Budgeting For Renovations

Turning a house into a home can be an expensive process.

When contractors are remodeling your bathroom, kitchen, or bedroom, renovation costs sometimes exceed your expectations. That happens more often than you might imagine.

Contractors can find mold inside the bathroom walls while installing new fixtures. Your aging living room carpet may be hiding dry-rotted hardwood. You might not anticipate these conditions, but you'll still have to pay the cost, and this can be frustrating. Before you begin your next home improvement project, consider these options to help you budget for unseen costs.

Understand the costs

Calculating the dollars and cents might burst your remodeling bubble, but it can force you to focus on what's most important. Before you make any decisions, discuss pricing with your contractor. Get a written estimate as well, but understand the estimate will include standard home improvement tasks and visible extras. Some cost additions might be out of your contractor's control.

• Materials and fixture prices may increase between the time your contractor orders them and the day they're delivered.
• Unavailable materials may be replaced with more expensive options.
• The job may require more time to complete, which translates into higher labor costs.
• The estimates may not include the cost of insurance, permits, and state-required certificates.
  

Be realistic

Do you insist on a kitchen remodel that includes granite countertops, marble tile, a custom farmhouse sink, and an expensive new stainless refrigerator? If you live in an upscale community, your taste for the finer things in life might increase your home's value. If not, your costly renovations may feel like a waste of money when it's time to sell your home. Be realistic when you plan your home remodel. Make decisions based on the home and neighborhood where you live not the one you dream about.

DIY to reduce costs

The concept of sweat equity places a value on the work you're willing to perform to improve your property. Even if you have limited experience working with tools, you can paint, spackle, lay tile, and complete other tasks to reduce your remodeling costs.

Put a cap on your spending

Once you get a handle on the estimated costs for what you want, create a budget you can stick to. An experienced contractor should have a good idea of the potential for remodeling "surprises." Discuss the possibility ahead of time and factor them into your calculations.

Arrange project financing

Even when you have enough cash to pay for your renovations, financing your home improvement might be a better option. A major project can deplete the savings it took you years to accumulate. Instead of using your hard-earned cash, consider one of the following:

• Home Equity Loan: a single lump-sum loan using home equity as collateral
• Home Equity Line of Credit: a revolving line of credit with a variable interest rate
• Cash-out refinance: refinance your home for more than you owe and receive cash back
  

Remodeling surprises happen

Whether big or small, your remodeling job will require that your contractor juggle a hundred little details. Surprises happen, but you can handle the potential for unforeseen renovations when you plan ahead.

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