Looking to remodel your home, kitchen or bathroom? One of the most important aspects of your project is budgeting and tracking expenses. Keeping track of every cost can help ensure that you stay on budget and avoid any surprises along the way.
Budget & tracking guide
In this guide, we’ll cover some tips for budgeting and tracking your remodeling project to help you achieve your dream home without breaking the bank.
- Budget
Before starting a remodeling project, it’s important to have a clear understanding of your budget. This will help ensure that you don’t spend time designing a dream project that you can’t afford. Budgeting is a process that should be revisited multiple times throughout the project to ensure that it is fully developed. For instance, you should review and adjust the budget when you meet with your architect or general contractor and receive more accurate build-out cost estimates.
- Loans pros & cons
Effective budgeting is essential to avoid the risk of leaving a remodeling project unfinished, such as completing 75% of the work and running out of funds. This situation can lead to various problems, such as difficulty in accessing more funds once you have agreed to a loan and drawn out money. Additionally, you will continue to pay interest on the loan, along with your existing expenses like mortgage or rent while staying elsewhere.
In addition to the financial implications, there are also legal and practical considerations to keep in mind during a renovation project. Depending on the extent of the work, your local building department may require that your home be deemed liveable before you can move back in. If your project exceeds the permitted scope, you may need to update expired permits, adding to the overall cost. It’s essential to factor in all of these potential expenses when creating and revising your budget. - Research remodels, gather data
When budgeting, take time to research and consider:
1) the average cost of the type of remodel project
2) how much you are able and want to spend on your remodeling project, and
3) how you will pay for your home improvement
it’s important to consider all aspects of the process, including materials, labor, surveys, designs, and permits. These expenses can be divided into two categories: “remodel cost items” and “non-remodel cost items.” By taking a comprehensive approach to budgeting, you can avoid overspending and ensure that your project stays on track.
Remodel cost Items: typically include the materials and labor directly related to the remodel, such as hardware, HVAC, electrical, doors, windows, lumber, and tiles. These expenses are essential to the actual renovation process and will likely make up a significant portion of your overall budget.
Non-remodel cost items: expenses that are not directly related to the remodel project itself. These may include insurance, utility bills, permit fees, legal fees, survey costs, loan interest, and other costs associated with creating design plans. - Including interest and contingency plans
To ensure you have enough funds to cover all aspects of your renovation project, it’s important to factor in anticipated loan interest and loan processing fees in your budget. Additionally, setting aside a contingency fund for unforeseen circumstances or unexpected expenses can help prevent financial strain during the renovation process. A good rule of thumb is to earmark a percentage of the overall budget, such as 10% of a $50,000 renovation, to create a financial cushion. This would mean putting aside $5,000 for miscellaneous expenses that may arise during the project.
- Estimating tools
Free home remodel cost calculators are available on various websites that can provide a range of potential renovation costs based on the type of work required and the location of the home. For instance, you can check out the Remodeling Calculator on www.remodelingcalculator.org or find many other calculators via a Google search. Using multiple calculators can give you a sense of different cost estimates, helping you create a comprehensive picture of your remodeling budget.
- How to pay for a remodel
Choosing how to finance your home remodeling project is a personal decision that depends on your financial situation and the scope of the project. If you have savings specifically set aside for the project, you may choose to use those funds. However, if the project is larger or you don’t have savings, a home improvement loan could be a better option.
When it comes to home improvement loans, lenders have varying requirements that can change based on market conditions. To qualify, borrowers typically need to meet specific criteria, such as a minimum credit score, a maximum debt-to-income ratio, and a minimum down payment.
Learn more about key financing options for your remodel project – https://www.bankrate.com/loans/home-improvement/how-to-pay-for-home-improvements/