Renovations are a great way to add value to your home and let's be real - who doesn’t want a shiny new kitchen?

 

But when it comes to home improvements, they can be pricy… 

 

Here is what you need to know about saving and planning for home renovations.

 

Every home project will almost always cost you more than you thought and take longer than you thought. So always keep that in mind and budget accordingly. A great way of planning for a home renovation is to take 10%-15% of whatever the total of your renovation is and add that into the budget. 

 

 

 

 

HOW MUCH SHOULD I SPEND ON MY RENOVATION?

 

For a rule of thumb, you should spend about 5% to 15% of your home value on kitchen renovations, 3% to 7% of your home value on bathroom renovations, and avoid over renovating by following similar guidelines. Over renovating is a serious problem that needs to be kept in mind when renovating! If you over renovate your home in for your neighbourhood, you will “lose money” on your home renovation because your neighbourhood also has a ceiling price as well as your home itself. You would hate to put a $150,000 kitchen, into a home that’s only worth $300,000. You won’t make money on that renovation. 

 

 

WHAT AM I SPENDING MONEY ON?

 

Materials 

Labour 

Accommodation

 

You defiantly do not really want to cheap out on materials or labour. 

 

It is always best to purchase materials that will have some kind of warranty, just in case. If something happens you’ll be glad you spent the extra on the materials with warranties instead of doing it all over again. When you go to sell, providing the buyers with these warranties is a huge plus!

Labour is pure and simple, you get what you pay for. Don’t forget it. 

 

Accommodations whether you are staying with family, at a hotel, in the trailer, or just going out every meal to get food, you will need to be accommodated in some way shape or form. So make sure you budget accordingly. 

 

There are three major things affecting the cost of your renovation project:

  1. How much work you are willing and able to do yourself PROPERLY
  2. The materials
  3. The complexity of the project 

Labour is another huge part but it carries dramatically based on location and the complexity of the project. 

 

 

HOW DO I PAY FOR THE RENOS?

 

There are several options to pay for renovations, all with varying benefits and consequences. 

 

SAVINGS 

One of the most economical ways to pay for renovations is from a reserve fund or savings that you have saved for this specific project. You do not need to pay interest on it, depending on the savings account withdrawn from. 

 

HOME EQUITY/LINE OF CREDIT 

Homeowners with a good amount of equity in their home and with good credit can get a home equity line of credit (HELOC). Many people can get a personal line of credit at a higher interest rate to help pay for such projects. You will pay interest, but less interest than a credit card depending on your credit. 

 

CASH

Everyone likes cash. Talk to your contractor and see what they are able to do for you if you pay straight cash. 

 

CREDIT CARD

About 1 in 3 homeowners pay for their home renovations on their credit card. This is the most unfavourable way to pay for renovations because of the amount of interest you will pay on it. If you are paying for your renovations on your credit card, make sure that you budget for the extra interest that will be charged. Some contractors may not be able to take credit so you may end up paying cash advance fees on your credit card. Witch is much less than favourable. 

 

 

HOW DO I BUDGET FOR A HOME RENOVATION?

 

First off, go into it with a clear plan of what you want to be done. Do some research and see what it might work out to be. 

Second, now that you have an idea of what you want to be done and an estimated price, get a true estimate from a minimum of three contractors. Figure out their abilities, recommendations, timelines, and cost etc. 

Third, after meeting the contractors, pick the one you like best and start working with them. Chances are they are booking for a couple of months out or you can book for a couple of months out so you can have time to save for the project. 

Then make a BUDGET. It is NECESSARY. See where in your life you can temporarily cut out of your normal budget (like movies, dinner nights, camping trips, etc), to save for your big renovation. Make sure to budget interest and an extra 10% or so for wiggle room. 

 

 

There is no perfect way to make a budget. Everyones financial and personal situations are different. But make sure you can afford the renovation and it makes sense to do in your home. Find a solution that works best for you and meets your renovation needs. Taking the time to do the project right and save properly for it, will be wildly worth it for your financial future.