How to Budget for Home Remodeling

By: Dave Roos
Father and son working on home remodeling project.
Home remodeling can be a fun and rewarding project -- as long as you budget properly. See more home construction pictures.
David Sacks/Getty Images

The mortal enemy of any home remodeling project is scope creep, or the unintended growth of a project (in size and expense) caused by poor planning and those four dreaded words: "While you're at it…" [sources: Freddie Mac and Glave].

The process for creating a home remodeling budget starts long before the line item list of labor and materials costs. It begins with a clear set of priorities [source:]. Why exactly are you remodeling? Good reasons include a growing family, the need for a home office or a desire to increase the home's resale value. If you're simply bored with the status quo, you might only need to redecorate -- new paint, wallpaper, lighting fixtures and furniture -- rather than to fully remodel.


If your top priority is to increase the value of your home, talk to a local realtor about home improvements that translate into the greatest return on your home investment. Remodeling magazine says the following renovations (with their average costs in parentheses) recoup the largest percentages at resale:

  • Wood deck addition ($10,601): 81.8 percent
  • Vinyl siding replacement ($10,256): 80.7 percent
  • Minor kitchen remodel ($21,246): 79.5 percent
  • Two-story addition ($146,538): 70.7 percent

[source: Remodeling]

Once you know why you're remodeling, it's time to figure out exactly how much you can afford to spend. How much money do you have in short-term savings (money market accounts, savings accounts and CDs)? If you know that the project will exceed your savings, it's time to think about financing. In that case, consult your personal or family budget to see how much is left over each month that could be applied to a home equity loan or refinanced mortgage payment.

Now it's time to do your homework. Visit multiple home improvement stores and find exactly the types of materials and appliances you want. Compare prices and write down the best deals. When you're ready to prepare your budget, you'll have exact figures, rather than ballpark estimates.

Before you can proceed with the budget, you need to answer the biggest question of all: contractor or do-it-yourself? There are big benefits to using a professional contractor: faster, greater expertise (particularly electrical and plumbing), and knowledge of building codes and permits. Then again, doing it yourself is almost always cheaper, gives you greater flexibility and can be very rewarding -- if you don't screw it up [source: Freddie Mac].

Once that decision is made, you're ready to write up a detailed budget, which should include the following categories:

  • Labor (if you're using a contractor)
  • Tools and equipment (if you're doing it yourself)
  • Materials
  • Permits
  • Cleanup

[source: Wells Fargo]

Even if you use a contractor, you can save money on surcharges and fees by buying most of the materials yourself. If your contractor allows it, you can buy salvaged materials for half price from places like Habitat for Humanity ReStores [source: Glave]. Whether you use a contractor or go it alone, make sure that you add 20 to 30 percent more to your total budget to account for unexpected costs and errors [source: Wells Fargo].

For lots more information on budgeting and home improvement financing, take a look at the links on the next page.



Lots More Information

Related Articles


  • Freddie Mac. "Remodeling"
  • Glave, James. "21 Ways to Save On Your Remodel." This Old House.,,1186851,00.html
  • Remodeling. "Cost vs. Value Report: 2008-9"
  • "Tip #1: Set Priorities"
  • Wells Fargo. "Save on Remodeling Costs"