How to budget for home renovations

Owning a home is more than putting a roof over your head – it’s your own space to shape, enjoy, and fill with a lifetime of memories. Of course, houses need care along the way. Kitchens age, bathrooms need attention, and roofs require upkeep. But with a bit of planning and a smart budget, you can tackle these challenges with confidence.

You can help your efforts by doing some of the work yourself, as well as researching the costs, monitoring your home's condition, and learning how to create a budget for a home renovation.

Average costs of home renovations

The cost of home renovations or remodeling can vary significantly, depending on the materials required, your location, local contractor rates, and the project's scope. Additionally, some homeowners may undertake more home improvement ideas and projects than others.

It's helpful to get a general idea of what renovations cost before you dive in. Here’s a look at estimates for the most common renovations, according to Home Advisor.

Developing A Home Renovation Budget: Steps For Success

Now that you have an understanding of how much average renovations typically cost, you can start to create your project budget. One of the first thing that you will want to do as you plan your home renovation budget is to follow a few key steps:

1. Create Your Project List And Prioritize Projects

First, decide what you want and need, what you are willing to spend more on and where you’re willing to cut back your budget. This can differ between projects and is personal to each renovation and your own specific situation. Be sure to consider what you want done first (for example, kitchen needs to be done before the basement gets finished) and be realistic with your timeline for completing your whole list.

You'll also want to take a look at which home improvements add the most value to your home as you decide which projects you tackle. A kitchen remodel or full kitchen renovation usually provides the most resale value, though a bathroom renovation or addition also often has a good return on investment. Consider getting a value report from a lender or trusted real estate agent to see what projects have good payback value in your area.

2. Estimate Home Renovation Costs

Next, consider what materials you want to use, appliances you’ll need, lighting, paint, flooring, furniture, etc. The more detailed you can make your cost estimate plan, the easier it will be when talking to contractors. Make sure to research any permits you might need and their associated project costs, and to factor in labor costs. Include a contingency or buffer in your budget to account for any unknowns you might need to mitigate. And if you’ll need to board pets or stay in a hotel during the renovation, make sure to add a line item for accommodations to your budget.

3. Get Quotes From Contractors

Unless you have extensive experience working with a particular general contractor, you'll want to get quotes from multiple contractors before deciding who to go with. Don't always choose the lowest contractor's bid either — low-ball offers might not be worth the added stress or expense if something goes wrong, so be wary of deals that sound too good to be true. Look for reviews from other local homeowners and ask each general contractor if they offer a warranty on their work.

Decide how to finance your project

There are several options available for funding home renovations.

Home renovation personal loans

Home renovation personal loans are flexible and often offer same-day funding. You can choose between secured and unsecured personal loans.

For example, Rocket Loans℠ offers unsecured personal loans that require no collateral.¹

Home renovation personal loans also typically have a lower interest rate than credit cards, which can save you money.

When lenders review your personal loan application, they consider key factors to determine whether you qualify and which rate you'll receive.

• Debt-to-income (DTI) ratio. Your DTI ratio is the percentage of your gross monthly income that is allocated to debt payments. The lower your DTI ratio, the more room you’ll have in your budget for a new loan.
• Credit score. Most lenders look for a credit score between 610 and 640, but requirements vary.
• Income and employment. Lenders prefer borrowers with consistent income and a reliable employment history, so they likely will ask to see recent pay stubs or income tax returns.

Credit cards

Credit cards are a common method of payment for home renovations. According to a recent This Old House survey of 2,000 homeowners, 48% planned to pursue renovations in 2025, and 30% planned to use credit cards to finance them.

While credit cards are typically easy to get, they usually have a higher annual percentage rate than personal loans.

Credit cards that offer promotional zero-interest rates are an effective way to finance renovations, as long as the balance is paid off before the promotional period expires.

Home equity loans

A home equity loan is a second mortgage that allows you to borrow your equity as a lump sum. Approval typically depends on how much equity you have, as well as your credit, DTI ratio, income, and employment status.

Taking out a home equity loan comes with risks. If you default on the loan, the lender can foreclose on your home.

Home equity line of credit (HELOC)

A HELOC is also a second mortgage, but your equity is used to back a line of credit that you can use as needed, rather than borrowing a lump sum. HELOCs typically have a draw period, where you can borrow as needed up to the credit limit. Once it expires, the repayment period begins, and you can no longer borrow from the line of credit. Also, like a home equity loan, a HELOC uses your home as collateral, and you're at risk of foreclosure if you default.

Savings

Using savings for renovations avoids the need to go into debt. Remember that depleting your savings can leave you in a difficult situation if you face unexpected expenses or emergencies. If you use savings to pay for renovations, be sure to replenish them so you can remain ready for whatever comes next.

How to save money on your next home renovation project

If you know what project you want to tackle, here are some ways to do the job for less.

Do what you can yourself

If you have the know-how, you can DIY parts of a renovation yourself. Common DIY tasks include demolishing flooring, removing cabinets, painting walls, and installing new hardware.

Plan, plan, plan

A successful home renovation requires planning. This includes making a backup plan in case of unexpected setbacks or delays. Home repairs can become complicated, so be prepared for unexpected surprises. Your budget should include a financial cushion to accommodate this.

Buy materials yourself when they’re on sale

If you know the specific materials you want to use, consider buying them yourself when they go on sale. Consider using refurbished or used materials to save money while reducing your environmental impact. This is another time when having a detailed plan before you start work can save you money.

The bottom line: When it comes to renovation costs, it pays to plan ahead

Renovations can make your home more welcoming and increase its fair market value. When preparing for a renovation, it's essential to conduct thorough research and establish a budget to cover the costs. Personal loans, credit cards, home equity loans, HELOCs, and savings can all help make your renovations a reality.

If you're ready to explore a personal loan to fund your renovation projects, apply today with Rocket Loans.

¹ All loans are made by Cross River Bank, a New Jersey state chartered commercial bank, Member FDIC, Equal Housing Lender. All loans are unsecured, fully amortizing personal loans. Eligibility for a loan is not guaranteed. This is not a deposit product. Please refer to our disclosures and licenses page for state-required disclosures, licenses, and lending restrictions.

Qualified clients using Rocket Loans will see loan options for a 36 or 60 month term, and APR ranges from a minimum of 8.01% (rate with autopay discount) to a maximum of 29.99% (rate without autopay discount) depending upon their credit profile. An origination fee of up to 9.99% is charged for each loan. This fee is deducted from the balance before funds are disbursed to the client. For example, a 5-year $16,000 loan with a 14.55% interest rate and a 6.95% ($1,112) origination fee would have 59 scheduled monthly payments of approximately $376.83 and 1 final monthly payment of approximately $399.09 for an APR of 17.90%. Borrower must be a U.S. citizen or permanent U.S. resident at least 18 years of age. All loan applications are subject to credit review and approval and offered loan terms depend upon credit score, requested amount, requested loan term, credit usage, credit history and other factors. Not all borrowers receive the lowest interest rate. To qualify for the lowest rate, you must have excellent credit, meet certain conditions, and select autopay. Rates and Terms are subject to change at any time without notice.