6 tips for budgeting for home improvement projects
Budgeting for home improvement projects #1
Whether you’re looking to upgrade your kitchen with new appliances or improve your home’s energy efficiency to qualify for the ecoENERGY Retrofit program through the Office of Energy Efficiency, budgeting for your home improvement project is absolutely essential. But most home improvement projects, whether small or large, can easily get out of hand and over budget if you aren’t careful.
The following tips will ensure that you have enough money set aside to cover your next home improvement project:
Budgeting for home improvement projects #1
Figure out what value you’ll add to your home
Before you even start the home improvement process, it’s important to understand exactly how the improvements will impact the value of your home. If you’re planning to stay in your home for a couple of decades, this may not matter so much, since your improvements will be more for your own personal enjoyment than for the resale value of your home. However, if you’re planning to sell in five years or less, you’ll definitely want to ensure you can recoup most, if not all, of your costs for your home improvement project.
The easiest way to figure out what kind of value a project will add to your home is to do some online and offline research. Your goal with a remodel is to ensure that, first of all, you add real value and saleability to your home and, secondly, that you don’t overprice or over-improve your home for the area in which you live. It’s very important that you keep your home on a similar level to the other homes in your area, or you’ll have a hard time selling it when the time comes.
Budgeting for home improvement projects #2
Know how much you can spend
Of course, before you start spending money, you’ll also need to know how much you have at your disposal. If you have money saved up for the project, count that in. You also could look at taking out a second mortgage to cover the cost of the remodel, if it will add value to your home.
Another option is to check out some of the best credit card deals. Credit cards with low interest and/or good rewards can be a good financing option for smaller projects that need to happen rather quickly – like fixing leaky pipes or replacing sections of wiring.
Take into account everything available to you to spend, but make sure that you don’t overextend your credit on a home improvement project. It’s better to take the home improvement process slowly and pay as you go than it is to get in over your head in debt, especially on projects that are really just for aesthetics or convenience, rather than necessity.
Budgeting for home improvement projects #3
Talk with a contractor, even if you’re planning to DIY
It’s a good idea to get a quote from a contractor, even if you’re skilled enough to do much of the work yourself. Most contractors provide free estimates in hopes of gaining a new client. When you talk with a contractor about your job, get as detailed an estimate as possible.
You may find that it’s actually a better option to have the contractor do some of the work – such as labor-intensive drywall replacement or technical and potentially dangerous electrical upgrades – and you can always hire out parts of the work while completing some of it on your own.
Budgeting for home improvement projects #4
Get multiple quotes, or price out materials
If you’re planning to work with a contractor for most or all of your home improvement projects, be sure to get multiple, detailed quotes. Also, work only with contractors who have a good reputation for staying close to their quoted prices, or you could end up getting in way over your head. The rule of thumb is to get at least three quotes before deciding on something major like a home renovation contractor.
When you’re planning to do the work yourself, obviously your cost will be in materials. But you’ll also want to price out materials. Check out what different types of materials cost – such as hardwood floors vs. bamboo floors. Once you’ve decided what types of materials you want to use, look at three or four different places where you can buy the materials so that you get the best possible price on the market.
When you’re pricing out contractors and materials, be sure that you write down the detailed quotes or price lists so that you have all the necessary information when it’s time to make a decision.
Budgeting for home improvement projects #5
Create a detailed budget
Once you have all the information you need to get your budget made, create a detailed spreadsheet-style budget. A detailed budget that helps you track what’s being spent on materials is particularly important for DIY projects, since contractors will normally just set up a payment plan or invoice you for a lump sum payment at the end of the project.
There are many different ways to create budgets. Just make sure whatever method you choose is comfortable for you, and that you’ll be able to follow the budget throughout the project, tracking expenses as you go. Be prepared, if one part of the project gets out of hand, to move money from another part of the project to cover the new expenses.
Budgeting for home improvement projects #6
Add at least 10%
It’s always a good idea, especially when working with a large project, to add about 10% contingency to your budget. If you get through the project without having spent that 10%, you can always add extras – like getting a more expensive finish on your kitchen cabinets or upgrading the shower head in your bathroom – or you can just put it back in savings for other projects in the future. But it’s always great to have that extra 10% available, just in case you do need to use it.
Creating a budget for a home improvement project doesn’t have to be terribly difficult. It can, in fact, be simple. But it does take time and plenty of research on your part to ensure that you have all the necessary information before you create a budget. Having a workable, reasonable budget for your home improvement project, though, will ensure that you don’t overspend and regret ever getting started!
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This article was written by Danielle Baker. It can be found here
Kristina Crosbie, Mortgage Broker
Smiths Falls, Ontario