Remodeling your home can lead to so many new possibilities. For one, it can help increase the value of your property, especially if you make the right upgrades. More importantly, remodeling your home can significantly improve your quality of life, be it something small like a bathroom renovation or a bigger project like an entire home extension.
However, if there is one challenge that almost always holds true for many homeowners; it’s that remodeling your home is rarely cheap. The materials alone can be very costly, not to mention the money you will have to shell out for the contractor, building permits, design, and more.
With these expenses in mind, we’ve come up with a handy guide on how to remodel your home and pay for it–without breaking the bank.
How to remodel your home
Remodeling your home is not as complicated as it may seem–so long as you do proper planning beforehand. Here is a standard home remodel project to understand what steps to take throughout the entire process:
1. Envision what you want
First things first, think about what you want and figure out how to articulate it into the most accurate details possible. Write down every idea that pops into your head–even if it might seem like a small detail–and play around with the concepts that you come up with until you create a detailed plan of what you want.
For example, if you’re thinking of renovating your entire kitchen, list down what kind of counters you want to have; the layout you prefer; the type of fixtures you want; and even the small details like the color of your light switches or the orientation of your furniture. Look to the Internet for inspiration. A good tip is to create a vision board where you can compile all your ‘design inspos’ for later deliberation, which can also serve as a tool to help your designer bring your ideas to life.
It’s always a good idea to spend more than enough time with this step. Making changes to the design when construction has already started can cost you quite a lot of money, and you might not be able to make any changes if the work is close to complete anyway.
2. Look for the right people
Once you have a concrete vision in your head, it’s time to start looking for the people that can make it into a reality. The first professional that you need on your team is an architect or home designer. These two professions are not to be confused with each other, however. An architect
is someone who is professionally trained to create detailed drawings of structures, ensuring that the building is up to code. On the other hand, a home designer is in charge of designing interior elements, such as the flow of spaces and influencing style.
The right professional to hire depends on what type of project you want to do. For instance, if you’re looking to build an extension, an architect is the best choice. But if you’re looking to renovate the interiors for your, say, master bedroom, a home designer will do.
Next, you have to have a great contractor on your team. Depending on the scope and size of your project, you might need just a handful of workers–or an entire team altogether. Either way, the results of your project and the amount of money it will cost will largely depend on the contractor company that you hire.
Here are a few tips on how to find the best contractor for the job:
- Ask around. Ask your family, friends, co-workers, and pretty much anyone else in your network if they know a good contractor in your area. If someone was satisfied with the work of a contractor that they hired, it is very likely that they will recommend it to you. And if you personally know someone that has experience with a particular company, their testimonial will likely be more trustworthy than what the contractor has on their website.
- Look for companies with impressive portfolios. Many contractors have portfolios on their websites where they showcase their best work. Browsing these portfolios can give you a good idea of what level of quality they can deliver, and if they can give you the results that you want.
- Consider specializations. If you’re looking for a particular specialization, such as greenhouse construction or basement renovation, choose a contractor that has experience with that particular area.
Make a list of potential professionals and companies that are most suitable for the type of project you have. Consider at least three to five, and then narrow down your list based on your priorities, e.g. price, quality of work, location, etc.
3. Figure out financing
By this point, you should have your final list of vendors along with their initial quotes. Now, you have an idea of how much your project will cost, and can figure out how you’re going to finance your project.
There are many ways you can pay for home remodeling, such as:
If you have the cash to pay for the entire project, why not pay for it upfront? By paying in cash, you have a better chance of securing discounts from your vendors as most of them prefer to receive the entire payment at once. Furthermore, paying in cash means you don’t have to worry about taking out loans, paying interest, or having another bill on top of the mortgage.
A word of caution: do not pay in cash if doing so will deplete your reserves. Remember that renovation quotes aren’t set in stone. Things can go wrong, and you might end up paying more than what was initially agreed upon.
Home equity loan
A home equity loan allows you to borrow against the current equity in your home. Many homeowners use home equity loans to pay for home renovations, as this type of loan lets you access the entire proceeds at once.
Repayment for a home equity loan varies from lender to lender, but most homeowners choose to repay the balance between 8 to 10 years. That said, it is best to take out a home equity loan if you plan to stay in your home for longer than the loan life.
A home equity line of credit (HELOC) is a type of home equity loan that gives you access to a line of credit instead of giving you the proceeds of the loan in a lump sum. A HELOC is similar to a credit card where you can borrow what you need and make repayments as needed. When you take out a HELOC, you have a set period where you can make withdrawals (about 5 years), which is followed by a repayment period where withdrawals cease.
Typically, HELOCs have variable interest rates, but some lenders offer fixed-rate options for HELOC loans.
If you are at least 62 years old and have built substantial equity in your home, consider taking out a reverse mortgage to fund your renovation project and pay for other expenses. Unlike a home equity loan, a reverse mortgage only becomes due when the last remaining borrower dies, moves away permanently, or is no longer able to meet loan obligations.
Moreover, a reverse mortgage eliminates the rest of your mortgage payments. This means that along with having the money to pay for home renovations, you no longer have to worry about paying the mortgage and can enjoy your entire retirement income.
Paying for home remodeling with your credit cards is only advisable if you are only making small upgrades to your home. For instance, if you’re only eyeing a minor bathroom renovation, using your credit cards is a much easier option than taking out an entire loan altogether.
You can also consider taking out a new credit card that offers an interest-free period for the first few months. This way, you can fund your home renovation and not pay interest on expenses before the promo period ends.
Simply put, mortgage refinancing is taking out another loan to pay off your current mortgage. With a cash-out refinance, you can keep the difference between the new loan and the old loan to pay for a home renovation or other expenses.
Some homeowners also use refinancing to obtain lower interest rates or to switch from a variable-interest mortgage to a fixed-rate mortgage.
These are just some of the ways you can finance your remodeling project. Some other options you can consider include government loans, personal unsecured loans, as well as 401k and IRA funds.
4. Finalize the plans
Once you’ve figured out financing–congratulations, you’re done with the hardest step! Now, it’s time to finalize your plans with the help of your designers and lenders. This is your last chance to make changes to the initial draw-ups (if there are any) before construction starts.
5. Prepare your family
If you’re renovating a central part of your home, such as the kitchen, you have to figure out how to live without that room until the project is done. For instance, you can convert the living room into a makeshift kitchen for the time being. Or perhaps you may want to live off of ready-made meals for a while. The same goes for any other part of your home that will disrupt your routine without access to it, such as your bedroom, the master bathroom, and the home office.
If you have young children and pets, you also have to take safety precautions before construction starts. Here are a few tips to consider:
- Install baby gates on all entrances of the room being renovated
- Keep your kids and pets in a room farthest from the construction area while work is ongoing
- Consider leaving your kids and pets at daycare or with a babysitter at another house
- Never leave materials, tools, and equipment unattended
Sometimes, it can be too much of a hassle to handle very young children and pets while construction is ongoing inside the home. If this is the case for you, it might be a safer option to stay in another house or rent out a motel until the bulk of the project is done.
6. Prepare the house
Finally, prepare the house before the construction team settles in. Put away your belongings, move furniture out of the way, make room for equipment and materials, and store any valuables that you don’t want to risk getting damaged. If you have a pest problem, make sure to address that first before construction starts; contractors may refuse to start work if there is an infestation present.
As you can see, remodeling a home doesn’t have to be the headache that others make it out to be. As long as you make the proper preparations, spend enough time looking for the right contractors, and figure out the best way to finance your project, achieving your dream home can be very hassle-free.