How to make a budget for a home improvement project
Do you want to renovate or remodel your home? Home improvement is an excellent way to increase its market value.
When it comes to home remodeling or improvement project, you can renovate your entire house or work on specific areas, such as kitchen and bathrooms.
The tricky part of the project is making an affordable budget. In this article, we will tell you how to plan or make a budget for your home improvement project.
Estimate the cost of the project
In general, the rule is to calculate the value of your house and then divide that value for each room. For example, if your house value is $300,000, you must not spend more money on your home improvement project. Also, if you are just renovating your kitchen, then you need to spend at least 10% of the total house value, which in this case is $30,000.
Look for home remodeling loans
There are many types of home remodeling loans, such as refinancing, cash-out refinance, home equity loans, and HELOC. Let us briefly tell you each of these loan options. The first one is refinancing, which depends on your interest rate.
Using this option, you can refinance your mortgage at a low rate for a longer-term. Thus, it will lower the monthly payments and allow you to save money for your home improvement.
Cash-out refinance is the second option, which is available to you when you have enough equity. The option is all about refinancing the existing loan for the amount, which is higher than you owe.
When you choose this option, you will pay off the original mortgage with left-over cash. There are many refinancing tools and calculators available online, which can be used to determine the rates.
A home equity loan is somewhat similar to HELOC, which requires you to receive all the cash at one time. Home equity loans are known as second mortgages because you will get them in addition to your first mortgage.
HELOC, on the other hand, works better for many people. HELOC stands for a home equity line of credit and works similar to the credit card. It means you can borrow money using HELOC for your home improvement project and pay interest on it. Also, HELOC will limit the amount of loans based on your credit score.
Get quotes from contractors
Many contractors will give you an accurate estimate based on your requirements. If you don't have enough knowledge on creating a budget, a contractor will give you a rough estimate.
You can then discuss it with someone who has good money management skills. It could be your friend or family member. Thus, you can come up with an affordable budget and know the number of items will you need to complete the project.
Create a home improvement plan
Once you have an accurate budget, it is time to utilize it. You can do this by making a plan for your home improvement project. For example, use online tools to create charts and timelines as well as allocate a specific amount of budget or money to each task.
Make sure you complete each phase of the project on time and spend the amount of money allocated for it and no more than that. Otherwise, you will hurt your budget and end up losing money.
|Thomas Moore is a proud American with a Bachelors Degree in Business Administration from the University of San Diego. He has been in the financial industry for many years holding numerous licenses in multiple states. He currently helps operate cashkingco.com and is our resident expert on all things finance and a great writer. Thomas is also an avid outdoor enthusiast that loves fly fishing streams in the Western United States. LinkedIn Profile