How to Set a Home Renovation Budget and Stick to It
June 26, 2025
June 26, 2025
The excitement of planning a home renovation can quickly turn overwhelming once the numbers come into play. One moment you’re picturing that dream kitchen or extra bathroom, and the next you’re staring at costs that don’t seem to add up. But it doesn’t have to feel that way.
You need a home renovation budget. This simple tool lets you plan how much you’re willing (and able) to spend. When you map out the total cost ahead of time, it’s easier to balance your vision for the perfect space with what fits your wallet.
A little planning really does go a long way. That’s why we’ve put together this guide. You’ll learn how to figure out what you can comfortably spend, how to break those costs down, and how to stick with your plan.
Let’s go through how to build a budget that works for your life and how to keep your renovation on track, from the first sketch to the last coat of paint.
The cost of renovating a house can go anywhere from a few thousand dollars to well over six figures. It all depends on the size of your home, the rooms you’re updating, and the quality of the materials you choose. You should also consider labor costs in your area and the necessary permits,
On average, homeowners spend $15 to $60 per square foot on a remodel. But for major upgrades or high-end finishes, costs can climb to $150 per square foot or more.
To give you a clearer idea:
A whole-house renovation for a typical 1,200 to 1,600 square-foot home often runs between $20,000 and $90,000, with many projects landing somewhere around $50,000 to $60,000.
A kitchen remodel usually costs between $14,500 and $41,600, though a major overhaul with top-of-the-line appliances and finishes could hit $65,000 or more.
A bathroom remodel ranges from about $6,600 for basic updates to $50,000 or higher for a full redo.
Even smaller projects like fresh paint, new lighting, or flooring updates can add up quickly. And here’s something many homeowners find out the hard way: unexpected expenses happen. Older plumbing, hidden electrical issues, or structural repairs can add another 10% to 20% to your total cost.
That’s why it’s so important to set a realistic budget and to pad it with a little wiggle room. A solid plan can help you manage your spending, handle surprises along the way, and still create the home you’re hoping for.
Before you dive into budgeting, spend some time on these key prep points. They’ll help your plan be practical and prevent unwelcome surprises.
A research conducted by Clever Real Estate in 2024 shows that the most common big-ticket renovation projects are kitchens (37%) and bathrooms (33%). Focus on the changes that will make the biggest difference for your daily life, and try not to get sidetracked by extra upgrades that can drive up costs fast.
Many real estate professionals suggest keeping total remodeling costs within about 10% to 15% of your home’s value if you want to recoup your investment at resale.
While this is solid advice, it’s based on expert guidance rather than hard data. Therefore, consider it a helpful rule of thumb and follow your instincts and what works for you.
The average building permit costs about $1,650, with most falling between $525 and $3,040 depending on the type of work, revealed data from HomeAdvisor.
Don’t overlook this in your budget. Permits are essential for major electrical, plumbing, or structural updates.
Research shows homeowners who take on DIY work often spend more overall when they have to hire pros to fix mistakes. According to OnePoll, nearly half of homeowners avoid DIY plumbing or electrical work because of the risks involved.
For anything structural, electrical, or plumbing, it’s usually safer and cheaper in the long run to hire a licensed contractor.
While we don’t have exact numbers, experts agree: rushed projects often cost more. Contractors may charge premium rates for last-minute jobs, and you might pay extra for express shipping on materials. Planning ahead gives you more choices and helps keep costs down.
Homeowners use a mix of funding sources for renovations. Surveys show that many rely on home equity loans, savings, or personal loans.
Your financing choice affects how much you can comfortably spend and how much cushion you should build in for the unexpected.
Getting at least three estimates can help you save up to 10% compared to hiring the first contractor you contact. It also gives you a clearer picture of fair pricing and keeps surprises to a minimum.
Material costs vary widely. For example, laminate counters typically cost $8 to $27 per square foot, while quartz can range from $15 to $70 per square foot. Choosing where to invest can help you stay on budget without losing style.
Most experts recommend setting aside an extra 10% to 20% for unforeseen issues; things like hidden water damage, outdated wiring, or structural fixes. That cushion can save you from last-minute stress when something unexpected comes up.
Planning a renovation budget can feel like a huge task, but breaking it down into clear steps makes it manageable. Here’s how to build a budget that fits your home, your plans, and your wallet.
