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This “Guide to Planning a Home Renovation From Start to Finish” post is underwritten by Hearth. Hearth specializes in educating consumers regarding home renovation products and helping them find the best offers to avoid overpaying for renovation projects. All opinions expressed are mine.
The process of renovating your home can be one of the most stressful and overwhelming experiences as a homeowner. Decisions regarding paint colors, decor, flooring, and themes are challenging in their own ways, but larger projects introduce new sets of challenges and excitement.
You may be excited about renovating your home, or it may be your only option if you purchased your home at a higher price point than what you could sell it for today. Either way, a reasonably priced and well-executed renovation project could be just what you need to make your home more enjoyable and livable for your family.
In the past year, my wife and I experienced the home renovation process when we opted to finish our 800 square-foot basement. We were fortunate that our project went according to plan and stayed on budget.
The sad truth is that many people have a worse experience when starting and completing home renovation project. Selecting a space, creating design ideas, determining a budget, hiring a contractor, and completing a project can be incredibly stressful and costly.
Even in the age of HGTV, the average consumer is poorly-equipped to make smart decisions when it comes to home renovation projects. This is especially true for millennials.
This guide is designed to help you navigate the home renovation process from start to finish and make the process smooth and enjoyable. Whether you’re new to home ownership or a longtime homeowner, this guide will help you avoid costly home renovation mistakes every step of the way.
Starting Your Renovation Project
According to a recent study by Hearth, 45% of millennials surveyed expressed a strong desire to renovate their homes. Starting a renovation, not just as a millennial, is often the biggest hurdle to leap based on several factors:
- Existing debt obligations (student loans, auto loans, credit card debt)
- Lack of basic financial literacy
- Little understanding of which renovation projects will maximize return on investment
Fortunately, a wealth of resources is available for anyone considering a renovation. The National Association of the Remodeling Industry (NARI) recommends consumers consider their reasons for remodeling and develop a vision for how their completed project will add value to their lives in the future.
Highest Value Renovation Projects
Understanding your potential return on investment is critical before starting a new renovation project. The simple reality is that few projects instantly increase the value of your home in proportion to their cost, but many projects lead to increased values and high returns on investment over a period of just a few years.
According to a Realtor.com article, the following projects feature high returns on investment:
- Fiberglass insulation in attic
- Steel entry door
- Stone veneer (manufactured or real)
- Kitchen remodel
- Siding replacement
- Bathroom remodel/addition
- Universal bathroom redesign/remodel
- Basement finishing
Determining What You Can Afford
One of the most critical components of any home renovation plan is a budget. The sad reality is that many people skip this stage entirely and rush into their project without a plan to pay for it.
As a result, many people exhaust their cash resources and take on high APR credit card debt in order to complete their projects. The previously mentioned study by Hearth revealed that an alarming 16% of millennials are likely to refinance a home renovation project using credit cards.
Credit cards are admittedly convenient, and 0 percent APR financing offers can be alluring. However, financing large home renovation projects using credit cards can trigger unexpected high payments and crippling interest charges once promotional offers expire in 6 to 12 months.
A wise rule of thumb when planning a renovation budget lies in estimating total project costs and adding 15-20%. My wife and I used this technique when planning our basement renovation, and it helped us to determine how much cash we could afford to spend (without exposing ourselves to financial emergency) and whether we would need to seek affordable financing to complete the project.
Ultimately, we qualified for a small loan with low payments at an interest rate which was lower than our current mortgage interest rate.
Considering Financing Options
Once armed with knowledge of how much you need to borrow, it is best to research financing options from a variety of sources. One common renovation mistake is applying for a loan with only one lender and accepting their offer right away.
Many borrowers fear that applying for multiple credit offers is too time consuming, damaging to their credit score, and exposes them to identify theft. These worries may have been relevant in the past to varying degrees, but today’s processes have largely eliminated these worries.
The Hearth Advantage
For example, a borrower who is seeking attractive financing options for a home renovation project can receive multiple personalized offers just by filling out a secure 60 second form with Hearth.
Hearth’s process is quick, won’t impact your credit score, doesn’t require fees or collateral, and will provide personalized rates from leading companies like SoFi, LendingClub, Prosper, and BestEgg.
Unlike other companies, Hearth is not a lender. They work with lenders on behalf of borrowers to gather pre-qualified offers for personal loans. Collecting these offers does not require a hard credit pull until the final stage of application, which is why the initial process does not affect your credit score.
Once your offers have been gathered, Hearth simplifies the process of considering your options by helping you compare interest rates, fees, total interest cost, monthly payments, and more. Unlike other companies, the core of Hearth’s service lies in educating consumers to make wise decisions.
All offers gathered by Hearth are sent directly to your email inbox and are valid for 30 days. Applying for one of these loans is as simple as one click. At this time, you will need to provide further information to your chosen lender to complete your application. Assuming you provided accurate information from the start, the final terms and rates offered by your lender are likely to be similar or the same to those quoted initially by Hearth.
Once your application is complete and approved, funds are typically dispersed in 1 to 14 days. This is important, as quick access to cash can often be a difference maker when securing a contractor.
If you’re not sure whether you’re ready to dive into your renovation project, Hearth has created a useful quiz to help you determine your readiness for your remodel. It asks important questions about your project plans and provides actionable advice based upon your responses.
Starting Your Home Renovation Project
As in nearly every industry, money talks and cash is king. When starting your home renovation project and selecting a contractor, having cash in hand can help you compete for top contractors in your area, many of whom would rather be paid in cash than on credit.
The process of choosing a contractor to oversee and complete your project is far less stressful when financial concerns have been removed from the equation. With a funded loan and cash in your account, you are in better position to take your time interviewing multiple contractors, check their references, compare bids, and check reviews with the Better Business Bureau.
Before choosing a contractor, be sure he/she is licensed in your area and has appropriate liability and worker’s compensation insurance (for subcontractors). Any history of complaints or unethical behaviors are cause for concern.
You will be working with your contractor for the length of the project, so it is also important your personalities mesh well. You want to work with a contractor who is an excellent communicator and is able to show you in-depth plans and timelines for completing your project.
Make Your Renovation as Smooth as Possible
Home renovation projects can be very exciting, but the truth is that they can be scary and stressful. At a basic level, any remodeling project involves trust, as a relative stranger is redesigning a huge part of your life.
The best way to make your renovation as smooth as possible is to minimize your risk exposure from the very beginning. You can avoid contractor conflict, running out of cash, and taking on high interest credit card debt, and risking foreclosure thanks to home equity issues when you take advantage of sensible lower interest personal loans.
Despite sensationalist headlines to the contrary, the American Dream of home ownership is alive and well – and it doesn’t end when you buy a home! Making your house a home may require changes. Simply put, home renovation decisions can have a lasting financial impact for years -even decades- to come.
If you’re serious about making your renovation process as smooth as possible for yourself and your contractor, start by making the right decision about how to pay for it. You can review your options and make the most-informed decision by planning your project well, considering responsible lending options with Hearth, and selecting a well-reviewed contractor.
Disclaimer: Shogun Enterprises Inc D/B/A Hearth is not a lender, does not broker loans to lenders and does not make personal loans or credit decisions. This article does not constitute an offer or solicitation to lend. Hearth will submit the information you provide to a lender. Providing your information to Hearth does not guarantee that you will be approved for a personal loan. Hearth is not an agent, representative or broker of any lender and does not endorse or charge you for any service or product. For more information, please visit https://www.gethearth.com/terms/ and https://www.gethearth.com/disclosures/
This article is not intended to provide legal or financial advice is purely provided for entertainment and informational purposes only. All opinions contained herein are the property of FinanceSuperhero.com.
Mrs. Picky Pincher saysJune 9, 2017 at 8:16 AM
We bought a house that was ugly-as-hell last year and we renovated it pretty extensively. We gutted the kitchen down to the studs and rebuilt that completely. I’ve had people say it looks like an HGTV kitchen, so that’s a good feeling. 🙂 But it’s not easy! For months we slaved away on this house and it cost A LOT of money. More money than we budgeted for.
Noah Horn saysAugust 5, 2017 at 8:04 AM
Whatever renovation process you want to do, it all starts with the budget. So definitely, if you have not set any realistic budget, then you would face problems in future. So from the very beginning it’s required to set the maximum budget you can afford and then identify your requirement. Apart from that, there are hundreds of money saving ideas that will help you to build your dream kitchen even lower than your set budget. If the homeowners don’t have much knowledge about home remodeling and required material and equipment, they should hire a trustworthy home remodeling professional.