A home renovation is a sure way to not only increase the value of your home, but also to add intrigue and interest as a newly renovated home enters into the Brea real estate market. Choosing the room or rooms you want to remodel is the easy part, setting and sticking to your renovation budget can be rather tricky. As the premier real estate agent for the Brea homes for sale, I would like to offer the following tips on how to set a home renovation budget.
Estimate by Percentage
Here’s the Deal:
When it comes to setting a renovation budget, one of the easiest ways to come up with a dollar value is to base the estimated cost on a percentage of your overall home.
Your home’s kitchen usually accounts for 10 to 15 percent of your home’s total value. If your home is worth $100 000 you will want to spend no more than $15 000 on your kitchen’s renovation.
If you are choosing a renovation strictly to increase the resale value of your home, a kitchen renovation may not be your best choice. In general, a remodeled kitchen only returns 50 cents on every dollar spent. The highest rate of return on a home renovation is usually a mid-range bathroom remodel.
Renovation Loan Options
Once you have arrived at a rough estimate of what your home renovation will cost, the next step is to secure the money that will cover the remodeling costs. There are many different options that are available and include:
- Refinancing – Depending on your current interest rate you may want to refinance your mortgage at a lower rate or a longer term. The money you will save on your monthly payments can be used to pay for your renovation.
- Line of Credit – Talk to your local bank or lender and see what interest rate they are charging for a line of credit. If it is less than what you can get on your mortgage, this may be a great way to cover the renovation costs.
- Home equity loan – Sometimes known as a second mortgage. A home equity loan allows you to borrow a percentage of your home’s value which you could use for your renovations.
Regardless of what type of loan you choose, make sure to add another 10 to 15 percent on to your original renovation estimate. This will help cover unforeseen expenses or cost overruns.
Once you have secured a loan, talk to a host of contractors and get a quote from each. Make sure that your quote includes all materials that are to be used, a time frame and a step by step detailed account of the overall project. Don’t be afraid to ask for references from past jobs as well as the type of insurance they have.
Stick to the Plan
The fastest way to go over budget is by adding on smaller jobs, side jobs or changing your mind half way through a renovation. Stick to the original plan if at all possible to ensure that your renovation is on budget and on time.
A newly renovated room is a great way to add new life to your home. A renovated home not only adds value but can also bring about prospective buyers if you are thinking about selling. If you would like more information about setting a renovation budget or how to take advantage of Brea’s hot summer real estate market, please give me a call today.