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Budget Home Improvement

Remodeling Budeting Tips

Introduction
Start With Budget
Estimating Costs
View Saving Tip$
Build Up Credit
How to Finance
Manage Project
Lower Monthly Bills
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introduction

Before starting a home improvement project, it's a good idea to establish a budget plan to maintain costs and ensure you take advantage of savings and discounted benefits.

Page Topics:

start with an assigned budget
estimating costs
view money saving tips
build up your credit
understand how best to finance
manage project to avoid cost overruns
lower monthly bills
FREE: budgeting worksheet

First Topic: Start with an Assigned Budget

budget planning tips

Start with an Assigned Budget

No matter what size of the remodeling project - something big like a home addition or something small such as updating a bathroom - you need start with an assigned budget.

The budget keeps your costs within limits. And if materials or labor costs begin to rise, you need to find substitute materials or reduce the project to keep costs within line.

If you don't, you might find the remodeling project costing more than you want. Going over budget can hurt your finances and reduce the overall value of your ROI.

Note These Rules for Budgeting:

Note 1:
make sure you don't spend more than what your home is worth. You might get a better return if you buy a house with the renovation done than spending a vast amount on an existing home.
Note 2:
do your research when figuring out what goes into the renovation. View ideas, house and remodeling plans, and discuss your ideas with a designer who can offer suggestions that might fit your budget.
Note 3:
be specific in your remodeling design - it other words, develop a detailed specifications plan.

This plan should list everything you want to do all the way down to the type of of materials needed for the project.

Having everything listed and detailed will avoid mid-project changes that can add to the total cost.
Note 4:
get quotes from contractors. Show them your spec plan so that they know exactly what you want to accomplish.

Often contractors can get materials at a lower price then you can get via retail. So listing your material specs may allow the contractor to quote close to the budget you set.

One saving cost is for you to become the general manager and hire out sub-contractors for carpentry, plumbing, electrical, installation, etc.

You must have good working knowledge of the project and have a detailed plan that they can follow. You will also be responsible for all permits, building codes, and inspections.
Note 5:
stick to the plan. Any changes to the plan can increase costs if the project is at mid-renovation.

But if you must change the plan, discuss it with the contractor in detail. That will give you an idea how much the change will cost.
Note6:
plan for those unexpected hidden costs and emergencies. Material costs might take a sudden jump, weather might alter renovations schedules, tearing out a wall might reveal extra work to pass building code, etc.

It's alway good to add a buffer of 15-20% to the budget for cost overruns and emergencies.

What Goes Into the Budget

The budget should include each project item followed by material and labor costs.

For example in a kitchen remodeling project, your project item may include a new kitchen sink. The budget should include the following:

Kitchen Sink
Type (description)
Material Cost
Installation Cost

Total Cost
Notes

Kitchen Sink

Type (description)

Material Cost

Installation Cost

Total Cost

Notes

Under notes will be a more detail description of the sink item - where it can be purchased - and what lesser price substitute you will consider if your budget requires cutting back on some items.

This example will include every spec of your kitchen remodel - that will include kitchen flooring, lighting, electrical, and plumbing needs - with an added buffer between 15-20% for cost overruns and emergency circumstances.

The total cost for all specs with the buffer will tally up to the budgeted cost of your kitchen remodel.

Once you have that budget, you can then plan for project financing.

Budgeting Worksheet

The budgeting worksheet segments the budget by home area and by floor.

You simply list the remodeling specs you are looking for with its estimated budget. Everything tallies up to give you the total budgeting costs.

use this FREE remodeling budget plan to assign costs and budget items
	download FREE budgeting worksheet

Estimating Costs

Before you start any remodeling project, you need to get a good estimate on how much the project may cost in your particular area. Most estimates range from low-to-high end. Use the middle figure for your budgeting plan.

Estimates include materials, labor and other ancillary items such as permits and inspections. Use these cost estimators to get an approximate cost for remodeling projects within your area.

Finding Area Costs

We have partnered up with Home-advisor ™ who has years of data regarding labor and material costs for the following projects:

estimate kitchen n' bath remodeling costs
	kitchen remodeling
	bathroom remodeling
	install countertops
	refacing cabinets
	shower installation

estimate home project costs
	home additions
	window installation
	remodel a basement
	attic conversion
	paint the home interior

estimate home exterior costs
	replacing roof
	add a driveway
	install garage door
	home siding

estimate home interior costs
	home theaters
	home offices
	interior designers & decorators
	laundry rooms
	sun rooms

estimate home utility costs
	electrical
	heating and cooling
	plumbing
	energy efficiency
	safety and security

estimate yard and landscaping costs
	decks and porches
	landscaping
	outbuildings
	patios and walkways
	swimming pools, hot tubs & saunas

view other remodeling projections
	view project estimator

View Money Saving Tip$$$

Before you start any project, view these tips on how to avoid costly mistakes and reduce your remodeling costs:

jump over to our money saving tips area
	view money saving tips

Build Up Your Credit Score

You need to check and build up your credit to ensure low credit costs when it's time to finance your project.

If you plan to finance your project either through a bank or contractor, they will certainly pull your credit report to determine what rate to charge.

Those with excellent credit scores will likely get the lowest financing rate, which translates into lower financing costs.

