Home Renovations

Home renovations can be an exciting process for any homeowner, but they also come with a myriad of challenges, can be quite stressful, and may become a financial risk, especially when you don’t properly plan for them. 

As a homeowner, you could consider a home renovation for several reasons, including improving its livability, increasing property value, or increasing your comfort or enjoyment in your home. 

The success of your home renovation depends on many factors, and some of the most important factors include your renovation budget, renovation plan, building regulations in your area, cost of materials, and the total renovation time. 

In this guide, you will learn how to plan your home renovations effectively while optimizing for the most value out of your renovation budget.  Follow the tips provided for a successful renovation of your home.

Assessing Your Renovation Needs

Before planning any home renovation project, you must assess your renovation needs. This way, you don’t jump headfirst into a project you may not have the finances for or one your state does not permit.

Acquaint Yourself With Local Renovation Regulations 

Before you start any major renovation project in your home, you must familiarize yourself with the building codes and regulations in your county regarding construction and renovations. 

In some cases, you may require a building permit. In New York City (NYC), for instance, performing a full home renovation may require you to obtain everything from building and electrical permits to curb cut and roof work permits.

By ensuring complete regulatory compliance, you can make sure your home renovations adhere to the standards and safety protocols in your state. This also means that you don’t end up shelling out extra cash to pay fines.

Identify Your Renovation Objectives

It is important to know early on in the project planning phase why you need to carry out a renovation. Is it simply to increase the value of your home for resale, improve its overall functionality, or update the aesthetics to accommodate your personal styling preferences?

For instance, many home renovation experts advise that you focus on high-impact areas, such as the kitchen, bathroom, and curb, to boost your home’s resale value.

On the other hand, if your goal is to improve your living experience, you might prioritize renovation projects that focus on improving comfort and convenience, such as upgrading your HVAC system or adding storage to your home.

Understand the Scope and Scale of Your Project

Just like it is important to know your renovation objectives, you must define the scope and scale of your renovation project from the start. Perhaps your home renovation only involves a minor update, such as repainting your walls and replacing old fixtures, or you might be considering performing a major overhaul, like knocking down an old wall with too many cracks or even adding new rooms. 

Regardless of the scale of your project, identifying its size can help you set the right expectations in terms of time, cost, and the level of inconvenience you can expect during the renovation process.

Consult With Professionals

It might be tempting to perform DIY home renovations, especially if you think it might save you a lot of money in the long run. But in most cases, unless you are a seasoned construction expert, you might end up spending more money than you initially intended because you are likely to make avoidable mistakes that renovation professionals could have helped you avoid.

It is highly recommended that you consult a professional renovation agency, which can provide valuable insights into what’s feasible within your budget and timeframe. Experts such as architects, designers, and contractors can help you define the most realistic renovation path, considering your current structure.

Lastly, you should consider getting multiple quotes and opinions to ensure that you get the best value for your money.

Consulting a designer to help you polish your home renovation ideas, establish your vision for your home visually, and show you what’s structurally possible can be a time-saving and value-driven endeavor. 

If you don’t have the time to look for a designer for your project and prefer to work with professional designers, you can make use of Cottage. Cottage recently joined forces with RenoFi to remove the hassle in renovation planning and can help make your vision come to life affordably and dependably. Contact Cottage to learn more about this service, which can help you understand what’s possible, visualize your renovated home, and get preliminary quotes. 

Creating a Realistic Budget

Budget – the big bad wolf of any renovation project. One thing you don’t want to do is to under-budget for your renovation project only to realize that you still require a bucket load of cash to bring your dream home to life.

Pick Your Projects

When creating your budget, ensure that you pick projects that can allow a high enough cost recovery on the total value of your home, especially if your renovation will increase its value. 

A 2022 Remodeling Impact Report by the National Association of Realtors estimates hardwood flooring refinish provides a 47% cost recovery, while installing new wood flooring can provide as high as an 18% cost recovery. 

Once you pick the projects you want to work on, ensure that you stick with them regardless of how tempting it is to add more along the way unless it stays within your budget, of course.

Research the Costs

This is the part of the renovation process where you discover that you have underestimated the cost of some materials or renovation operations and overestimated the cost of others!

To save money during your renovation, you will need to carefully research the cost of everything involved, including the cost of materials and labor. 

If you have already consulted with a home renovation agency, then you probably already have a list of materials and an estimated cost on hand.

This is the part where you go online and manually research the cost of various renovation items. There are plenty of free renovation calculators to choose from online. Pick one and use it. You can also manually check the cost of materials on sites like Amazon or eBay.

Compare Renovation Bids From Different Contractors

The next thing to do is consult various home renovation contractors based on your renovation goals and compare their remodeling costs. Some contractors offer more renovation options than others.

Seek out at least three trusted home renovation contractors in your area or state and request project bids from all of them, as well as the estimated timeline for your project.

Don’t just opt for the cheapest contractor and call it a day, as cheaper isn’t always better. Instead, research your potential contractors by looking at online reviews, as well as asking about their insurance type and certification.

Set Aside Emergency Funds

No matter how well you plan the budget for your home renovations, something else that you didn’t plan for is likely to show, and you’ll most likely require more funds than you had initially budgeted. It is recommended that you set aside around 10-20% of your total budget as your emergency/contingency fund.

Unforeseen issues that may arise include unplanned structural repairs, mold remediation, and an increase in the price of materials.

How Much Does It Cost to Perform Home Renovations?

