Are You Overspending on Your Home Improvement Project?

Cut Your Initial Budget
Whether you’re planning a big renovation or a modest remodel, two key early steps involve money and planning. First, create a budget. Then, trim that budget as much as you can. 

Budgets tend to grow as projects unfold, as unforeseen costs are somewhat inevitable. For example, you might find that you need to update wiring or plumbing, causing total costs to climb. A good way to keep a lid on your total project costs is to start with a slim budget. 

You can also crowdsource some intel that will help you be accurate in your budget. Ask anyone you know who did a similar project what they paid, or search the internet for more details about costs.

Factor in Hidden Costs 
Because unforeseen expenses are inevitable, brace yourself and add a hidden cost buffer of as much as 10%–20% back to your trimmed budget. That way, your ballpark cost up front will more closely resemble what you’ll end up paying. Try to stay within your tight budget figure but prepare to pay the higher amount if needed.

Consider the Cost vs. Value
Of course you want to enjoy the improvements you’ll make to your home. That’s what’s driving your renovation. But also keep in mind what your return on investment will be. Will the upgrade pay for itself by raising the value of your home?

Decide: DIY or Hire a Pro?
Will you do it yourself or hire a pro? The answer might be clear if you are particularly handy and have the time or, on the other hand, if the nature of the project puts it beyond your comfort zone. 

If you are on the fence, consider the pros and cons. You could save money by doing things yourself, but if you make a mess of the project and a redo is needed afterward, your savings could go up in sawdust. 

To compromise, you might do some of the work yourself. That could involve doing some of the demolition (as long as you’re careful!), removing and discarding old carpet, or taking on some of the painting and finish work.

Anyone who has ever hired a contractor for their home will tell you that the process of finding and vetting potential contractors can be a time-consuming hassle. Same goes with getting referrals from other homeowners, because what worked for one homeowner might not be right for the next. Using a service that helps you find experts in your area, like HomeAdvisor, can help streamline the process and get you project quotes faster.

Look for Deals on Materials
If this is a do-it-yourself project, you can save on materials in several ways. First, do your homework and comparison-shop. Consider buying from a large home center, such as Lowe’s Home Improvement, where you might find lower prices because they buy in bulk.

Also, consider buying or finding reclaimed materials via Craigslist, the Building Materials Reuse Association, freecycle.org or friends and family.

Rent Equipment; Don’t Buy It
Avoid buying any equipment that you don’t expect you’ll use again or would use infrequently. This might include a pressure washer, chainsaw or scaffolding. Instead, look into renting what you need for a fraction of the cost. Major home centers, such as Lowe’s, have extensive rentals available.

Hiring a Pro? Get Three or More Quotes
If you go with a pro, do your homework and get at least three quotes. There might be a fairly large variance based on whether any contractor is particularly busy, and some just charge more than others. But be wary of an estimate that seems too good to be true. It could be a sign that the contractor is inexperienced or isn’t being honest. 

●    Do your due diligence. Interview the bidders and get references. Also, ask your friends and neighbors for recommendations. Word-of-mouth can be a good tool here. 
●    Be critical. Is the contractor on time, well organized, experienced? Do they inspire confidence?
●    Find the right time. Consider scheduling your renovation job during a quiet period, where contractors might be more inclined to make their costs more competitive, just to have the work.

Decide How You’ll Pay
Now, how will you pay? Ideally, you’ll save on the project cost by saving money ahead of time, but in some cases financing may be the right choice for you.

●    Save up. If you save up for a planned home project within the next couple of years, make sure that your savings are secure in a high yield savings account, certificate of deposit or money market account, where your principal is protected.
●    Finance. If you decide or need to finance, consider tapping your own home equity through either a home equity loan or a home equity line of credit (HELOC), if that’s a viable option. A home equity loan will typically have a fixed rate of interest, while a HELOC’s interest rate will vary over time. In general, HELOCs have slightly lower interest rates and allow you to draw only as much as you need when you need it, potentially lowering your interest costs.
●    Promotional financing. When it comes to paying for a big-ticket item like a home improvement project, consider lines of credit with promotional rates. In many cases, financial institutions will partner directly with home centers, retail companies or other types of service professionals, and those partnerships can benefit your bottom line. Ask about promotional rates or search the website of the company you are working with. You could end up with convenient monthly payments instead of paying a lump sum.

If you borrow from your home equity, be aware of your loan-to-value ratio. That’s how much you owe on your mortgage versus the value of your home. Most lenders won’t let you borrow more than 80% of the value of your home.