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Guide to Creating an Accurate Home Renovation Budget

Guide to Creating an Accurate Home Renovation Budget
Kristin Luna
Kristin LunaUpdated November 11, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
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 can 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 $48,000. 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. Per room, you can expect to spend:
  • Bathroom: $3,000 – $25,000 
  • Living room: $5,000 – $10,000
  • Kitchen: $6,000+ 
  • Bedroom or primary suite: $10,000 – $15,000 
  • Office: $5,000+
  • Utility room: $6,000+ 
  • Garage: $3,000 – $30,000
  • Attic: $12,000 – $70,000

Things to Consider When Budgeting for Home Renovations 

To create a home renovation budget, you must first consider how many rooms you’ll be remodeling, in what style, and how premium you plan to go when it comes to fixtures and furnishings.  Additionally, hiring contractors for home renovations will require a larger budget, while doing the work yourself can 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’ll want to prioritize projects that require immediate attention. Next, consider renovations that will 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. These are just some of the 8 home improvement tips that can help as you’re drawing up a budget.

Cost Estimates 

Hiring a general contractor will help 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’ll have a good idea where to trim (quartz instead of marble countertops for instance), or what to save for another time (perhaps adding a skylight to your kitchen can wait).

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 will be completed from each one. 

Affordability 

Figuring out how to budget for home improvements can be tricky, but setting a maximum price point and obtaining contractor bids will give you a more accurate idea of what you can realistically afford.  You may find that it makes sense to do some renovations now (the bathroom, say), and wait to do others (like 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 pay 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, including extra money you can use for home improvements. You’ll want to explore the pros and cons of each to determine the best option for you.For instance, it’s good to know the various ways to use a personal loan to cover your home improvement costs if this is a lending product you are considering. With a 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 can go through a  personal loan pre-approval process, which is typically quick and easy.

Tips for Lowering Renovation Costs 

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

DIY Projects 

If you’re handy with tools, doing some of the work yourself can be satisfying while also helping you save on your home renovation budget. Break the project into different parts, do the things you can handle, like demolition or painting, and have contractors do the work that you can’t, such as plumbing and electrical. 

Purchase the Materials Yourself 

A contractor may charge you to shop for the materials and also add a markup onto their cost. If you feel confident about sourcing and choosing materials yourself, you can 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 can 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: The contract you sign with the contractor should lay out in detail all the pertinent information about the job, such as costs, deposit and payment plan, the project’s start and end date, the permits required and that the contractor will obtain them, and how any change orders will be handled. 

Compare Personal Loans With Lantern

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 and see if you prequalify with Lantern.
Photo credit: iStock/stevecoleimages
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Frequently Asked Questions

How do you determine your home renovation budget?
What should be included within your home renovation budget?
What is the average home renovation budget?

About the Author

Kristin Luna

Kristin Luna

Kristin Luna is a Tennessee-based journalist with 20 years of writing and editing experience. She has contributed to such publications as Southern Living, This Old House, Real Simple, Parade, Conde Nast Traveler, Travel + Leisure, and various other titles. With her spouse and fellow journalist, she runs a public art nonprofit and also purchases and rehabs older model homes.
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