A home renovation is a great way to increase your home’s value, especially if you are thinking about taking advantage of the summer market. However, figuring out how much a renovation should cost and staying within that budget can be a bit tricky. As the premier real estate agent for UBC homes, I would like to share the following advice on how to set a renovation budget.
Estimate the Costs as a Percentage
Here’s the Deal:
You should spend no more in each room than the value of that room as a percentage of your overall house. For example – A kitchen generally accounts for 10-15% of your home’s value, so if your home is valued at $200 000, you will want to spend $30 000 or less on a kitchen renovation.
Another key piece of advice:
Kitchen renovations offer some of the lowest rates of return in terms of a renovation. For every dollar you spend, your home’s value increases by 50 cents.
The highest rate of return on a renovation – a mid-range bathroom remodel.
Consider Loan Options
Once you have decided what type of renovation you want to do and have come up with a rough estimate for that renovation, it is time to think about how you are going to finance your renovations.
- Refinancing – depending upon what your interest rates are on your mortgage, you may be able to refinance or add term to your loan lowering your monthly payments allowing you to save for the renovation.
- Line of credit – A line of credit may be a great way to finance your renovation, talk to your lender or bank to see what type of term and rate they are willing to provide you.
- Home Equity Loan – this type of loan is also known as a second mortgage and allows you to borrow a percentage of your home’s assessed value.
Make sure that you are very specific about what you want done in your renovation and get it written out in a contract. Make sure to get a quote and include even the materials that are going to be used for the job. Take your time to talk to a few different contractors and ask lots of questions, especially about the overall timeframe. Don’t be afraid to ask for references and look at past jobs and customer satisfaction before making your final decision.
Stick to the Plan
Do not change the overall outlook of your renovation by adding side projects or changing your mind part way through a job. This is the fastest way to add costs and time to any project. Strive to stick to the original plan regardless of how tempted you may be.
A renovation can breathe new life into any room and is a great way to add intrigue and interest to your home if you are thinking about selling. By following these simple steps, you should be able to enjoy a newly renovated home without breaking the bank. If you would like any more information about how a renovation can add value to your home or to see some of the new listings in the UBC area, please call me today. I'm Sam Huang. 778-991-0649