Your kitchen hasn't been updated since the 1970s, and the only bathroom on your home's first floor is the size of a closet. Your home needs some major improvements, and quickly.
Unfortunately, home improvements are rarely cheap. And you don't have an unlimited pile of money available to pay for an expanded master bedroom, new sunroom or finished basement.
The good news? It is possible to save money on home improvements, even major ones. The key is to get creative when updating your home. And turning to a home equity loan or home equity line of credit (HELOC) can help preserve your finances, too, thanks to the relatively low mortgage interest rates that come with these loans.
Here are some strategies for reducing the costs of the home improvements that can help turn your residence into a dream home.
Make sure the project is worthwhile
Pablo Solomon, an artist, designer and author based in Austin, Texas, said that the best way to save money on home improvements is to either not do the job at all or do as little as possible.
That might sound odd, but it makes sense. Solomon recommends that homeowners carefully weigh the pros and cons of a job before starting any work. They might find that, after careful consideration, a job simply doesn't make economic sense and should either be scaled down or abandoned, he said.
"Are you just trying to make the home a bit more attractive to sell it for more?" Solomon asked. "Or do you have something in mind that you and your family will enjoy for years to come? Are you trying to save money on a cheap fix-up, or do you want to do a top-quality job?"
Rely on equity, not credit cards
Unless you’ve saved a significant amount of cash, you’ll probably have to finance the cost of major repairs such as kitchen and bath remodels and bedroom additions. Turning to a credit card will cost you plenty in interest. But tapping your home’s equity for loans can give you the financing you need at far lower interest rates.
Equity is the difference between what you owe on your mortgage loan and what your home is worth today. If you owe $200,000 on your mortgage but your home is worth $275,000, you have $75,000 worth of equity in your home. You can tap this equity in the form of a home equity loan or home equity line of credit. Say you have $75,000 worth of equity, a mortgage lender might loan you $55,000 in the form of an equity loan, money that you can then spend on home improvements.
Home equity loans and lines of credit are not the same thing. Home equity loans provide you with a lump sum of cash that you pay back, with interest, over time. Lines of credit operate more like credit cards; you’ll qualify for a credit limit based on the equity in your home and only have to pay back what you actually borrow.
It’s best to talk with a mortgage lender about these loan types to determine which is best for you. A lender can also tell you what interest rate will most likely be attached to your home equity loan. Whatever the rate is, though, it will be lower than the rates that come with credit-card debt.
Most banks and lenders also offer home improvement loans. These are unsecured loans, meaning that they don’t use your home as collateral, that usually come with slightly higher interest rates than do home equity loans or lines of credit. But you won’t need any equity in your home to take out a home improvement loan. They, too, are far better options for financing than is your credit card.
Chasen Nick, digital marketing strategist for RAMS Home Loans in Sydney, Australia, said that homeowners worried about the cost of improvements should start small.
"Curb appeal is a huge determining factor when potential home buyers are evaluating a piece of property," Nick said. "This is a great opportunity to grab a shovel and pry open a couple cans of paint."
Bright flower beds and freshly painted walls in your kitchen and living room won't cost much, but they can make your home seem more inviting.
John Bodrozic, co-founder of El Dorado Hills, California-based home-remodeling app HomeZada, said that owners who want to spend as little as possible should plan their projects in detail. This includes creating itemized lists of everything that they require to finish a project.
Bodrozic uses the standard kitchen remodel as an example. Homeowners often soar overbudget on kitchen remodels because they don't create a realistic budget for the job, he said
"They forget about materials required for the project," Bodrozic said. "Most people will budget off the cabinets, countertops, floors and appliances. But they forget the fume hood, sink, faucet, garbage disposal, backsplash and light fixtures."
Bodrozic recommends, too, that homeowners spend plenty of time shopping around for materials. It's possible to save thousands of dollars by doing this, he said.
Bodrozic said that owners should have three to five choices for each major item they need for a remodel. This is especially important for appliances. Homeowners can consider high-end brands, mid-tier ones and entry-level varieties, Bodrozic said.
"The price point there has a big range from $4,000 on the high end to maybe $700 on the low end," he said. "When you have done that for all the items on a project, you can assess that the budget range for your project could widely vary from $75,000 to $25,000."
The key after shopping is for owners to balance what they like versus what they can afford, Bodrozic said. To save money, homeowners must make trade-offs, he said, such as agreeing to spend more on high-end kitchen cabinets but less on mid-tier or entry-level appliances.
Some projects should be avoided
Alex Kamunya, portfolio manager with Cambridge, Massachusetts-based KAM House Buyers, says that some home-improvement projects are more likely than others to send your costs soaring. These include changing your home's plumbing and electrical systems, moving load-bearing walls, installing new windows, adding new floors and making changes to exterior walls.
"If possible, avoid these budget-busting projects, but only if no safety issues are involved," Kamunya said.
Get creative in finding or re-using materials
Kamunya said that homeowners can find less expensive materials if they are willing to shop for improvement materials in unusual locations.
ReStores, run by Habitat for Humanity, are good choices. They resell home-improvement materials at lower costs, Kamunya said. He also recommended that homeowners shop at yard sales or purchase materials that are easier to put together. For instance, homeowners can use ready-to-assemble or semicustom cabinets that cost less. They might even decide to repaint their existing kitchen cabinets instead of replacing them.
It can help, too, to lower your expectations. Kamunya pointed to bathrooms. Instead of paying for a permanent glass shower door, homeowners can save dollars by instead going with shower curtains.
Cut the costs of working with contractors
Homeowners can do some projects on their own. But there are some home improvements -- such as major kitchen or bathroom remodels or additions -- that are simply too advanced for amateurs. In such cases, homeowners must hire professional contractors.
But even if you must pay for a contractor, you can save money, said Gary Wolf, owner of Wolf's Home Improvements in Fleetwood, Pennsylvania.
Wolf said that homeowners should always prep their project before contractors arrive. This means clearing the area of clutter or furniture, draping furniture on your own, and washing or wiping down walls before they are painted. Homeowners can save money, too, by taking care of trash and debris removal on their own, Wolf said.
It helps, too, to put an area back together on your own. Instead of having your contractor re-hang the curtains or move the furniture back to its proper place, homeowners should do these jobs themselves. That will save additional dollars, Wolf said.