17 Jan 2022

How to Budget for Home Improvement

Home Improvement

Home improvement projects are usually a big commitment in terms of time, discomfort and costs. Before starting to plan and set a home renovation budget, do some soul searching. Whether you’re thinking of replacement windows or new siding, determine what is motivating the need for improvements. Next, decide what you want the outcome of the project to be. Itemize the details of how to achieve the desired outcome. For example, the project will be successful if… Then decide what you are willing to splurge on and what you are prepared to compromise on. In seeking the answers, it is important that you research options and costs.

How to Budget for Home Improvement

Rule of Thumb

Working on a cost-per-square-foot budget is a good guideline. Depending on the size and age of your home, and the condition of the plumbing and wiring, a 1,000 square-foot renovation will be around $19 per square foot. In larger homes between 3,000 and 4,000 square feet, renovations will cost between $20 and $30 per square foot, according to HomeAdvisor.

The best thing to do is to set a budget per room and see where that leads. A rule of thumb for the bathroom and kitchen is to have a budget of around 15 percent of the total value of your home. Therefore, a house worth $100,000 would have a budget per room of $15,000.

Average Costs

Average costs will be determined by the size and scope of the project. Therefore, the cost of each project should be in accordance with the prominence of the room undergoing renovations. Preference is usually given to kitchens, bathrooms, and basements. The suggested costs below are from the July 2021 edition of HomeAdvisor.


Minor kitchen upgrades cost around $4,000 whereas a full-scale remodel and refit will cost upwards of $60,000.


Guest bathrooms and family bathroom improvements can cost as little as $2,500. A full remodel and refit of the main, en suite bathroom will start at around $25,000, depending on the flooring, wall tiling, fixtures, and fittings.


Here again, the budget depends on the size of the room and the scope of the project. Cost estimates for complete basement renovation projects run anywhere from $11,000 to $30,000.

If these average costs are within your budget, the next thing to do is to bring in a home renovation company to discuss ideas and provide more accurate estimates. Most contractors prefer being responsible for the entire project and may be amenable to giving discounts if they are appointed on a one-stop-shop basis. A further benefit of such an appointment is that the lead contractor will be responsible for anything that needs to be sub-contracted. This will include things such as electrical components and plumbing. Therefore, you will only have to deal with one contractor instead of several.

Pre-budget financial planning

Before committing to a budget, decide how you will pay for the home improvement project. Will it be cash savings, a re-mortgage, or a credit loan? If going with a re-mortgage or a credit loan, factor in interest charges. Once you establish how much you can borrow, consider how much you actually want to spend. Be wary of overcapitalizing by thinking that the improvements will increase the value of your home for resale.

It is vital that you factor in an amount for unexpected expenses. For this purpose allocate 10 to 20 percent of the overall budget to unexpected costs. If the project runs accordingly, you will then have money left over to spend on the next project or pay off the bank loan quicker.

Additional Reading: How to budget and pay for renovations

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