How Do You Plan and Budget For Home Improvements?

[Staceyy]

I'm wondering how everyone plans and budgets for home improvements? Do you plan to do something every year or do you wait until things look really bad before updating? Do you do it yourself or hire contractors? Do you take out a home equity loan, borrow from your 401k, finance it elsewhere or save and pay cash? Do you have any hints or tips you'd like to share to make the job easier?

[Broken Arrow]

I just have to say this. Ahem.

Don't borrow from your 401k!

Thank you.

Home equity loans are typically the norm, though I'm personally not too excited about that. I guess it depends on what kind of home improvement you have in mind. If the upstairs plumbing is leaking through the downstairs ceiling, then yeah, that'd be OK. However, if it's because you want new cabinets and marble counter top, then I would think it's a bad idea.

Personally, saving up for it and "paying in cash" sounds like a dandy idea... if the ceiling isn't leaking.

[FrugalFish]

We did a full renovation on this house a few years ago. We did the work piecemeal, saving up and doing things as we could afford to with cash. We did almost all the labor ourselves, which saves a ton if you are motivated and talented enough. It took us 2 years to get through the whole job- the first six months were the most unlivable as we were still in cardboard boxes and living on concrete slab- after that it was like a livable house that needed improvements. We still do occasional jobs, but like before make sure we have the money first. It was definitely worth it to do it that way.

[Aleta]

frugalfish is right. It's always a better idea to save up rather than to get a loan. Of course, if your roof needs to be replaced and I mean needs to be replaced and you don't have the funds - that is different.

As far as budgeting goes, there are books on the market that will list the expected life of any item. You sort of have to allocate each month and budget a set amount for HOME MAINTENANCE. That is apart from home furnishings. Home furnishings is for smaller things like toasters, lamps, etc. I budget about $20. a month on items like that. You have to start somewhere to get a fixed amount each month. I try to set aside $1,000. a year knowing that I may have to spend $250. for paint or other project needed larger amounts of money.

[anonymous_saver]

I have yet to buy a house, but I will most likely buy a house before 2 years is up.

I plan on putting money aside each month, and then once a year I will gather that money and fix one room in my house. So, if I save $1,200 for one year, I'll fix up the bathroom (for one example).

For real emergencies (such as the roof caving in), I plan on having a good emergency fund in place for such emergencies before I buy a house.

Basically, I would try to do whatever I can to not take a loan out.

[MonkeyMama]

We bought a new home. I know it's not a guarantee of no problems. But it is a long time before we need to improve anything all the same.

We are saving around $2k/year for home improvements. I know we will need to paint the exterior in a few years and our wish list is to upgrade the bathroom (they did a crappy job).

We plan to pay cash for any improvements. We have the emergency fund in case something happens far earlier than we plan. I am sure we will also up our cash contribution to the house fund with time. We also have a wish list to add on a room - but we would not do so unless we could pay cash.

We will probably hire contractors. My parents always did everything themselves, but not particularly a good job. I'd rather pay more for a good job done right.

[Caoineag]

Well, we are planning on buying a fixer upper in the next year so this is definitely something we have thought about. Our goal is to save up and do projects as we can afford them. We also will have an emergency stash of a couple thousand prior to moving in since chances are with the type of homes we are looking at, an emergency repair will probably occur quickly. Mind you, that wouldn't buy a new roof, but that would be the point of a home inspection before buying.

We plan to do part of the labor to keep costs down. I do have experience remodeling so that does help. However, on truly complicated jobs, I always vote for professionals. Good example, we will definitely hire an electrician. I don't know how many times I have seen my father and grandfather (both carpenters and knowledgeable about electricity) zap themselves.

[Aleta]

Don't rely upon your seller's inspectors. Make sure that you get your own. Ask around for references. You want someone with alot of experience to do an inspection.

[disneysteve]

I totally agree that you should NEVER borrow from your 401K to pay for home improvements. That should be a very, very last resort option to handle a financial catastrophe. Not a source of funds for casual spending on luxuries.