The cost of renovation typically depends on several factors, like the size of your home, the type of materials your renovation project requires, the cost of materials in your state, and more. In most cases, the cost of renovating a home is very specific to that home.

However, here are a few national averages to consider according to statistics from Angi:

• The average cost of renovating a modern kitchen is about $26,960 and about $65,000 on the high end. 
• The cost of renovating a Bathroom is around $12,094 and can go as high as $30,000 on the high end. 
• Renovating a basement costs around $22,758 to $56,000 on the high end. 

The costs of renovations provided above are only provided as guides to help you plan your home renovation budget. In reality, the cost of renovating your home will be peculiar to your specific needs.

Financing Your Renovation

Not everyone has the cash on hand to fund a renovation, and many homeowners find themselves in tough spots when it comes to financing such projects. A Forbes survey revealed that 63% of people rely on savings for home improvement projects and this approach typically leaves homeowners with limited options for larger renovations. 

For many, especially new homeowners with minimal equity, tapping into thier home’s value through cash-out refinancing or a home equity loan is often out of reach. With average down payments hovering around 8-14%, it can take years to build enough equity to support a major project. Instead, many homeowners turn to less-ideal solutions like high-interest credit cards, personal loans, or borrowing from their 401k, leaving them stretched thin financially.

For most people, paying cash for their home renovations will be the best option, and this cash usually comes from their savings or retirement accounts.

However, not everyone has enough savings to finance a full-scale renovation, especially if it’s to increase property value. If this is you, then you may need to consider a few renovation loan options to pay for turning your current home into your dream home.

A RenoFi home renovation loan, for instance, allows you to borrow against the post-renovation value of your home, and in many cases, it may be the best option for homeowners with long-term remodeling goals.

Refinancing Your Mortgage

Refinancing your mortgage is one way to pay for your home renovations, especially if the current interest rates are lower than the existing mortgage rate. While this may free up additional funds for your renovation project, it is not a generally recommended approach as it will extend the lifespan of your mortgage.

Personal Loans

If your home renovation is not an extensive one, and you don’t have the cash to pay for it out of pocket, a personal loan may be the best route to go. However, like most unsecured loans, personal loans tend to have higher rates than secured loans, especially if you have a poor credit history.

Home Equity Loans and Lines of Credits

Home equity line of credit loans, also known as HELOC, like RenoFi loans, are the best options for homeowners who need to borrow money for their renovation while keeping the interest rates low and ensuring that you have the maximum loan limit possible based on the after-renovation value of your home.

Home equity loans let you borrow against the equity of your home, and they come with significantly lower interest than personal loans. However, the major caveat is that you have to use your home as collateral.

According to the US Census Bureau’s Housing Survey, approximately 50% of home equity loans are used for home renovations. So, your neighbor with the new curb and a freshly remodeled kitchen may just have taken a home equity loan for their project.

Imagine your home is currently valued at $500,000, and your outstanding mortgage balance is $400,000. You are planning a renovation and expect that the after-renovation value of your home will be approximately $640,000. 

Your current loan-to-value ratio (LTV) is at 80%, which means that you effectively can’t borrow anything to fund your renovation. A RenoFi loan, however, would allow you to go as high as 150% LTV or 90% LTV using the after-renovation value.

So, in this example, while using a standard home equity loan results in your borrowing power being $0, a RenoFi loan allows you to borrow up to $176,000, thanks to your home’s after-renovation value!

If you are considering a home renovation, RenoFi is by far the smartest way to finance your project. Learn more and explore your borrowing options here.

Making the Most Out of Your Home Renovation Budget

You also must ensure that you take advantage of every opportunity possible to save money throughout the renovation process.

Cost-Effective Design Choices

Discuss with your home renovation contractor some of the cost-effective ways to help you achieve a high-end look for your home without necessarily spending on high-end price tags. This doesn’t mean you should use cheap construction materials or cut corners on the cost of labor. 

However, based on the advice of your contractor, you can decide to refinish existing cabinets instead of replacing them. This can save you thousands of dollars in costs while giving your home a fresh and updated appearance.

Another example is opting for open shelving instead of custom cabinetry. However, it is important to ensure that whatever design choice you make aligns with your overall aesthetic.  

Reusing and Repurposing

Another good way to save is by reusing and repurposing old materials for new constructions. You can consider using reclaimed wood for flooring, designing your accent walls, or putting a shine on your old furniture using a fresh coat of paint.

You can think of it as adding a special touch to your renovation.

Getting the Most Out of Your Home Renovation Fund

Home renovations can enhance the appeal of your living space and increase your property’s value. Through careful planning and budgeting, choosing the right financing method, and making smart design and material choices, you can save significantly on your renovation project and avoid common pitfalls.

It is important to communicate your goals and visions for your home renovation project with your contractors to ensure they give you exactly what you had in mind. You must also manage your expectations accordingly and remain flexible throughout the renovation process, as you never know what challenges the project will face along the way.

RenoFi loans are the smartest way to finance a home renovation project. Unlike traditional loans, which are based on your current home value or require you to refinance your primary mortgage and give up your low rate, RenoFi loans are based on the after-renovation value of your home. This allows you to borrow, on average, 11x more, get a low monthly payment, and keep your low rate on your first mortgage.

With the right plan and financing opportunity, a home renovation can transform your space into a beautiful and functional space that is fit for you and your family.

Explore RenoFi loans and find out how much you can borrow to finance your dream home today!