Tip #1: Decide how much you want to spend for your kitchen remodeling project then stick to it.
Setting a budget for your kitchen remodeling project is the most important thing you can do. Once you set the budget you need to try to stick to it. It can be tempting to starting adding upgrades along the way. Don’t do it.
The average cost of a mid-range kitchen remodel is more than $50,000. That is for a major kitchen renovation including: new floors, new cabinets, new appliances, new lighting and possibly removing of walls or rearranging the layout of the kitchen altogether.
The amount you spend should be determined by whether you are going to stay in the house or plan to sell it within the next 5 years.
If you plan to stay in the house and have always wanted your “dream kitchen” then you should allocate more money in your budget.
Don’t go overboard though. Only spend as much as you can afford. You don't want to get into money troubles paying your monthly bills.
Don’t forget to factor in the value of your house. Don’t create an upper-class kitchen if your house is in a working class neighborhood.
Remember, you’ll only get about 60% of the value of the kitchen remodeling project back as added value for your house. So if you spend $50,000 on your kitchen renovation, your house value will only go up about 60% of that ($30,000).
Tip #2: Know all the costs that are involved in the project.
Labor will consume anywhere from 20 to 35 percent of your project costs. New kitchen cabinets can also take up a big part of your kitchen remodel budget.
Below are the average costs for a kitchen remodeling project. Note: This does not include a major redesign where walls will be removed and the layout will be changed drastically.
Don’t forget to add an extra 20 percent of your budget for the unexpected. You may encounter a few surprises in your kitchen remodeling project, especially in an older house. There are all sorts of surprises you can find behind the walls or under the floor. Like when you rip out your walls and discover that your electrical wiring is out dated. Or maybe you find some leaking pipes that need repair. Always leave a little extra money to take of these surprises.
Tip #3: Make a list of all the things you “must have” in your new kitchen.
Prioritizing certain features in your new kitchen is good to do at the beginning to help you come up with the budget. Do you want to have the layout of the kitchen updated substantially? Do you absolutely want new kitchen cabinets or flooring? These are the most expensive items for your kitchen remodeling project. Identifying those items in the beginning will help you be more flexible if you run into budget issues during the renovation. You may be willing to settle for lower grade cabinets as long as the layout is updated to your liking.
Tip #4: Determine how you will function during the kitchen remodeling project.
Having a good understanding of how you will feed your family while the kitchen is out of order is important. Having to eat out all the time can start to add up quickly if you didn’t plan for it. Make sure you budget in the added cost of not having your kitchen available for weeks or even months during the remodeling project.
Also, you'll need to determine if you will live in the house during the renovation or not. If you don't have a second home or relatives in the area that are willing to take you in during the renovation, you can be in for a surprise if you need to get away for a while and stay at a hotel or maybe rent a home for a few months. Again it's just an added cost that you should plan for before starting the project.
Tip #5: Determine how you will pay for the kitchen remodeling project.
There are many ways to pay for your kitchen remodeling project. Home equity loans are the most popular because they may be tax deductible. When it comes to deducting interest for home renovation loans, homeowners will need to be on guard. Since The Tax Cut and Jobs Act was passed in 2017 not all home equity loans are deductible. They are only deductible if the money is used to build a new home or add substantial value to your existing home. For one, the IRS has only defined a “substantial” improvement to a home as one that adds value, prolongs its useful life or adapts a home to new use.
This means homeowners who put on an addition, overhaul key structural elements or make the home more livable or accessible are likely to qualify.
Cosmetic updates to your home like painting do not add value. If you do a major renovation of the kitchen it will add value to the house so you should be fine deducting any home equity loans you get. It’s always good to talk with an accountant before taking out a loan just to be sure.
Other options include refinancing your existing mortgage, taking out a personal loan or taking a loan against a retirement plan.
Even if you have cash in hand for the renovation, borrowing money at a low interest rate may be smarter than pulling your money from an investment account getting a higher return.
If you're getting a loan, add in costs like interest and loan origination fees. Also, find out when you'll get the money from your loan. You'll need to make a deposit with your contractor, and you'll need to pay for materials up front.
KitchenRemodelingInChicago.com is here to help you with all aspects of planning your new kitchen remodeling project.