Home renovations are booming in popularity. In today’s tough housing market, finding a home you love in the neighborhood you love can seem nearly impossible. So adding the upgrades and square footage you’re looking for to a place you already call home can be the perfect solution. Not to mention, increase its resale value significantly when the time is right to move.

But finding the right type of financing for your home renovation project can be confusing. Every home improvement costs money, so it’s important to know that you’re going to be able to recoup some of the costs.

In this guide, we’ll cover everything you need to know from average home renovation costs, how to set a budget for your project, and how to save money throughout the process.  

Renovating a home can be a complicated process, and the costs can add up quickly. But the best way to stick to your budget and keep costs associated with house remodeling low is to set expectations and make a plan that best sets yourself up for success.

Planning for Your Renovation

Know Your End Goal: Before you can decide what home renovations you want to tackle, you should determine your ultimate goal for the project. Do you want to increase the value of your home? Add more space for your growing family? Assess your needs and prioritize the upgrades that will help you accomplish it.

Step 1 Do Your Homework:

There really isn’t a thing as too much research when it comes to contractors, lenders, and the cost of home renovations. Head to a home center or hardware store and pick the brain of the manager, talk to various contractors in your area and friends who have recently completed a project. The more you know going into the project, the better you’ll understand the cost to remodel your house and what to expect along the way.

Step 2 Determine Your Budget:

Talk to your financial advisor and review your finances together to get both an idea of what you can afford and what you’re willing to pay. Depending on your end goal, the cost to remodel a house can get expensive, so make sure to set realistic limits for your project before you make any major decisions in regard to your contractor or plans. Make use of a home renovation cost estimator to give yourself a better initial idea of what to expect.

And make sure to have a contingency fund to account for any unexpected or incidental costs that happen along the way — and anticipate having to use it.

Step 3 Research Financing Options:

You can’t really answer the question, how much do home renovations cost? without considering the financing you choose to pay for it. Different home improvement loan options will have varying interest rates, closing costs, insurance fees, and more that will all play a role. And in order to get the most money to cover the cost of your home renovation, you’ll want a loan that factors in the after renovation value (ARV) of your home, which boosts your borrowing power significantly.

For answers to all your loan questions and to get help finding the right lender for your project, reach out to a RenoFi Renovation Advisor today. 

Should You Hire Professionals or DIY?

When many homeowners find out the average cost to remodel a house, they try to explore ways to tackle certain upgrades themselves. While this may be a good cost-saving move for owner-builders or very handy homeowners, it can actually end up costing even more in the long run if you don’t know exactly what you’re doing.

Pros & Cons to Hiring Contractors

Pros:

  • They have experience, so they’ve already learned from the common mistakes and can guide you any issues that arise.
  • The results you can expect from specialized lines of work, i.eplumbing, electrical, woodwork, etc., will reflect this higher level of expertise.
  • Saves you time from doing it yourself. 
  • General contractors will have a network of qualified subcontractors and specialists in your area, preventing you from conducting the search from square one.
  • They can get better pricing on materials, lumber, etc. 
  • They understand permitting requirements and other details that prevent legal risks.
  • They’re licensed and insured, which protect you in case there are any issues with the finished project.

Cons:

  • They probably have other jobs that will require them to split their time. 
  • Timelines aren’t always met.
  • The labor will be more expensive than DIY.
  • You’ll still have to be pretty hands-on throughout the process to ensure everything is done the way you want.
  • There are times they may default to certain design things that they’ve done in other homes
  • You’ll have a number of unfamiliar people in your home at any given time.

If you’re still considering DIY home improvements to minimize the cost of renovating a house, here are some things to consider.

  1. Time Commitment: How much time do you have to focus on remodeling the house? Do you have kids or pets to care for? The best way to add even more costs to your project is letting it get drawn out much longer than it should.
  2. Adaptability: Are you up against a specific deadline? Is your renovation causing a major inconvenience to your family’s everyday lives? If you can’t afford for the project to take longer than expected, leave it to a professional.
  3. The End Result: How ok are you with the possibility that your project may not be perfect? If you know you’re not as skilled or trained as a professional who could do the work, make sure you’re willing to accept some flaws when all is said and done.

Choosing the Right Renovation Projects: Prioritizing Based on Importance

It’s not uncommon for homeowners to have a renovation wish list that’s a little larger than their budget will allow. Even if you know what you want, unexpected costs can lead to big decisions throughout the project to ensure your house renovation doesn’t break the bank. For this reason, it’s important to focus on the most impactful and valuable improvements first.

