Guide to Creating an Accurate Home Renovation Budget

Transforming your house into your dream home typically starts with creating a home renovation budget. But your budget doesn’t have to be huge to create a beautiful living space. Making tweaks to things like cabinets, countertops, and flooring materials could help give your home a new look. 

There isn’t a one-size-fits-all model for creating a home improvement budget. It varies based on your wants, needs, and where you live. Here’s how to budget for home improvements, no matter what your situation may be.

What Is the Average Cost of a Home Renovation? 

On average, the cost of a home renovation is about $52,000. It ranges depending on the size of your home, the number of rooms you’re remodeling, the materials you choose, and the area in which you live. Here are typical costs per room:

• Bathroom: $6,600-$18,000 

• Living room: $2,500-$15,000

• Kitchen: $15,000-$42,000

• Bedroom or primary suite: $12,000-$28,000 

• Office: $5,000+

• Utility room: $6,000-$17,000 

• Garage: $7,000-$30,000

• Attic: $7,500-$35,000

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Things to Consider When Budgeting for Home Renovations 

To create a home renovation budget, first consider how many rooms you plan to remodel, what style you want, and how premium you plan to go when it comes to fixtures and furnishings.

Additionally, hiring contractors for home renovations may require a larger budget, while doing the work yourself could help save on labor costs.

Here’s what to factor in:

Your Needs 

As you’re thinking about your home renovation budget, start with what requires fixing. Does your bathroom badly need updating? Is your roof ready for a replacement? You may want to prioritize projects that require immediate attention. 

Next, consider renovations that could add to the value of your home and also increase your enjoyment as you live there, such as remodeling your kitchen or installing wood flooring. 

Cost Estimates 

Hiring a general contractor helps you determine the costs of the project. But beforehand, it’s smart to do some research to figure out the different components of your renovation and what the cost of each one might be. That way, if you need to cut back along the way in order to save money, you have a good idea where to trim (quartz instead of marble countertops, for instance), or what to save for another time — perhaps wait before adding a skylight in your kitchen.

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Contractor Bids 

It’s a good idea to speak to at least three different contractors. Get a detailed bid and a timeline of when the work would be completed from each one. 

Affordability 

Figuring out how to budget for home improvements is often tricky, but setting a maximum price point and obtaining contractor bids gives you a more accurate idea of what you’re able to realistically afford. You may realize that it makes sense to do some renovations now (the bathroom, say), and wait to do others, such as finishing the garage. 

Value Remodeling Adds 

Renovating your home adds value to it, and some projects give you a bigger return on your investment than others. For instance, upgrading your kitchen and bathroom and installing new windows typically pays off when you go to sell your home. 

Financing Options 

Home improvement financing options include a personal loan that gives you a lump sum you pay back over time, taking out a home equity line of credit (HELOC) backed by your home as collateral, and cash-out refinancing, which replaces your mortgage with a larger loan that includes extra money to use for home improvements. It’s a good idea to explore the pros and cons of each to determine the right option for you.

For instance, with a personal loan, you pay back what you borrow in regular installments over time with interest. To see what rates and terms you may qualify for, you could go through a personal loan preapproval process, which is typically quick and straightforward.

Tips for Lowering Renovation Costs 

There are plenty of ways to lower renovation costs, including: 

DIY Projects 

If you’re handy with tools, doing some of the work yourself might be satisfying while also helping you save on your home renovation budget. Break the project into different parts, do the things you’re able to handle, such as demolition or painting, and have contractors do the work that you’re unable to do, such as plumbing and electrical. 

Purchase the Materials Yourself 

A contractor may charge you to shop for the materials and also add a markup to their cost. If you feel confident about sourcing and choosing materials yourself, you could save money. 

Take Control of the Hiring Process

• Interview contractors: After you have bids from several contractors, meet with the ones you’re most interested in, and talk through the project and budget. Be clear about your needs and expectations, and tell them that you want to be notified of progress and any potential changes or delays along the way. 

• Check references: Ask for references and check them out to help ensure that the contractor you choose does good work, is reliable, and stays on budget. Make sure he or she is licensed and insured. You could also check online with the Better Business Bureau to see what their rating is and to look for any outstanding complaints against them.

• Read the contract carefully: Ensure that the contract you sign with the contractor lays out in detail all the pertinent information about the job, such as costs, the deposit and payment plan, the project’s start and end date, the permits required — and that the contractor is responsible for obtaining them — and the handling of any change orders. 

The Takeaway

A successful home renovation budget starts with careful planning. First, prioritize your needs, such as repairs, and then look at projects that add the most value, such as updating your kitchen or bathroom. Get cost estimates and bids from at least three licensed contractors. To save money, consider taking on simple tasks yourself, such as painting or demolition, and buying your own materials. Always review your financing options, such as personal loans, to make sure you’re able to afford the investment. By planning, comparing costs, and being smart about how you hire, it may be possible to create the dream home you want without breaking the bank.

A renovation can be costly, but it can also upgrade and add value to your house. Financing the cost with a personal loan could help you make this investment in your home. As you’re exploring personal loan options, Lantern by SoFi can make the process more convenient. In our marketplace, you can easily compare current personal loan rates and terms from multiple lenders to find the best one for your needs.

Compare your rates with Lantern.