working with a very rigid and finite budget, you will have to adjust the budget downward by 20% in order to have a financial cushion for unforeseen expenses and cost overruns. This should effectively take care of any hidden costs you may not have been aware of when you first drew up your budget.