How To Budget for Remodeling

Is there a remodeling project that you have been putting off? Maybe it’s revamping a bathroom, adding a breakfast bar or replacing carpet with hardwoods? Knowing what you want is the easy part, but figuring out the budget isn’t always easy. Here are the steps you should take when considering taking on a remodeling project:

Estimate what the costs will be. Generally when doing major upgrades like an addition or bathroom remodel, the costs will be between $100-$200 per square foot. You can also look at Remodeling Magazine’s 2010-11 Cost vs. Value Report, which will give you the national average on 35 common projects.

Once you have a general idea of what the costs will be, itemize everything that you think you will need. If it is a kitchen remodel, go through catalogs, go to home improvement stores to get ideas and price out things like cabinets, faucets, appliances. Next, talk to your friends, neighbors, and co-workers to get names of recommended contractors.

Now that you have an estimate of what the costs will be and a list of what you want, do you have the money? If you have cash saved up, then it is a decision of if you want to spend it or not. If you do not have cash, then consider taking out a home equity line of credit. The best type is called a HELOC, which is secured by your home equity, qualifies for a lower rate and the interest can be deducted from taxes. A HELOC comes with a checkbook that can be used to withdraw money as needed up to the maximum amount borrowed. However, keep in mind that the minimum payment is just that month’s interest with no principal included. Make sure to take into account a payment plan when taking a HELOC loan, otherwise you could find yourself with bad debt.

If you have decided that it is feasible to move forward, start calling the recommended contractors for actual quotes. Give them your project description and the itemized lists of what will need to be purchased. Ask to see some of their previous work and testimonials. Take your overall impression and their monetary quotes into account when making a discoing, but do add between 15%-20% for unforeseen problems and changes that could occur. If your budget doesn’t have room for that, it is time to prioritize.

Your contractor will give you an itemized bid and you can ask for suggestions of ways to cut back if you find you are over budget. If it is a kitchen remodel, maybe replace appliances over time. Other possibilities include waiting until the slower winter season or doing some things yourself. Once you get your plan to work, you can get started!

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