How to budget for a remodel

How to set a remodeling budget that will keep you out of the financial doghouse.

Key takeaways:

  • A successful remodeling project starts with a solid budget.
  • Build a wish list, separate ‘want’ versus ‘need,’ and then prioritize.
  • Do your homework and get competitive bids and a signed contract before you start, but don’t forget to leave room in the budget for unexpected expenses.


Inspired by all the home remodeling shows on television? If so, you’re not alone. One study said annual spending on home improvement and repair by American homeowners could reach $430 billion by late 2022.1 Another study found that the average homeowner planned to spend $15,000 for renovations—a big jump over previous years—and more than half of all homeowners took on a big project in 2022.2

Renovating your home can be an exciting but stressful time. Most people find that their renovations cost more than expected, so it’s important to start with a solid budget.

Take these six steps to successfully set a budget for your home renovation.


1. Make a wish list

Draft your wish list, then prioritize it by ‘want’ versus ‘need.’ Admittedly, some projects are more exciting than others, but making essential repairs, especially those that protect the value of your home, should always be a top priority. For example, if your roof leaks, this is a repair or replacement which falls into the ‘need’ category, so be sure to include this in your budget before anything else.


2. Know your home’s value so you don’t overbuild

Before you begin a project, make sure you don’t put more money into your home than it is worth. Use an online home valuation site like Zillow to assess the value of your home and compare it with others in the neighborhood. Evaluate the cost of what you plan to do against how much it will add to your home’s value. Even if you don’t intend to sell your home anytime soon, consider consulting a local realtor. They can give you an approximate idea of what your home is worth both before and after a renovation.


3. Prioritize your planned improvements

Prioritize your wish list according to need and the increased value your improvements will have on your home, then decide what you can afford to spend. According to the National Association of Realtors,3 the top remodeling projects in 2022 in terms of their return on investment (ROI) included a new primary bedroom suite, a kitchen upgrade, a bathroom renovation, and hardwood flooring refinish, which showed 147% of value recovered from the project. Granted, not every remodel will result in an immediate increase in your home’s value, but certainly keep ROI in mind as you budget.


4. Do your homework

When you show contractors specific examples of what you hope to achieve with the renovation, it will help you get more accurate bids. Do the research and gather photos to show what you’d like your house to look like. Consider visiting a local lumberyard or home center to gather information. Chat with local experts to help you become a more informed consumer.


5. Get bids

Get names of recommended contractors from friends and neighbors. Be realistic; if you know you only have $20,000 to spend on a kitchen remodel, tell the contractor up front. A good contractor will make suggestions on ways to get the most from your budget. Look for detailed estimates and ask questions to determine exactly what is and is not included, so you can make accurate comparisons between bids. For example, some contractors don’t include appliances in their bid, or they include an ‘allowance’ for things like tile or light fixtures. Check to make sure the allowances are realistic to your expectations. Make sure tax is included in the bid, agree to a timeline, check their references, and verify that the contractor is licensed, bonded, and insured before you sign a contract.

This last point is very important. Never start a remodeling project without a detailed, signed contract.


6. Set aside money for contingencies

Many projects begin only to find unanticipated surprises during the renovation that add to the overall cost. Make sure to designate some portion (usually 10 to 20%) of the total budget to handle the unexpected.

Did you know?

The most common reason people exceed their renovation budget is because of changes they make along the way. Do as much homework as you can up front, then do your best to make a plan and stick with it.

Remodel your way to your dream home

If your renovation has a larger budget, consider a home equity loan from Global Credit Union.

Global offers two types of loans you can use for home renovations:

  • Home Equity Loan—Often used to finance a major purchase like remodeling, a home equity loan uses the equity you’ve built in your home as security. This fixed-amount loan is taken in one lump sum to be paid back in regular payments over a specified term.
  • Home Equity Line of Credit (HELOC)—Like the home equity loan, this loan is based on the equity you’ve built in your home. A HELOC is a line of credit you can access any time, in any amount needed up to your loan limit. Your payment amounts vary, depending on how much of your credit line has been used.

Building a House vs. Buying: Which Is Best for You?

Deciding whether to buy or build your next house? Consider these key points.

Why and How to Build Home Equity

Here’s how and why you should work to build home equity, and how to use it.

What Is a Home Equity Loan and How Does It Work?

Put the equity you’ve earned in your home to work for you.

Knowledge is power

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