5 Financial Home Remodeling Mistakes to Avoid

March 13, 2024 Jeannie Bidner
Remodeling your home can be your own transformation story, but make sure you think it through and avoid these five common financial mistakes.

Whether you just bought a fixer upper or are finally deciding to turn your current home into your dream house, remodeling can be exciting—and painful. I know because we've done it four times! From expanding our first small home to doing a major renovation on our current house including moving an exterior wall, each remodel has been a learning experience. And the most important lesson we've learned is that you need a plan—both personally and financially.

It doesn't matter whether you're doing a small one-room update, or a major overhaul like I'm dealing with now. If you don't think it through carefully and have a vision before you even talk to a contractor, you could make some costly mistakes.

But don't let that stop you. I'm happy to share some of my experiences that may help you as you consider a remodel. Here are five mistakes at the top of my list along with my suggestions on how to avoid them.

Mistake 1: Being unrealistic about what you can accomplish.

What to do instead: It's so easy to think big, and design magazines are filled with great ideas. But don't bite off more than you can chew. Instead, think about what you want, what you need, and what you can realistically get done. Of course, cost is a top consideration. But also think about the size and scope of the job. How long will it really take? Our current remodel is the biggest one we've done, and we factored in a long timeline. Even so, it's taken considerably longer, and we've had some unexpected challenges—including going through three contractors. Think ahead and watch out for scope creep!

Mistake 2: Under budgeting.

What to do instead: Look at all the possible expenses. The contractor's bid is just the beginning. Will you need a designer/architect? How much will building permits cost? Will you be buying new appliances? And don't forget about what you might find behind the walls, like plumbing or electricity problems. A good rule of thumb is to set a budget and then add 15% to cover overruns. I've never done a remodel that hasn't gone over, whether from scope creep or structural issues.

And from my experience, get multiple bids and be specific about what's included, from project management to materials. A high bid might mean a contractor really doesn't want the job; a low bid could be just a way to get in the door. Use the Goldilocks approach and look for a realistic bid that's just right for you and your budget.

Mistake 3: Not considering impact on daily life.

What to do instead: Think about how the process will affect your quality of life as well as your wallet. Plan for the worst phases, like demolition or doing floors. Will you have to move out? Where will you go and what will it cost? What about storing furniture or valuables? If you're remodeling a kitchen, you'll have restaurant or take-out costs. It all adds up.

Then there's the dust and the noise. When we did our first remodel in Colorado, I had a two-year old and was pregnant. We didn't have a kitchen and had to use our laundry room instead. There was a film of dust over everything. It took six months and seemed like an eternity, but we were happy with the result and thought we'd live there forever. Then we decided to move. Which brings me to the next mistake.

Mistake 4: Ignoring return on investment (ROI).

What to do instead: If you think you're going to move—and even if you don't—it's important to consider not only the money you're putting into the house, but what you may be able to get out of it when you sell. Certain types of improvements historically give you a better ROI. Kitchens are a big seller. Curb appeal is also important. In fact, the 2023 Cost vs. Value report lists replacing a garage door, entry doors, and exterior stone veneers as providing some of the highest returns. 

Of course, you're also remodeling your home for your own enjoyment. So the type of project and quality of materials you use have to suit your own tastes, needs, and timeline. If you plan to be in your home for a long time, let your personal style and financial circumstances guide you. If you plan to sell soon, it's probably wiser not to sink time and money into something you know you won't recoup. Do your research so you have an idea of what's a reasonable return on the project.

Mistake 5: Borrowing too much to cover the cost.

What to do instead: Remodeling costs are high now—but so are interest rates. If you need to borrow to cover the cost, figure out not only how much to borrow, but how and when you'll pay back the loan. Don't go into it blindly.

Check out all your options—from a 0% introductory-interest credit card if you can pay back the loan within the initial 0% interest period, to a home equity line of credit (HELOC) if you need something longer. Each has pluses and minuses in terms of interest rates and repayment. For instance, while a HELOC can have a long repayment schedule, often it has a variable interest rate. (We took one out four years ago and got caught in a rising interest rate environment!) Bottom line: Don't borrow too much, and have a realistic repayment plan.

Avoid the mistakes—and enjoy the results!

For all the practical and financial concerns, remodeling is also personal and emotional. For me, it's been worth it every time not only in ROI but in the enjoyment of our space. And this last time, I feel like I'm putting my heart and soul into it and will leave a bit of my legacy in this home. Sure, there are a lot of hassles, but there's also an element of dreaming and creativity. It can be your own transformation story, something to be proud of and enjoy now and possibly for many years into the future.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.