Before you start dreaming about new cabinets or updating the flooring, take a careful look at what you can realistically spend. This helps you set limits that protect both your finances and your peace of mind.
Start by reviewing your savings. How much can you put toward the project without dipping into your emergency fund or other essentials? Many financial experts recommend keeping 3 to 6 months’ worth of living expenses set aside as a safety net. Whatever’s left after that can go toward your renovation.
If you’re planning to borrow, explore your options early. Home equity loans, HELOCs, personal loans, or even refinancing your mortgage could all be possibilities. Each comes with its own interest rates, fees, and terms, so it’s worth shopping around to find what fits your budget.
Remember: monthly payments should still leave room for your other goals. That includes but is not limited to retirement savings, kids’ education, travel, or just everyday living
Tip: Once you settle on a total number, plan to set aside 10% to 20% of it as a contingency fund for unexpected costs. That small cushion can save you a lot of stress if surprises pop up.
Start by writing down everything you’d like to change or add during your renovation. Consider big ideas, small upgrades, and everything in between. This helps you see the full picture before narrowing things down. Once you have your list, take a closer look at:
Must-haves: These are the updates your home truly needs. Think repairs that affect safety, function, or long-term value, like replacing old wiring, fixing a leaky roof, or updating worn-out plumbing.
Nice-to-haves: These are the features that would make your space more enjoyable but aren’t essential. Custom built-ins, upgraded light fixtures, or high-end finishes might fall into this group.
Someday items: Ideas that can wait until a future phase or when your budget allows. This could be that dream patio, outdoor kitchen, or luxury soaking tub.
Tip: Be realistic! It’s easy to get carried away with ideas when you’re excited about improving your home. A clear list of priorities helps you stick to your budget and avoid stretching it too thin. If you’re planning to sell within a few years, ask a local agent which updates are likely to add value in your market. That can help you rank projects with a return on investment in mind.
Before setting your budget in stone, it’s smart to understand what your renovation ideas might actually cost. This helps you avoid sticker shock and plan realistically.
Start by doing some basic research. Look at reliable sources like:
Home services marketplaces (like HomeAdvisor or Angi) for national and regional average costs
Remodeling Magazine’s Cost vs. Value Report for estimates tied to resale value in your area
Local contractor websites or showrooms for price ranges on common upgrades
Once you have a general sense of costs, it’s time to get real numbers. Follow this tips:
Contact at least three contractors for written estimates. This lets you compare pricing, spot outliers, and understand what’s included and what’s not. Some bids might cover demo and cleanup; others won’t.
Ask for itemized quotes. A detailed bid helps you see how costs break down: materials, labor, permits, and more. It also makes it easier to adjust later if you need to cut back in certain areas.
Be clear about your vision. The more detailed you are in describing your project, the more accurate the quote will be. Share sketches, photos, or inspiration boards if you have them.
Watch for red flags. Be cautious of bids that are dramatically lower than the others. These can sometimes lead to cost overruns later, when corners are cut or unexpected charges appear.
If possible, check contractor reviews and ask for references. A fair price is important—but so is reliable work that stays on schedule.
Once you have rough estimates, it’s time to break your budget into clear categories. This gives you a full view of where your money is going and helps you spot areas where you might be able to cut back if needed. Here’s what to include in your cost breakdown:
Materials: Everything from flooring, cabinets, countertops, and tile to lighting, paint, and fixtures. These can easily take up 30% to 50% of your total budget, depending on your choices. High-end materials like quartz, hardwood, or custom cabinets cost far more than the standard options.
Labor: Expect this to account for 30% to 40% of your budget. This covers contractors, electricians, plumbers, carpenters, painters, and anyone else needed to complete the job.
Permits and fees: Costs vary based on your location and the scope of work, but they typically range from $525 to $3,000+. Major structural, electrical, or plumbing updates nearly always require permits.
Design services: If you’re working with an architect or designer, their fees might be a flat rate or a percentage of the project cost (commonly 5% to 15%).
Demolition and cleanup: Don’t overlook these! Dumpster rental, hauling debris, or professional cleaning at the end of the job can add a few hundred to a few thousand dollars.