As to how to pay, I think it partly depends on the magnitude of improvements you are talking about. When we replaced our roof, got a new central air conditioner, a new furnace, new appliances, etc., we just charged the purchase and paid the bill in full when it came out of savings. If we were to take on a project more costly than what we could cover from savings, I'd say a home equity loan would be the option of choice.

[Caoineag]

Don't rely upon your seller's inspectors. Make sure that you get your own. Ask around for references. You want someone with alot of experience to do an inspection.

Yeek, no. I didn't even know they had seller's inspectors. I knew about buyer agents hiring inspectors for you and that you should still get your own. After all, even your agent wants the deal to go through so they can make money.

The experience issue is part of the reason why I think we will end up hiring both a home inspector and an electrician for a run through. There are limits to what the home inspector can find and wiring is a big issue for my husband and I.

[Aleta]

Inspectors can see even problems with dishwashers and other items that along the way will add up in costs. They know what to look for and can save you big bucks or even could give you a reason to change your mind about the house you're considering to buy.

[cptacek]

I agree with BA...mostly. If the roof is leaking or the windows are broken, etc, then a HELOC is probably the right way to go.

If I was making improvements to make the house more comfortable for me to live in, then I would pay cash. No, actually, I would budget how much I could pay for it, do most of the work myself, buy the stuff on a Home Depot 0% interest for 12 months, and then MAKE SURE I didn't go over budget AND paid it off in 11 months 2 weeks.

I improved my house last year with new paint/texture in every room, carpet, vinyl tile, etc., with a lot of help from friends and family and did almost all of it my(our)self, so I could sell it. A $7000 investment at the time yielded about a $20,000 return. But the market has changed, so that might not work now. Anyway, I "financed" that with 0% interest from Home Depot, 0% interest from a carpet company, and savings...the emergency fund took a hit, that's for sure. After I sold the house, I paid off all I had financed, including replenishing the emergency fund. It worked for me at the time, but like I said, it might not work now.

[Aleta]

That's another thing that people have to look at in not over improving their property while the market is taking a hit. One of the situations my nephew got into was building a pool. When you go to sell a house today that you bought recently, your house might not be worth what you think it is worth. Therefore, if it is a need, that's a different story. If it's a want, I 'd say to go slow and make sure that you have the money.

[Ima saver]

Lucky for me, I always get new homes since my husband is a builder, so we have never had any major problems. But when we do fix something up, my husband always does the work himself and we just pay out of our emergency fund. That is what it is for.
My husband recently redid the bar area. He moved the noisy ice machine out to the garage and redid the cabinets to put in a wine cooler. ( we only drink boone's farm, so we are not very swanky)

[katwoman]

I'm a woman so I do hire contractors.

If I'm buying the materials I use the Home Depot card (with a 10% off coupon) and use their 12 month/0% financing offer. The contractor gets paid by check.

Bought those pretty white plantation shutters from HD during their sale (and used a 10% coupon on top of that). Total cost included materials and installation. Deferred the payment for 12 months/0% interest. Oh! Lifetime warranty on the shutters.

Had a floor to ceiling pantry cabinet installed in the kitchen through a cabinet distributor. Installation was tacked onto the cost. This was paid with a VISA credit card.

Had all the built in air conditioners replaced (5). Went through a HVAC firm for the purchase and installation. Used the VISA to pay for it all. This VISA extends the manu warranty by a year so these units are warrantied 6 years. Learned this lesson the hard way when one of the old units literally died days after its 5 year mark and I found out my mom wrote a check when she bought it.

When the hot water heater needed replacing we called a plumbing company for the purchase and installation. Paid by check. They wouldn't accept credit card payment. Won't ever do that again unless I can at least buy the water heater with a credit card.

The washing machine needed service so I called an appliance repair company. $120 for 10 minutes work. They only accepted cash or check.



My point is that I try to pay by credit card whenever I can. Then I do balance transfers back and forth between 2 cards that offer me the lowest rate on the money. Currently I owe 14k @ 1%. Once this offer is up I'll switch it over to the card that has usually offered me 2.99% for another specified time.

It's only a matter of time before the furnace needs to be replaced. I've already got a quote of 4k.