How to Pay for a Renovation?

[froggy76]

We are in the final stages of planning our renovation, which includes a complete 1st floor reno, 2-story addition, exterior renovation, and new screened porch. We have cash to pay for the project, using what we've saved and what we just got from a cash-out mortgage refi to make up the shortfall.

However, the cost of the project keeps going up little by little. The latest estimate is right at the top of what we had hoped to spend, and that doesn't even include surprises during construction. What do people do to cover additional costs that come up during a renovation? Is a HELOC the best option? Or should we scale back the project to make sure we won't go beyond the cash we have available (which would mean cutting out a major aspect of the project)?

I'm just dumbfounded at how the design-build company keeps giving us higher and higher estimates as if we will be able to do this no matter what it costs...

[Susie]

We were planning to do a master suite addition + re-siding the house, and our plan was to save up in cash for the estimated cost of the project, with the knowledge that we had the ability to borrow another 25% or so of the project cost using a HEL or HELOC if/when the project ran over budget.

For now though we are favoring moving instead of renovating, so we're not taking any steps on this.

[hbomdiggity]

We did a combo of savings+ cash roll+ 0% credit card. But we only needed about $50k.

[aprilsails]

I’m in the commercial/industrial construction industry and doing cost estimates today and prices have gone insane in the past 8 months. Everything is 15-30% more expensive for the exact same product. So I wouldn’t blame it on the design build firm, they are actually being honest with you.

A HELOC or another LOC would be your best bet for fairly quick financing without high interest rates. That is what we did to cover the last bit of our previous renovations. We got access to a Heloc with our first mortgage and when we switched providers they converted it to a LOC. We always used that one since it has great rates and was always there for $50k if we needed it.

[froggy76]

Feb 4, 2021 12:29:54 GMT -5 aprilsails said:

I’m in the commercial/industrial construction industry and doing cost estimates today and prices have gone insane in the past 8 months. Everything is 15-30% more expensive for the exact same product. So I wouldn’t blame it on the design build firm, they are actually being honest with you.

A HELOC or another LOC would be your best bet for fairly quick financing without high interest rates. That is what we did to cover the last bit of our previous renovations. We got access to a Heloc with our first mortgage and when we switched providers they converted it to a LOC. We always used that one since it has great rates and was always there for $50k if we needed it.

Thanks- that's a good point about materials. They never tell me that, though. They always blame it on something else. I'll look into a HELOC.