How To Budget for a Home Renovation

Do you have an eyesore in your home that you’re tired of looking at and wishing was fixed? Maybe it’s your kitchen cabinets or your primary bathroom. Or maybe you’ve just had some home renovation plans on your wish list for a while.

Whether you’re considering an all-out remodel or a smaller project across one or more areas of your home, you’ll need to start out by developing a budget for your renovations.

Once you have an idea of how much money you can put towards your renovations and how you’ll finance them, you’ll be on the way to making your vision for your home a reality. We will help you get started with this guide to creating a home renovation budget.

Prioritize What to Fix or Update First

The first step to planning for your home renovation budget is to identify the different parts of your home that you want to update or change.

While you might already have a general idea, we suggest writing down each area that you’d like to renovate. That way, you can assign a rough cost estimate to each part of the overall project.

As you start to add everything up, you’ll also be able to prioritize what changes you prefer to make before others, if that becomes necessary. The order of which updates are most important is really up to you. Our suggestion is to focus on any major structural issues and unfinished areas of your home before cosmetic improvements.

How Much Should I Plan to Spend on Renovations?

The range for home renovation budgets varies just as much as home sale prices do. How much you spend on your renovations usually depends on two factors: what you’re renovating and how much you can afford.

In the first step of your home renovation budget planning, we discussed prioritizing the areas of your home that you’d like to upgrade. With those priorities in place, you can begin estimating the cost for each part. Usually you can do this through a quick online search, by talking with your real estate agent or a trusted advisor, or by giving contractors a call directly.

Then, once you have an estimate for each part of your renovation project, you’ll be closer to an estimate of how much your renovations are likely to cost overall. That’s when you can start to make determinations about how much you’re able to afford, given your other financial obligations.

Rule of 3: Get Quotes from At Least 3 Contractors

Rough estimates for the materials and labor costs for the different parts of your renovations are good to help you calculate an overall cost. They can also help you decide what renovations to carry out versus what to cut if needed.

But, when you’re deciding on who you’ll hire, you’ll want to get quotes from at least three different contractors. Not only will this allow you to compare price points, it will also let help you compare the quality and the overall service offerings of each person or company.

Here are a few recommendations to consider when choosing a builder or contractor for your project:

  • Get Recommendations. Talk to family, friends, and neighbors who may have recommendations.
  • Talk to Your Realtor or HUD Consultant. If you are using a 203(k) or HomeStyle® loan, your consultant or real estate agent is allowed to refer you to a contractor.
  • Check Online Resources. Research licensed contractors in your area with positive online ratings and reviews.
  • Ask to see their work and referrals: Request to see some of their past or current work, and to interview their customers.
  • Pay attention to their attitude and professionalism: Don’t hire anyone who refuses to answer any of your questions. Legitimate, reputable contractors will be happy to provide any information you’re requesting as part of your vetting process.

As you get quotes for the different home improvements you’ll be having done at your home, you’ll be able to fill out a more complete home renovation budget, too.

Options for Financing Your Renovations

Many homeowners try to save up for their renovation projects. This is a great approach, especially if it’s a smaller project. But when it comes to a large addition to your home or a major overhaul, sometimes it’s not realistic.

Rather than waiting around to afford your renovations solely from your savings, you can put your home equity to use! There are many loan options, such as HELOCs and home equity loans, which let you tap into the equity you’ve built up in your home to pay for your improvements. You’ll be able to pay off your renovations in a more manageable monthly payment and enjoy the benefits of having those improved parts of your home for your enjoyment today.

Here are some typical construction and renovation loan programs, and the situations when they’re ideal.

  • Cash-Out Refinance: If you need to refinance and you have a fair amount of equity, a cash-out refinance can be a great option. This is best suited for larger projects, above $150,000. These loans are limited to 80% of the value of your home, unless you are a qualified veteran. Veterans can finance up to 100% of the value of their primary home.
  • Home Equity Line of Credit (HELOC): HELOCs offer more flexibility and are best used if you intend to pay off the loan within two to five years. They can allow you to draw, or borrow, from your equity for up to ten years before you have to start paying back on the balance. These are best suited for homeowners who are planning to work on smaller projects over a longer period of time.
  • Home Equity Loans: This option is best used when your primary mortgage has a low interest rate and you’re planning to pay off the home improvements over a longer period of time.
  • Renovation Loans: These types of loans are a great option if you don’t currently have enough equity built up in your home, but will once the renovations are done.
  • Construction Loans: Often overlooked, some construction loan programs do allow you to finance renovations to an existing home. They require higher credit scores and 10% to 20% equity after the renovations are completed, but can be a good option if you need a jumbo loan.

You don’t have to figure out which loan program is best for you all on your own, though. Our team will work with you to understand your goals and current financial situation so that they can advise you on the best options available to you.


Now you’re ready to start budgeting for your home renovation project! To get expert advice on financing options available to you and to learn how much you can qualify for, get in touch with our team today. They will get to know you and gain an understanding of your personal situation and goals in order to offer the best loan options for you.


The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 05/19/2022.