What's Is Excellent Credit

Credit scores range from 300 to 850 and are segmented as follows by Equifax:

800-850:
excellent credit with the lowest financing rate
740-799:
very good credit with low financing rates
670-739:
good credit with the slightly higher interest rate
580-669:
fair credit with rates higher
300-579:
poor to bad credit with declines or high-end financing

Sample of Rate Charges

Let's demonstrate monthly costs for different score ratings. Let's assume you are planning a remodeling project that will cost $25,000 with financing terms of 6 years to pay it back.

Note: This is just a demonstration and financing terms and rates may be different depending on lender and applicant.

800-850:
rate: 3.24% - monthly budget: $382.53
740-799:
rate: 4.05% - monthly budget: $391.70
670-739:
rate: 7.25% - monthly budget: $429.23
580-669:
rate: 11.5% - monthly budget: $482.28
300-579:
rate: 17.9% - monthly budget: $568.78

What this demonstrates is that an applicant with excellent credit will have a monthly cost of ~$383 vs. an applicant with fair credit that may be looking at a financing cost of ~$482 — that is almost $100 dollars extra in cost over someone with excellent credit.

That $100 extra in financing costs may or may not impact the remodeling project costs.

If you can't afford the full ~$483 monthly cost along with other living costs, you may need to reduce your remodeling project and/or find other financing terms that will fit your expense needs.

jump over to credit section
	get your FREE credit report for review

Understand How Best to Finance

When it comes to paying or financing home remodeling and renovation costs, you have several options to look at. These include:

Credit cards:
If your home improvement cost is minimal, with the intention to pay if off in full in less that 3-5 months, then a credit card with the lowest rate may be your best option.

Credit cards generally come with higher rates. But if you going to pay it off within a few months, the extra interest won't be much.

But beware! If you don't pay it off fast, you will rack up a lot interest rate fees for holding that debt on your card.
Contractor financing:
Many contractors work with finance companies that offer financing for all kinds of home related projects. Some contractors will offer FREE financing for 60 or more months.

With FREE financing, it doesn't matter what your credit score may be. But there is a catch, you must make every payment with the right amount and at the right time for each month of the term.

If you skip a month, than the finance company can collect all of the accrued interest and charge high rates.

So you must be disciplined with this type of financing - like having it automatically paid each backed up with several accounts. Make sure to read the fine print before signing.
Home equity financing:
Having a home equity line of credit is the favored option for renovations. You can use the line as needed to pay for materials, contractor fees, and other costs as needed.

The home equity allows you to budget costs and it generally comes with the lowest financing depending on your circumstances.

You can pay it off quickly or setup an monthly budget plan that works best for you. It offers the best overall flexibility for home improvement.
Home refinancing:
Some homeowners like to estimate a major remodeling project and then refinance their home with a cash-out option for paying the renovation.

The advantage of the refi with cash-out is that the rate is mostly the lowest rate you can get. Also, the cash-out becomes part of the refinance loan that usually has fixed rates and terms that meet the homeowners need.

The disadvantage is the refi is an one-time option. In the event another home need arises - such as a new HVAC - you will need to find additional financing or do a refi with a cash-out option again.

Please note that if you use the cash-out option, over estimate your needs. You don't want to find yourself without enough money on hand if the project costs go up.

What you don't use can be used to pay down the mortgage.
Unsecured bank loan or line:
The final option for financing home improvement in an unsecured bank loan or credit line. These rates are higher than home equity lines and home refinancing.

But it may be the preferred option for homeowners who don't want to refi (given that may have to refi at a higher rate) and that they don't want to encumber their mortgage with a second mortgage like a home equity.

jump over to finance section for more information
	click for financing guide

Manage the Project to Avoid Cost Overruns

Homeowners that take an active role in managing their renovation project can help keep costs down; and more importantly, make sure the spec plans were followed correctly and that everything meets code.

Project management means the following:

plan and manage material costs and substitute options
negotiate the remodeling labor costs
manage change management to keep costs down
understand building codes and permits
get inspections before making any payments.

Become the General Manager

Another way to keep cost down is become the general manager for your project. In this role, you will hire individual sub-contractors to perform the electrical, plumbing, cabinet install, flooring, etc.

This way you can negotiate best price from each sub-contractor.

This role requires some knowledge of the remodeling trade; that includes understanding architectural plans, spec planning, building codes, jurisdiction permits, and what should be inspected. There are plenty of resources online that can help fulfill this role.

The disadvantage is that you may not get best pricing. Contractors with large operations get discounts on bulk purchases and with sub-contractors that secure multiple projects from the contractor.

Sometimes contractors will baked these discounts into the price. So the role of becoming the general manager may be a wash - something you need to investigate.

DIY Stuff

Another cost reduction is do some other remodeling work by yourself (DIY). You may have some experience in floor installation, painting, carpentry, or other.

By tackling some of these projects on your own can help reduce contractor costs.

visit our section project management
	view project management guide

Lower Monthly Bills

Adding a home remodeling project can certainly increase your living experience and perhaps your home value. But it comes with a cost - and that cost (financing) might increase your family living budget.

That means you may have to cut our household costs to keep everything within your overall family budget. Review expense reductions strategies to lower housing, living costs, transportation, family care and more.

Every penny reduced is a penny earned that can you used to pay for the remodeling costs. So view this guide on how to lower cost in the following areas: