If you’re considering a home remodeling project, you may be wondering how much you can afford to spend, or better yet, how much you should spend.
Home remodeling projects can be expensive and it’s not always clear if you’ll be satisfied with the results once the project is complete. Maybe you hope to build an addition to your home, tear down a wall to open up your home’s floorplan, or update a fireplace mantel; one thing’s for sure, it’s hard to visualize how things will look (or how much they’ll end up costing) until the work is finally complete.
I always laugh when I read articles that analyze the best rate of return on home remodeling projects. In almost every case, you’re guaranteed that you won’t get your money out of the remodeling project when you sell your house. Kitchen and bath remodels seem to boost resale values the most but usually by an amount that is less than the cost of the actual renovations.
In today’s home remodeling blog post, I want to look past the actual “return on investment” aspect of home remodeling and focus more on how much you can actually afford to spend and how much you should spend. While the answer to these questions are unique to everyone, I wanted to narrow in on a few things to consider when determining the affordability of a home remodeling project and how much you should plan on spending.
Quality of Life:
The most important thing to consider when evaluating how much to spend on a home remodeling project is how much value the project will add to your daily life. Is the home remodeling project an attempt to keep up with the Joneses, or is it to improve a major shortcoming of your home as it currently exists. A $40,000 master bathroom makeover will most likely not improve your family’s quality of life as much as a $40,000 addition that ensured each child had their own room and added a dedicated family room.
Affect on Financial Goals:
Another factor to consider when determining the affordability of a home remodeling project is how the cost of the remodel will affect your other short and long term personal finance goals. If you already have an excessive amount of mortgage and consumer debt (auto loans, credit cards, student loans, etc.) then we highly advise you to postpone any unnecessary home remodeling projects until you get your personal finances under control.
Hidden Costs of Home Remodeling:
Another important aspect of remodeling your home is how the remodeling will affect your home’s property tax assessment. One of the main reasons cities, towns and other municipalities require building permits for various home remodeling projects is so they can reassess your home for any increase in value and charge you more in property taxes. After finishing our basement into a dedicated family room a few years ago, we were surprised to find the town raised our property taxes over $250 per year. Depending on the scope of your renovations, you may end up paying more in home insurance as well.
Peace of Mind:
Your home is your sanctuary. The last thing you want it to become is a burden on your peace of mind and financial independence. If you end up spending too much on a home remodeling project at the expense of other areas in your life, that is exactly what your home may become; a burden.
Make sure to consider these facts when determining whether or not you can afford a home remodeling project.
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