The best way to make these is to refer back to your end goals. If your goal is to improve functionality and overall layout of your living areas, focus on the structural changes that will open up the space. If you’re determined to boost your home’s curb appeal, start with the exterior upgrades before moving inside.

And if your biggest concern revolves around costs to remodel a house overall, then identify the lowest-cost/highest impact improvements, such as refinishing a wood floor or giving a fireplace a facelift. Talk to your contractor and take advantage of a home renovation cost estimator to get a better idea of options and costs for your space. 

Here are the top four most popular renovation projects and the benefits each can provide.

  • Kitchen Remodel. As the hub of the home, any major updates to the kitchen will be a game-changer in terms of improving every day tasks associated with meal prep and entertaining. While a fresh coat of cabinet paint or new hardware may look nice, investing in improving the functionality of the overall space will always pay off big in the long run.
  • Bathroom Refresh. While usually the smallest room in the house, it is often the most used throughout the day. For this reason, it can benefit your home’s value more than almost any other upgrade in the house. Not to mention, it can save you tremendously on utility costs for water and lighting with the right energy-efficient updates.
  • Energy-Saving Updates. These types of updates aren’t only big-time cost savers in the bathroom. Storm windows, new appliances, LED lighting, a new roof — most of these improvements will easily pay for themselves pretty quickly.
  • Additions. Almost any increase in finished square footage will increase a home’s value, as long as it’s functional. By pushing out walls and adding new rooms to offer more living space, storage, or another bedroom/bathroom, you can add all new opportunities to how you — and future owners — use your home. 

How Much Does it Cost to Renovate a House: Factors and Average Cost Ranges

So how much do home renovations cost? Overall home renovation costs will differ based on a number of factors, including which home improvements you choose to pursue. But there are a number of other costs that you’ll have to consider first.

  • Labor and Contractor Fees. Most contractors will work at an hourly rate, while charging a fee of 10-20% of construction costs for larger projects. But these rates will also likely be influenced by the material costs, project size, and location as we. 
  • Materials and Supplies. In addition to labor, you’ll have a number of expenses in the items and materials you choose for your home. Things like lumber and flooring will be based on unit or square footage prices, and these will be impacted by current market and supply chain conditions. Make sure your contractor is taking advantage of contractor discounts at home centers and hardware stores, which can save you up to 25%.
  • Permits and Licenses. Every state and city will have their own requirements for construction licenses and permits, do your research to know what to expect in your area.

Average Home Remodel Cost for Common Renovations

If you’re looking for a general idea for the cost of your house renovation, here’s what expenses look like for the most common value-boosting improvements right now.

  • Kitchen Renovation: $10,000 - $50,000
  • Bathroom Renovation: $5,000 - $25,000
  • Flooring per 500 sq. ft. (excludes labor) Hardwood: $3,000 - $10,000 Tile: $1,500 - $10,000 Laminate: $1,350 - $5,500
  • Painting Bedroom: $300 - $750 Living Room: $900 - $2,000 Bathroom: $150 - $350
  • Kitchen: $500 - $3,250
  • Roofing: $4,700 – $10,500
  • Siding: $2,800 – $15,800

Average cost and post-renovation value by location:

Methodology: All figures sourced from Remodeling’s 2023 Cost vs Value report, taking averages of the cost of all projects in each city.

Note that we took individual averages of similar projects (such as minor and major kitchen remodels) before taking an average for each city.

TABLE WITH DATA MISSING

Saving Money on Your Home Renovation: Research, Alternatives, and Financing Options

In addition to knowing how much you need to renovate a house, there’s the question of how you’re going to pay for it. Financing will play a major role in what you’ll pay now and in the year’s following your project’s completion, as well as what your construction process will look like for both you and your contractor.

This is why it’s extremely important to research and compare all your options. And RenoFi can help. To get you started, we’ve compiled a list of the most common renovation financing options available.

  • Home Equity Loans A home equity loan is a loan that’s secured by your home’s equity. You receive a lump sum upfront, and repayments are made over a fixed term. This lump sum is determined by the lender’s assessment of  the amount of equity you’ve built in your home.

    This loan’s fixed interest rate is typically set lower than other types of loans (e.g., personal loans), usually around 7 - 15% of the loan amount. You’ll then have 5 to 20 years to pay off a home equity loan during the repayment period.

  • HELOC A HELOC, or home equity line of credit is a revolving line of credit based on your home’s equity that functions like a credit card. These loans have variable rates, meaning that your interest rates will change depending on market conditions as you pay back your loan.

    The main factor that determines your maximum line of credit is your Combined Loan-To-Value (CLTV) Ratio, which will vary by lender, but is typically between 75% and 95%. A CLTV ratio is simply your mortgage and your HELOC, divided by the value of your home.