Equipment rentals: This includes things like scaffolding, lifts, or specialty tools. If your contractor supplies these, the cost will be part of their bid.
Contingency fund: Build in 10% to 20% of your total budget to cover surprise costs, like if hidden water damage is found, some wiring is not up to code, or there are price increases on materials.
Tip: Write these numbers down or use a spreadsheet. A detailed budget makes it easier to spot places where you can adjust without losing the look or function you want. You should also keep track of actual costs as the project moves along. That way, you can catch overruns early and make adjustments before they snowball.
No renovation budget can cover top-of-the-line choices in every area. The key is to be intentional and that means spend more where it matters most to you, and look for smart savings elsewhere. Start by thinking about function and long-term value. See below:
Splurge on things that last or get heavy daily use. This might include durable flooring, quality cabinets, countertops, or energy-efficient windows. These upgrades can stand up to wear and tear and may even help lower utility bills over time.
Save on cosmetic details or items that are easy to upgrade later. Consider standard cabinet hardware, stock trim, or mid-range light fixtures. These can still look great and won’t break the bank.
For example:
Quartz countertops might cost $50 to $150 per square foot, but you could choose laminate for $20 to $40 per square foot and still get a stylish finish at a much lower price.
Tip: Think about your lifestyle. If you love to cook, investing in a quality stove and solid counters might make sense. If you rarely use your dining room, there’s no need to blow the budget on designer lighting in that space.
Your budget and your timeline go hand in hand. How long your renovation takes can have a big impact on your overall cost. Rushed jobs often lead to higher contractor fees, premium charges for expedited materials, or mistakes that require costly fixes later.
The more time you give yourself to design, choose materials, and book contractors, the more options you’ll have and the more likely you are to stay on budget.
For example, custom cabinets or special-order fixtures often have long lead times. Rushing those orders usually means paying extra for faster shipping or limited choices.
Weather delays, shipping hiccups, or permit approvals can all slow things down. Building in extra time helps keep stress down and gives you room to adjust without extra expense.
A good timeline should outline start and end dates, key phases (like demo, rough work, finishing), and when payments will be due. That way, you’ll know what to expect and can spot delays before they throw your budget off track.
Be mindful of seasons. For example, exterior work (like roof replacements or major additions) is usually cheaper in the off-season when demand is lower.
Once you’ve gathered estimates, broken down costs, and mapped out your timeline, it’s time to take a hard look at the big picture. This is your chance to catch any areas where your budget might not align with what you can comfortably afford and make smart adjustments before work begins.
Compare your total cost to your funding plan. Does your budget fit what you’ve decided you can afford through savings, loans, or both? If the total is higher than expected, go back to your priorities list. Ask yourself:
Can any “nice-to-have” features wait for a later phase?
Are there materials where a more affordable option would still meet your needs?
Can you tackle parts of the work (like painting or demo) yourself to save on labor?
Double-check your contingency fund. Make sure your final budget includes that essential 10% to 20% cushion for surprises. Too many homeowners skip this and end up stressed or overspending when hidden problems pop up.
Get everything in writing. Once you’ve finalized the budget, make sure your contractor’s agreement spells out costs, payment schedule, what’s included, and what’s not. This protects both your wallet and your peace of mind.
Stay flexible. Even the best-planned projects can run into minor changes. The goal is to have a solid plan, but also enough breathing room that small adjustments don’t throw you off track.
Tip: Keep your budget handy throughout the project. Tracking actual spending against your plan helps you spot overruns early, when they’re easier to correct.
Staying within budget is often the hardest part of a home renovation. Luckily, these few habits can help you stay on track from start to finish.
Track your spending as you go. A quick spreadsheet, budgeting app, or even a notebook works. What matters is that you update it regularly. Costs have a way of creeping up quietly, especially with small, easy-to-overlook purchases like hardware or extra paint.
Stick to your plan every step of the way. Scope creep is a budget’s worst enemy. It’s tempting to add “just one more thing” whether is a fancier tile or an extra built-in, but those choices add up fast and will hurt your pocket. Take a pause before agreeing to changes. Sleep on big decisions.
Protect your contingency fund. Avoid calling anything “a contingency.” That 10% to 20% cushion? Save it for what it’s meant for: true surprises. Hidden water damage, code-required fixes, or material price hikes. This money is not wish-list upgrades. Once that safety net is gone, it’s hard to get back.
