As a homeowner, it can feel like your list of house projects is never-ending. What do you tackle first? Where do you even start? How will you afford it?
I see these questions as a mortgage originator working with home buyers and as an individual prioritizing my own home projects. From my experience, here are the steps I’d recommend to anyone getting ready to renovate.
1. SET YOUR BUDGET.
One simple way to decide what to take on this spring? Figure out what your budget is and choose a project you can afford. Unless it’s part of a plan to sell, the value-add to your home isn’t going to pay for the renovation upfront.
2. CHOOSE YOUR MATERIALS.
Some aspects of a renovation are out of your control, like the length of the project or unexpected issues in the walls or ceiling. But you can control what you use for materials, which is the greatest variable in your final price tag. This is where you can cut costs (or not).
What’s your aesthetic? What fits your budget? Where might you be able to compromise? With supply chain issues driving up the cost of materials, can you get the same or similar effect with a less expensive tile or wood?
3. THINK ABOUT THE SCOPE OF THE PROJECT.
Renovations affect more than your wallet. You will have a construction project in your home, after all. How will the scope of the project impact other parts of your home and life?
If you’re remodeling your kitchen, what’s your meal plan? If you’re updating your only full bathroom, will you need to find another place to stay? If you’re working from home, can you focus with construction sounds in the background?
Time is another important element of the project. How long will it take? Renovation projects almost always take longer than expected. As you plan for your house to become a construction zone, be sure to build in a time buffer.
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4. TALK TO A CONTRACTOR.
There are three important reasons to speak with a contractor at this stage:
- Availability: Contractors are extremely busy these days! Many are unavailable to begin work on short notice. You may need to adjust your timeline (more time to save up!). Start reaching out to contractors sooner rather than later so you can get on their radar.
- Options: With their expertise and experience, a contractor may multiple ways to complete the renovation. One way could take less time but cuts corners. Other options might be more imposing, either for the cost or the work that would need to be done.
- Estimates: Get multiple estimates if you can. You can compare pricing, timelines, approaches, personalities, and any other factors that help you make the best decision.
- Permits: More significant home renovations will require a work permit to get started. Your contractor should help you pull the right permits to move forward with the project.
Don’t forget to ask for references and examples of their work!
5. REVISIT YOUR BUDGET.
Remember the budget you made back in step one? It’s time to get that back out. Now that you have some estimates, how do they compare to what you can afford?
Be prepared for the final cost to be more than the estimate you received. Contractors tend to underestimate how long projects will take and how much they’ll cost. When we’re thinking about loans for home renovations, we typically add 5% to 20% on top of the estimated cost. It’s better to be safe than sorry!
6. REVIEW YOUR OPTIONS.
All the cards are on the table now: how much you can afford, what project you want to do, the impact it will have on your home life, and the estimated costs and timelines from contractors. At this point, take a step back and look at the options in front of you.
After talking to a contractor, does it seem like it could be a DIY (do it yourself) project? Does it need a professional touch? Or is there a happy medium? Perhaps there are some DIY aspects, like demolition or painting, and some that require true expertise, like electrical work or plumbing.
7. PUT FUNDS INTO PLACE.
Congratulations—you’ve arrived at a decision! You’ve already mapped out your budget and what you can afford, so now you just have to conjure up the actual money. There are a few ways you can line up the funds for your renovation project:
- Savings: If you have enough set aside, you can simply dip into your savings account.
- Personal loan: If you can’t pay for a smaller renovation in a lump sum from your savings, you can go with a personal loan.
- Home equity loan: If you have equity in your home, you can borrow against it to pay for a larger project.
- Cash-out refinance: If you have $200,000 left to pay on your mortgage, you could refinance for a $250,000 mortgage and get back the $50,000 difference in cash to put towards home improvements. As a bonus, you can use the opportunity to update your mortgage terms.
- Green loan: If you’re starting an energy efficiency project, you could qualify for an energy loan. You also may be able to take advantage of various programs and rebates for certain upgrades.
8. GET STARTED!
There’s only one thing left to do now—break out your toolbox (or supervisory hard hat) and start renovating!
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