How Much Does a Home Renovation Cost?

Home Projects Can Increase the Value of Your Home

The cost of a home renovation depends on several factors. Thankfully, though, the price tag on a home renovation doesn’t have to be all guesswork.

You can get an estimate or a rough idea of the cost to help you budget and decide if it’s worth the potential increase in home value that a home addition often brings. 

Understanding Home Renovation Costs

When you decide to renovate your home, there are a few things you’ll want to consider, with cost likely at the top of that list. Renovation costs are based on three primary factors: the scope of the project, materials, and labor. Keep in mind that these costs can vary depending on where you live, with some areas having steeper prices for materials and labor.

What Is the Difference Between Remodels and Renovations?

While often used interchangeably, remodels and renovations aren’t the same. Renovations focus on cosmetic changes, such as updating your kitchen with new cabinetry and flooring. Remodels tend to change the structure of your house, such as in the case of adding on an extra bedroom.

What Factors Contribute to the Cost of Home Renovations?

• The size of the room: Generally, a small room is more affordable to renovate than a big room, but it can vary with the complexity of the project. Small bathrooms could be more expensive than a large bedroom, for example.
• Cost of materials: Appliances, cabinets, flooring, tile, and other materials can be costly, and some common home renovation materials (such as lumber) have seen big price jumps in the past several years.
• The extent of the remodel: Are you just doing an update or gutting the whole area? Is it a weeklong project, or will it take several months? The longer the project duration, the more you’ll likely spend—especially on time and labor.
• The age of your home: When you break open the walls of older homes, you may find issues, like outdated wiring and plumbing or inefficient insulation. These can add surprise costs to your project.
   

Generally, kitchens and bathrooms cost the most, since they can include plumbing, electricity, cabinetry, appliances, flooring, and tiling. Bedrooms and living rooms are generally less expensive. Also, keep in mind that where you live will affect how much you’ll spend. Contractors and supplies could cost more in some urban areas than in rural locations, or vice versa.

Renovation Costs of Common Projects

Here are some national averages for the costs of popular renovations, plus their recoup value, from the Journal of Light Construction’s 2024 Cost vs. Value Report. When you see “96.1%” cost recouped, this means that for each dollar you spend, you’ll increase the value of your home by 96 cents.

Be aware that these are averages and don’t reflect hidden costs. It’s a good idea to add an extra 20% to your budget, just in case.

Other Factors That May Increase Renovation Costs

Sometimes, surprise costs can pop up when you renovate your home. Here are some examples of how project costs can creep up on you.

• Changing your mind: If you decide on an idea and change your mind, the contractor (or you) may have to redo work or pivot to incorporate the change. Try to stick with your initial decisions, being aware that you may spend more if you change your plan after work has already started.
• Structural issues: You never know what you’ll find during a remodel until you open the walls or floors. There could be rot, pests, electrical issues, or water damage. Especially in an older home, be prepared for these unfortunate surprise costs.
• Getting up to code: Inspectors can be part of renovation planning, so look for issues you might need to address. Your house may have been built before standards were put in place, or by someone unfamiliar with local codes. Find out what inspections your renovation may need and what standards you might be required to meet.

Benefits of Home Renovations

According to the National Association of REALTORS®, 64% of homeowners have a greater desire to be in their home, and 46% have increased their enjoyment, after a renovation or remodeling project. While you always want to get a good value return on your investment, enjoying your updated home is priceless.

Consider how long you’ll live in your home when determining which projects to tackle. If you plan to stay in your home for some time, your priority may be comfort and better living, rather than increasing the value for an upcoming sale.

Whatever home improvement projects you tackle, proper planning, budgeting, and realistic goals will help you set expectations to ensure that the investment, time, and value are well worth it.

How To Pay for House Renovations

When choosing to renovate your home, minimizing costs will likely be a priority. If you’re wondering how to pay for a renovation, rest assured you do have options. Besides a home equity loan or line of credit, you could also choose a cash out refinance (which has the lowest rates for borrowing against equity). This loan, which replaces your original mortgage, can:

• Tap into your home’s equity: If you’ve owned your house for a while, you may have some good home equity built up in it. If so, you can refinance your home and add the cost of the renovations onto your new mortgage.
• Lower your interest rate: Depending on your current rate and market conditions, you might be able to get a lower interest rate than you had on your original mortgage loan.
• Give you tax advantages: If you use the money from the cash out refinance to upgrade your home, the interest on that money may be tax deductible.

Final Thoughts: Home Renovation Cost

Remodeling can add value to your home and make it a more enjoyable place. Before starting the project, be sure to think about the costs and how you’ll pay for them. At Freedom Mortgage, we can help you save money when you’re ready for home renovations with a cash out refinance. These refinances allow you to tap into the value of your home’s equity at the lowest possible rate and get cash to start on freshening up your house or creating more space to enjoy your home.