5 Tips for Sticking to Your Renovation Budget

Couple talking while examining blueprints with a building contractor in their apartment

Home renovation projects are notorious for costing more than expected. How much more? Experts say it’s often as much as ​​​​20%. That means a homeowner with a mid-range home improvement project of around ​​​​​​$60,000 could potentially go $12,000 over the renovation budget. It’s crucial to plan ahead to avoid potential financial difficulties.

To avoid renovation surprises, follow these tips for a happy home and wallet. 

How to renovate your home without breaking the bank 

The secret of sticking to a ​​home renovation budget is preparation. With a bit of research and comparison shopping, you’ll be in a better position to estimate the real cost to renovating your home and stay within your spending limit. 

1. Review your finances 

Instead of letting the project dictate your budget, start by creating a budget that guides your renovation choices. Before you create a home reno Pinterest or start accepting quotes from contractors, review your finances.  

Take a look at your savings, income and expenses to see how much room you have for a new project, and be sure to set a hard limit on how much you’ll spend. The total cost of ​​house renovations tend to grow as projects unfold, and if you’re ​​​​paying over several installments (which is recommended), you may not even realize exactly how much you’re spending overall. 

2. Define your project 

If you’re not clear on what you want done to your home, it will be impossible to estimate the cost and keep the bill under a set dollar amount.  

To avoid an ever-growing project, spend time up-front creating a clear, realistic picture of what you’re looking to accomplish. Make a list of everything that needs to be renovated, then arrange your list in order of priority. That way you can easily decide what to eliminate (or save for later) if your ​​remodeling budget isn’t enough.  

When listing the work, remember to consider various costs that need to be accounted for, such as:  

  • Labor 
  • Materials 
  • Permits 
  • Taxes 
  • Relocation/housing (if you need to stay elsewhere) 

3. Shop around for contractors 

Avoid the temptation to hire the cheapest contractor available or go with the first name you find online.  

When it comes to home improvement projects, you want the work to be done right and add value to your home, which means vetting contractors to find an experienced professional. After all, if you cut corners on this expense, you may have to pay someone else to come and fix the work.  

Here are a few ways to narrow down your search for a contractor: 

  • Ask for ​​word-of-mouth referrals
  • Read reviews on home improvement sites like HomeAdvisor, Houzz and Angi
  • ​​​Check the status of the contractor’s license to make sure it’s current
  • Make sure the contractor is easy to contact and provides clear communication
  • Make sure you understand their ​​payment schedule

4. Compare bids 

Renovation costs will vary based on the details of your home, including its ​​age and​​ location. For example, Home Depot estimates that the materials for a kitchen overhaul might cost $56,639 in Titusville, Florida while they cost $77,460 in San Francisco, California. 

To get clarity on market rates in your area, renovation experts suggest collecting a​​​​​​t least three bids. If you get an ​​unusually low quote, proceed with caution since it might be a scam. But be sure and take the time to gather multiple, reliable bids. You can use them to find the best rates and even negotiate a better deal.  

5. Stay involved 

Your home renovation project could realistically last ​​several years from start to finish. During that time, you may get overwhelmed or tired of the project and even be tempted to toss your budget aside.  

Instead of letting your architect or contractor talk you into pricey extras or just letting them make the decisions for you, stay in active communication and be prepared to reiterate your budget constraints. 

How to pay for a home remodel  

In a perfect world, you’d pay for your home renovation with money you’ve already saved up. But most homeowners don’t have five figures in extra cash on hand. If you’re looking for a way to get extra money for a home renovation, consider these sources: 

  • Lenders: A personal loan for home improvement could be the key to paying for renovations. If you have equity in your home, you could also consider a HELOC, HELoan or cash-out refinance. Just make sure you have room in your budget for the payments and lender’s fees. 
  • Government programs: You may qualify for a home repair assistance loan or program through your ​​federal, state or local government based on your income, location or other demographics. 
  • Grants: Check to see if a home repair or adaptation grant is available to you through the ​​VA, ​​USDA or the ​​Bureau of Indian Affairs (BIA). 

Budget conservatively 

It’s normal for home renovation costs to grow during a remodeling project, since unexpected things come up. But that doesn’t mean you have to keep stretching your budget.  

Instead of planning to spend every dollar available, aim to spend no more than 80% of your available ​​renovation budget on the project. If you do, you’ll have some extra funds to cover unexpected expenses that may arise along the way. 

Written by Sarah Brady | Edited by Rose Wheeler

Sarah Brady is a financial writer and speaker who’s written for Forbes Advisor, Investopedia, Experian and more. She is also a former Housing Counselor (HUD) and Certified Credit Counselor (NFCC).

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