7 Tips for Big Project Budgeting
Plan ahead to avoid headaches, surprises and unwanted debt.
1. Get It All in Writing
Nail down payment terms in writing and be firm about enforcing them. A good contractor will accept a reasonable payment schedule that includes a fair down payment and periodic payments tied to progress.
2. Consider Financing
If you can’t pay for the remodel up front, consider tapping into your home equity. Home equity lines of credit, home equity loans, and cash-out refinancing are three of the most common options available.
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3. Shop Around for Loans
Try several different lenders to see who’ll give you the best terms. You don’t necessarily have to go with the bank that holds your primary mortgage to access equity credit. Pay close attention to the interest terms, which will play a big role over the life of the loan.
4. Don’t Get In Over Your Head
Carefully consider your prospects. Home equity credit is a powerful tool, but wield it wisely. If you get too aggressive in spending money to keep up with the Joneses, you can find yourself underwater on your mortgage in a hurry.
5. Be Ready to Withhold Final Payment
Add a provision to the contract that allows you to withhold a final segment of payment, perhaps 10 percent, until you are completely satisfied with the job.
6. Expect the Unexpected
You should always assume a 10 percent bugger zone for unexpected costs. (Because there WILL be unexpected costs. Big projects will sneak up on you like that.) A contingency budget for unforeseen problems will save you a lot of headaches.
7. Don’t Overthink the Investment
When it comes to big-deal projects, you want a good return on your investment. But you should be looking at the improvement for its own sake. If you do a kitchen remodel just to raise the value of your home, you’re setting yourself up for disappointment when it’s time to sell.