    HELOCs will have two phases: a draw phase and a repayment phase. In the draw phase (about 10 years) you are able to access your line of credit on an as-need basis. Once construction ends, the repayment phase starts, when you’ll make monthly payments to cover the outstanding balance, which is both principal and interest.

  • Cash-out Refinance With a cash-out refinance, you replace your existing mortgage with a new one that has a higher balance, allowing you to take out the difference in cash. This can be a good option if you have a lot of equity in your home and can qualify for a lower interest rate than your current mortgage.

Expert Tip: In order to use a cash-out refinance, you must have sufficient equity built up in your property (at least 20%), and allow you to borrow up to a maximum of 80% of your home’s value.

Then there’s a RenoFi Cash-out Refi that allows you to multiply your home’s appraised future value instead, boosting your borrowing power to help you cover a lot more improvements on your wish list.

  • Government-Backed Loans FHA 203(K) Loans FHA 203K loans allow borrowers to finance the purchase or refinance and renovation of a home with a single mortgage. These mortgage loans also have lower down payment and credit requirements, making them accessible to more homeowners.

    But you are required to pay an upfront mortgage insurance premium, typically equal to 1.75% of your total loan value, and then monthly mortgage insurance payments moving forward.

    And since FHA loans are mortgage loans, you will have to refinance which could cost your current lower rate. You also have to pay typical closing costs and any extra costs associated with construction loans, making it one of the most expensive loans on the market. 

  • VA Loans A VA Renovation Loan, or VA Rehab Loan, is a specialized mortgage option offered by the U.S. Department of Veterans Affairs (VA) for eligible veterans, service members, and certain qualified individuals. These loans combine the purchase or refinancing of a home with the costs of renovation or repairs, all in a single loan. They offer all the same benefits of standard VA loan products — including very low qualifying credit scores and no down payment — while also allowing borrowers to roll in the cost of certain home repairs and improvements in their loan amount.

Managing Your Renovation Project: Creating a Plan and Hiring Contractors

When you’re ready to get moving on remodeling the house, preparation is key. Here are a few things you’ll have to do.

  1. Hiring Contractors

Finding the right contractor can feel like the hardest part of a renovation project. But there are things you can do to make the search a lot easier. 

  • Make your “want” and “need” renovation wishlists 
  • Ask family and friends or your neighborhood Facebook group for recommendations
  • Get architectural plans first (if necessary) 
  • Check out portfolios for examples of recent projects
  • Interview your top candidates and view finished projects firsthand

Establishing a good relationship with your contractor with open communication throughout the project is super important. Make sure to get on the same page about regular check-ins and expectations throughout construction before making your choice so that you can feel confident in their process.

  1. Creating a Detailed Project Plan. Gather all the details of your project, from architectural plans, structural plans, floor plans, renderings, and any other drawings or designs that your contractor may use. This will all not only be necessary for your home loan application process, but will also give you the opportunity to establish priorities and address any initial questions with your contractor to ensure both of you are on the same page as you get started.
  2. Setting a Timeline and Milestones Project timeline is one of the most important factors to consider when choosing your start date. Talk to your contractor about their bandwidth and how many other projects they’ll be working on at the same time. You’ll also want to know the availability of all your finishes and materials because delays can push completion dates as well. And plan for a buffer as more often than not, projects tend to run slightly over their desired timeline.
  3. Procuring Necessary Permits and Approvals Every city will have different requirements when it comes to permits and approvals. Generally, your contractor will agree to pull the necessary permits, and then you’ll be responsible for covering the costs. But you can file for yourself. Some projects won’t require any building permits, while others may need various types, such as electric or plumbing as well. All applications will have to be submitted in advance of construction day so your project isn’t held up. 

Read more about the full RenoFi Loan process here.

The RenoFi Renovation Index

Get Help for Your Home Renovation from RenoFi

Whether you’re considering some of the smart, value-boosting renovations recommended above or you simply have those personal wish-list items you’ve been dreaming about, let us help you create a happier place to call home.

To learn more about the cost to remodel a house in your area and find out how much you can borrow for your renovation, try out our renovation calculator, and contact us to discuss your project.

Lucas Jones Full bio
By Lucas Jones Lucas Jones has over a decade of experience in the lending and financial service industries. He’s a licensed broker, and holds a Bachelor’s Degree in Economics from Rutgers University. He is the head of operations at RenoFi. Lucas holds NMLS #956544 and is a Certified Encompass Administrator. Lucas’ experience in mortgage lending is the bedrock for RenoFi’s risk logic, mortgage manufacturing process, and partner lender development.

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