What to consider before proceeding

Understand the goals of your renovation.

Different renovation projects will prioritize different goals. Some homeowners—especially older residents who plan to stay in their homes for a long time—will pursue renovations that prioritize their comfort and enjoyment of their home. In these cases, the cost and subsequent home value increase won’t matter to them, because they’re making a lifestyle choice.

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Younger homeowners are less likely to be putting down long-term roots, so they may be a different story. They will typically be more concerned about controlling costs and pursuing renovation projects that add value to their home, such as adding another bathroom. 

These homeowners may recognize that they’re likely to move to another home in the future, so renovation goals might be centered around upgrading the home while also making it more attractive to future buyers.

Solicit quotes from multiple contractors to find the best value.

Before you hire a contractor, meet with at least three different contractors and request detailed bids for your home renovation project.

Each contractor will likely provide their own cost estimate based on your renovation plan. In addition, you will need to balance the reputation of each contractor, along with their availability and other factors, to determine who is the right fit for your project.

Have a financing plan in place before you start the project.

The worst thing you can do is start a kitchen remodel and run out of money  halfway through. Don’t start large remodeling projects without a clear understanding of how those costs will be covered.

The safest option is to save up all the money you need for a home renovation before you start your project. But you might also use a second mortgage or a home equity line of credit (HELOC) to cover these expenses. Some borrowers may also be interested in a home improvement loan.

Give yourself a financial cushion to cover unexpected costs.

Additional expenses happen. You might discover, in the course of doing a renovation project, that your home has suffered unseen water damage or that it requires more extensive electrical work to address safety issues. Always prepare for these costs by allocating additional money beyond the budgeted amount.

Experts recommend saving up 20 percent more than the cost of your desired home renovation project to provide a cushion for these expenses.

If money is tight, appliances and finishing surfaces are one way to cut costs.

During the course of some home renovations, you might face a situation in which mounting costs require you to cut expenses elsewhere. The most common way to do this is by scaling back on the quality of appliances and finishes.

During a kitchen remodel, for example, you might opt for a cheaper fridge to save a few hundred dollars, or you might swap out granite countertops for quartz. In other parts of the home, vinyl or tile flooring may be installed instead of wood, which tends to be more expensive.

And if you still need to save money, consider adding some sweat equity to your home. Instead of paying a professional, you can complete certain home renovation tasks on your own, and doing so could save you hundreds or thousands of dollars off of the cost of your remodel.

Don’t let home renovations become a money pit. Use careful planning and research to understand the costs before you get started. The more preparation you do before the project begins, the easier the renovation process will be—especially on your finances.