How to Budget for Home Renovations

After putting it off for so long, you’ve finally decided to go through with your home remodeling project. You started small, just some new tiles for your kitchen floor. But hold on, your new floor doesn’t really match well with those cabinets, now does it? While you’re at it, your old and worn-out electrical appliances sure look like they need an update as well. It is now somewhere around this point when it hits you—home renovations don’t come cheap.

Home Renovation Budget in 5 Steps

If you’re going to take control of your project without breaking the bank, you need to have a realistic estimation of how much you can afford. Renovating a kitchen on a budget doesn’t have to be a hassle. Follow our five-step guide and find out how to create the smartest budget that will turn your home remodeling dream into reality.

Couple talking about home decoration

Step 1: Establish a Clear SOW (Statement of Work)

Essentially, an SOW is a thorough description of all the work you’d like to have completed during your home renovation. While you’re on the lookout for home remodeling contractors, consider putting all your wishes in writing so that they can understand better what you’d like to see included in the renovation. Ideally, be as detailed as possible and consider what elements you can cut if the budget ever becomes a concern.

Having a well-thought-out SOW and sticking to it is one of the best things you can do to keep the cost down when remodeling on a budget. The conversation will always start with you, and you should be clear on what you want out of the home renovation. Your contractor can still help you further refine your plan, but it’s crucial to have a starting point.

Step 2: Set a Budget Range

It is highly unlikely you’re going to know how much precisely to budget for your home renovation project, and unless you’re an experienced remodeler, it’s perfectly fine. Here are a few pointers on how to help you get started:  

  • Rather than a fixed amount, your initial budget should start as a range. This way, you help your contractor provide alternatives to meet your criteria at different levels of investment. Think of your budget range as a starting point or a guide for the planned work and design before the actual cost is determined.
  • Have an honest discussion and determine where your budget will serve you best. Think about how much you can afford and what you’d be willing to invest in completing either the whole project or a part of it.
  • Determine a limit to your investment. Know what’s the maximum amount you’d be willing to part with regardless of what it will accomplish.
  • To better understand some of the typical costs for home renovations, we recommend checking out this remodeling calculator website. When viewing the data, have in mind that not one project is the same, and in accordance with that, the costs will vary. Like every other, your home has distinct characteristics, and everyone has their own preferences, all of which directly affect the overall cost.

Now that you’ve established a clear SOW and understand how typical budget parameters work, you are well on your way to take the next step.

Step 3: Build a Financial Plan

If the budget range you set is well within what you can afford, then it’s as simple as placing a reasonable limit on the amount you’d be willing to spend. But what if you don’t have such an amount of cash on hand? One thing you can do is seek help in the form of a home equity loan.

Home equity financing can be set up either as a line of credit or a loan. If you decide to take a home equity loan, your lender puts an advance on your total loan upfront, while a line of credit provides you with a source of funds to draw on as you require.

If you’re unsure who to turn to for help, we recommend you get in touch with Alpine Credits—It’s a place where homeowners get approved.

Step 4: Seek Professional Consultation

One of the best ways to set up a budget range is to schedule professional consultations with reputable home remodeling contractors. They will be able to determine if your budget range realistically matches your established scope of work. After discussing your budget options, they will advise you on how you should set your expectations but won’t get too much in detail until the project starts.

Based on what you’ve learned from your contractor, your budget range may need adjusting to match your scope of work and vice-versa.

Step 5: Planning and Design

We saved this step for last because it’s the step that most homeowners skip, and believe us when we say—it’s a huge blunder to do so. For just a small reasonable fee, you can hire a designer to meticulously complete the design and plan all the renovation work as well. You’d be surprised to learn how much you can save on costs that usually occur due to poor planning. A good designer will help you avoid these staggering costs and help you achieve your vision by doing so. 

As things get started, your design contractor will be able to pinpoint exact costs and help you tighten the budget. With their help, you can improve the functionality of your home while incorporating your desired design. Let your mind be at ease knowing your project and budget scope align with each other before any of the actual work begins. 

Parting Advice

Whether you’re doing bathroom remodeling on a budget or a full home renovation, there will always be unanticipated costs. Once demolition work begins, all sorts of problems might surface. Those century-old drain pipes aren’t going to hold forever. Always consider such expenses, even if you took a loan. It doesn’t hurt to add 10 to 15% of your budget and set it aside if the worst should occur. 

Source: Upscale Living Magazine

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