Choose materials early. Last-minute choices usually cost more and that would cause you to go out of your budget to fulfill the same goals. When you pick your finishes and fixtures ahead of time, you’ll have time to shop for deals, compare options, and avoid rush fees. Plus, it helps prevent impulse splurges at the showroom.
Check invoices and receipts. Glance through every bill before you pay. Is the math right? Are the charges what you agreed to? These actions may only take a few minutes, but they can save you hundreds in the long run. Make this a habit!
Set clear payment terms. Link payments to progress, not just dates. Paying for work as it’s completed keeps everyone accountable. It also helps protect you from delays or unfinished jobs.
Plan for future costs. A bigger house or new features often mean bigger bills later. Utility costs, property taxes, even insurance can go up. Factor those into your long-term budget so you’re not caught off guard.
Stay in touch. A quick check-in with your contractor once or twice a week can make all the difference. You’ll catch small issues early and keep your project (and spending) on track.
Once you’ve set your renovation budget, the next step is figuring out how to fund the work. Homeowners have several financing options, each with its pros, cons, and best uses. Here’s a list of options to help you decide:
This is the simplest option. Using your savings means you don’t have to worry about interests, loan fees, or monthly payments. It’s a great choice if you have enough set aside after keeping an emergency fund intact.
This is Best for: Small to mid-sized projects or when you want to avoid debt.
Home Equity Loan
This is a second mortgage that lets you borrow a lump sum against your home’s equity at a fixed interest rate. It’s predictable: you’ll have steady monthly payments over a set term (often 5 to 30 years).
This is Best for: Larger remodels where you need all the funds up front, and want stable payments.
A flexible option that works like a credit card secured by your home. You draw what you need (up to a set limit) as you go and pay interest only on the amount you use during the draw period.
Rates are usually variable, which means your payment can change over time depending on market conditions. This setup gives you access to funds when you need them without committing to a large lump sum upfront.
This is Best for: Projects done in phases, or when you don’t know the exact cost at the start.
You replace your current mortgage with a new one for more than you owe, and take the difference in cash. This option can work well if current mortgage rates are lower than your existing rate.
This is Best for: Major remodels combined with the chance to lower your mortgage interest rate.
An unsecured loan that doesn’t require home equity. Terms and rates vary based on your credit. Personal loans often have higher interest rates than home-secured loans but are faster to fund.
This is Best for: Mid-sized projects when you don’t want to use your home as collateral.
These can work for smaller renovations or finishing touches if you have a card with a low interest rate or a 0% introductory APR offer. But they can get expensive fast if you carry a balance. if you cannot have debt or may have issues paying debt, consider this option with extra care.
This is Best for: Small purchases or when you can pay off the balance quickly.
This government-backed loan combines a mortgage and renovation loan in one package. It’s designed mainly for buyers purchasing a fixer-upper who need funds for both the purchase and the repairs.
But it’s not just for new buyers. Refinancing options are available for current homeowners looking to fund major improvements. The loan allows you to borrow based on the home’s future value after renovations, which can help if you’re tackling larger projects that would otherwise be hard to finance.
This is Best for: Large renovations where you want government-backed loan terms.
Some contractors or big-box stores offer financing plans for projects or materials for home renovation. These can be convenient, but always compare rates and terms to traditional lenders before signing.
This is Best for: Smaller projects where promotional rates (like 0% interest for a set time) are available.
What’s must important here is that you don’t rush. Before deciding how to pay, consider the total cost, interest, fees, and your long-term financial comfort. For larger loans, talk to a lender or financial advisor to compare options and evaluate all the pros and cons.
A thoughtful budget is the best tool you have for keeping your renovation on track. It helps you prioritize, keep you in check if you tend to overspend, and handle surprises without stress.
Whether you’re updating one room or tackling a larger project, plan carefully, track costs as you go, and choose where to splurge or save with purpose. The result? A home you love without breaking the bank.
About the Author: Preston Guyton is the founder of ez Home Search. He has been a real estate leader for over 20 years. Starting with a focus on South Carolina, he has helped coach and empower real estate professionals to achieve their full potential by meeting the needs of their local community.
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