Last Updated on March 4, 2021 by Showrooms Online
How to Make a Budget for your Home Renovation That Will Succeed
The job of deciding how your renovation will look when it is completed will be shaped by how much you spend on the materials and labor. Deciding how to make a budget for your home renovation will likely be influenced by the amount of value you could add to your home. If you are living in your ‘forever’ home you may choose to indulge a bit more. That’s because your motivation will be to create a space you enjoy.
However, it is more likely that you are renovating to increase the value or functionality of your home but don’t plan to live in your home permanently. If this is the case, it’s critical to start with a budget. But, how does one go about creating a renovation budget? Here are some tips on figuring out what should be spent on a home renovation.
Determine the Value of the Work Based on Your Home Value
A good starting point is to determine the value of your home when you learn how to make a budget for your home renovation. Then, use this number to help decide how much to spend on a room by room basis. National Bank has some advice to help calculate this.
“Always keep resale value in mind when you’re planning your budget. For instance, a kitchen represents 10% to 15% of the overall property value. If you want to upgrade it, limit your expenses to that proportion of the value of the house. So, for a residence priced at $300,000, renovation costs for the kitchen should be anywhere from $30,000 to $45,000.
If you upgrade the bathroom—another room that increases resale value—calculate 5% to 10% of the property value. According to the Reno-Assistance service, that can mean anywhere from $12,000 to $25,000 to renovate a standard bathroom.
Remember that some renovations add more value than others, so don’t spend a large part of your budget on skylights or having a pool put in.”
Budgeting Based on the Size of Your Home
Another approach to budgeting comes from Meghan Paynter who notes that “According to HomeAdvisor, the average cost of renovating a home that is less than 1,000 square feet is $18,347. For homes in the 3,000 to 4,000 square foot range, the average cost climbs to $36,121. Renovations made to an older home tend to cost more than a newer one. This is especially true if the wiring, plumbing, and other features aren’t up to code.
Typically, you can expect to spend at least $100 to $200 per square foot on any renovation.
When you’re deciding on your home renovation budget, it can be easier, and more affordable, to prioritize projects by room and build a budget around the cost of each individual project.”
How to Renovate a House on a Budget
To get an approximate idea of what your remodeling budget should be, consider the value of your home as a whole. You don’t want to spend more than 10 to 15 percent of your home’s value on a single room. If you spend more, the value of the renovation will not proportionally add to the value of your home. Realistically, a budget for your home renovation should reflect the return on your investment.
When you have decided what should be spent on a home renovation, add an additional 10-20% for unanticipated expenses. It is likely that something will not go as planned or cost much more than you expected. A buffer will make your project much less stressful.
To avoid the stress of living in your home during a renovation you may want to stay in other accommodations during the construction. You may want to stay away for some or all of the work. Hotels, AirBNB, or other options can be a significant cost. Part of how to make a budget for your home renovation should include for this expense.
Consider the Cost of Temporarily Relocating
You may opt to move the contents of the spaces you are renovating to a storage unit off-site. Be prepared by knowing the cost of a moving van and the rental of a storage unit beforehand.
Take the Time to Investigate Other Renovations that Return a High Value
If you are primarily looking to increase the value of your home by renovating or remodeling, consider projects that may provide a better return on your investment than the project you have in mind.
Importantly, experts note that some renovations provide a better return than others. In particular, garage door replacement, manufactured stone veneer, kitchens, siding, vinyl window replacements and a bathroom remodel are at the top of the list of high return projects.
Do You Need Help Financing Your Renovation
There are several options for financing your renovation. For instance, you can choose one or more options such as savings, a credit card, a personal line of credit, a secured line of credit and home equity loan, mortgage refinancing, financing added to a home purchase mortgage, grant or rebate options for upgrading appliances to be more energy efficient.
Moving.com writes, “Now for the hard part: figuring out how exactly you’re going to finance this renovation. First, take a look at your current finances. Do you have enough cash to cover the renovation? If so, great. If not, you’ll need to borrow money for the project. Unless you have a fairy godmother willing to loan you cash, we recommend either using a home equity loan or home equity line of credit (HELOC), where homeowners can borrow money against their home.
Similarly, many homeowners also use credit cards to finance their renovation projects. This may be a good idea – assuming you have a plan to pay these credit cards off. If you have strong credit, you may also be able to obtain a loan through SoFi, an online personal finance company providing personal loans and mortgages to high income individuals.”
There are many grants available to help cover the cost of your renovation. It’s well worth your time to review what’s available from the government.
Know Your Cost Upfront
Finally, homeowners with all levels of renovation expertise need to be diligent in preparing a budget. Failing to prepare may bring your project to a halt or create more debt than you are prepared to handle. It’s a good idea to spend a lot of time on the budget.
Lisa Jackson reminds us the 49% of Canadians planned to renovate their homes that year, budgeting $10,211 on average. Among those who completed recent renovations, 39% went over budget – demonstrating how out of control renos can really get.
Setting your budget is an important initial step for your renovation. Hopefully, by following our guidelines on how to make a budget for your home renovation you should be able to avoid a lot of the problems that can derail your project. Drop us a line to let us know your budget planning successes.
