Manage Finances Carefully During Home Remodeling
Renovators Place Columnist
Oct 08, 2009
There are many financial pitfalls to avoid during a home remodeling project. Follow these tips to help stay in the black.
The solution is to:
The solution is to set aside 10 to 20 percent of the project cost for unexpected surprises. You can also ask the contractor whether he expects any surprises, given the type of project, the age of your house, and other considerations. With the right financial plan, you should be able to fund your home improvement project and enjoy the renovation project a little more.
Mistakes in Estimating the Remodeling Costs
An incorrect or incomplete remodeling estimate can cause you to pay more than you expect for your kitchen remodeling project. You could run out of home remodeling funds before you finish. You might also have to remove features like new kitchen faucet or kitchen sink from your plan to meet your remodeling budget.The solution is to:
- Get an accurate remodeling estimate; add a 10 to 15 percent contingency.
- Keep a list of all home remodeling products to buy.
- Leave a buffer in the bank for an emergency.
Mistakes in Home Improvement Financing
There are many ways to pay for a remodeling project, so consider which is right for you:- A home equity loan is for a set amount and period of time. Your payments are the same each month, but you don't have the flexibility of taking more money out as you pay down the loan.
- A home equity line of credit lets you use as much or as little as you want and only pay interest on what you've borrowed.
- By using savings, you save the interest on a home equity loan, but reduce funds available for an emergency.
Changing Your Product and Design Selections Mid-Stream
Be careful about making changes once the remodeling begins. A new ceramic tile order might delay the project and cause a domino effect. The remodeling cost will increase, as the contractor may have to change the drawings or delay construction for a bigger kitchen appliance or new ceramic tile.Not Adding a Contingency Fund to Your Budget
No project is ever completed exactly on budget, so it's important to have a little extra cushion. A kitchen remodeling might run over budget when the contractor finds structural problems with the walls, for example. This can leave you without enough money to complete the project, and you might have to switch to a less expensive kitchen cabinet. It could even go so far as to alter the overall kitchen cabinet design.The solution is to set aside 10 to 20 percent of the project cost for unexpected surprises. You can also ask the contractor whether he expects any surprises, given the type of project, the age of your house, and other considerations. With the right financial plan, you should be able to fund your home improvement project and enjoy the renovation project a little more.
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