Financially Savvy Home Renovations: Plan, Budget, and Build
- John J. Diak, CFP®
- 14 minutes ago
- 5 min read
Your home is more than just a place to live—it’s where life happens. With today’s housing market still adjusting to challenges that resulted from COVID-19, high inflation, and rising interest rates, many homeowners are choosing to invest in the spaces they already have rather than searching for something new.
On average, homeowners live in one home for about 12 years and own roughly three homes in their lifetime. Of course, everyone’s situation is different—some homes remain in families for generations, while others serve as stepping stones to new opportunities. [1]
If buying a new home isn’t in the cards for you this year, a renovation or home improvement project could be a great way to enhance both the comfort and functionality of your space. Here are some important personal and financial considerations to keep in mind when budgeting for home improvement projects and creating your perfect oasis.
When Renovating Makes Sense
Wherever you are in your homeownership journey, you might be feeling the urge to refresh or upgrade your space. Here are some common reasons homeowners choose to renovate rather than relocate:
You’re locked into a low mortgage rate. If you purchased your home during the height of COVID-19, you may have scored one of the lowest mortgage rates in history. Now that rates have climbed back to more typical levels, moving might feel less appealing—especially when you could simply renovate or add to your home without giving up such a low rate.
You’ve built significant home equity. While housing market trends differ based on your state and city, home values have risen nearly everywhere across the country. It’s possible that even if you bought your home within the last few years, it’s already gained a substantial amount of equity.
Low housing inventory has made moving difficult. If you’ve explored the idea of buying a new home but found limited options in your area, staying put might be the better choice. A renovation allows you to create the space you need without navigating a competitive market.
You want complete creative control. If you have a specific vision for your ideal home, finding a move-in-ready space that checks every box can be challenging. Renovating gives you the flexibility to design your home exactly the way you want it.
Your needs have changed. Maybe you’ve recently expanded your family and need an extra bedroom, or you’ve started a business from home. Rather than relocating, renovations can help your space evolve to better fit your lifestyle.
3 Tips for Nailing Your Next Home Renovation
Home renovations can vary widely in cost—from a few hundred dollars for small updates to six-figure investments for major remodels. Consider your budget as it relates to your home’s current value, potential value (based on other homes in your area), and other financial priorities or savings goals.
Here are three tips for building a realistic home renovation budget and incorporating it into your greater financial plan:
Tip #1: Focus on What Will Add Value to Your Home
While it’s not always possible to make back what you spend on a renovation dollar-for-dollar, some home improvements will increase the value of your home more than others. For some people, the future value of their improvement is not part of the decision process, and that’s okay. It’s your home, and you have the right to personalize it to your desires and tastes.
But if you’d like to make changes that can help with the future resale value of your home, there are certain projects that will add some significant value to your home.
Renovations with the highest value compared to cost include: [2]
Kitchen remodels
Deck addition
Replacing the siding or roofing
Bathroom remodels or additions
Primary suite addition
If you’re curious about what has the potential to decrease the value of your home, these projects include: [3]
In-ground swimming pool
Wall-to-wall carpeting
Built-in electronics (like home theaters or speaker systems)
Garage conversions
Tip #2: Gather Multiple Estimates
Once you have a project picked out, your next step is to gather estimates from contractors or specialists. If you’re able, get estimates from at least three different providers—you’ll be amazed at how wide the price range can go on home improvement projects.
When searching for contractors, do your due diligence:
Ask friends, neighbors, or colleagues for recommendations.
Read online reviews and check ratings if available.
Verify licensing and insurance to ensure they’re properly certified.
Ask about their experience, past projects, and specialties.
Once you have at least three estimates, consider your options carefully. As a general rule of thumb (and assuming all other factors are relatively equal), you may want to go with the person whose prices fall somewhere in the middle. If one estimate came back much lower than the others, this could be a warning sign that they didn’t do a thorough job during the consultation or may be inexperienced.
Tip #3: Determine How You’ll Cover the Costs
With an idea of how much your project will cost, your next step, naturally, is figuring out how to pay for it.
If you’ve been saving for a home but decided to renovate instead, those funds might be a natural fit for your project. However, if you don’t have dedicated savings set aside, there are other financing options to explore.
Depending on how long you’ve owned your home and how much has been paid off, you may have built a sizable amount of home equity. A home equity line of credit, or HELOC, can be used to access that equity as (just like it sounds) a line of credit. Once approved, you can use what you need and pay it back incrementally. Because a HELOC leverages your home as collateral, it typically offers more favorable terms and lower interest rates than unsecured credit, like credit cards or personal loans.
Whether you choose to save ahead or use financing, it’s important to consider how your renovation will fit into your overall financial picture. Taking on additional debt, for example, could impact your credit score or make it harder to save for long-term goals like retirement. Weigh your options carefully to find the best approach for your situation.
Keep the Financial Impact in Mind
A home renovation can be an exciting way to refresh your space and make it better suited to your needs. Whether you’re upgrading for comfort, functionality, or resale value, planning ahead is key—especially when it comes to cost. Larger remodels, in particular, can bring unexpected expenses, temporary disruptions to your daily routine, and long-term financial considerations. Taking the time to budget wisely and explore your financing options can help ensure your renovation enhances your home without putting undue strain on your finances.
If you’re considering a renovation and want to explore how it fits into your overall financial picture, our team is here to help. Reach out today to discuss your options and create a plan that works for you.
John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.
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The opinions expressed in this material are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security, investment, or other financial product.
This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.
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