Lay a Solid Financial Foundation
When considering home renovations, your first task should be to set a spending limit that aligns with your financial goals. Your second task is figuring out how you’ll pay for it. Consider using a low-interest rate home equity line of credit (HELOC), which lets you borrow against your home’s equity. Be sure to confirm whether your budget can comfortably handle additional payments.
Create a Financial Buffer
Renovations rarely go exactly as planned. Unexpected costs can pop up along the way. Prepare for these surprises by budgeting more than your initial estimate. A good rule of thumb is to plan for a 20% buffer. So, if you’ve set a spending limit of $100,000, only consider contractor quotes up to $80,000.
This cushion can cover unforeseen issues like hidden termite damage or the need to upgrade old plumbing and electrical systems, which are common in older homes.
Choose a Contractor with a Proven Track Record
Once you’re confident about your financial situation, it’s time to find a reputable contractor. While online reviews are helpful, the best referrals often come from family and friends with firsthand experience. People you know are often willing to let you perform a visual inspection of the contractor’s finished work.
Selecting a contractor with a proven track record may cost more upfront, but it can save you money in the long run. Poorly done work from a cheaper or unknown contractor can lead to costly repairs or needing to redo the project altogether. You might even risk the contractor disappearing before completing the job.
Clarify Contract Details Before Signing
Always read the contract thoroughly before signing. If you plan to handle certain tasks yourself, like painting or demolition, ensure these details are spelled out in the agreement. Some homeowners have run into issues when expecting a discount for handling parts of the project themselves, only to realize later that the contractor wasn’t required to lower the price.
Pay as You Go
During the renovation, it’s wise to pay your contractor as the work progresses. Paying in stages helps ensure the project stays on schedule and motivates the contractor to finish the job. Avoid making large upfront payments, as this can reduce your control over the project’s progress and increase the risk of the contractor not completing the job.
Ready to start your remodel? Apply for a HawaiiUSA interest-only HELOC today!
November 5, 2024
Whether you're transforming your home in anticipation of a new family member or simply upgrading outdated areas, renovations can improve your home’s functionality and comfort. However, diving in without proper financial preparation can lead to costly surprises and unnecessary stress. Here's what you can do to help ensure your renovation goes smoothly.
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