Homeowners significantly underestimate the costs involved when planning a home improvement project, finds a new study from Discover Home Equity Loans, based on a survey of 1,200 Americans.
Estimated Cost of Common Interior Remodeling Projects
- New master suite/owner’s suite: $125,000
- Kitchen upgrade: $35,000
- Complete kitchen renovation: $65,000
- Bathroom renovation: $30,000
- Adding a new bathroom: $59,000
- Basement conversion to living area: $40,000
- Attic conversion to living area: $75,000
- Insulation upgrade: $2,100
- New wood flooring: $5,500
- Hardwood flooring refinish: $3,000
- HVAC replacement: $7,475
Source: “2017 Remodeling Impact Report,” National Association of REALTORS®
Eighty-two percent of consumers believe the home they own is a financial asset, the study says. As such, they want to tackle home improvement projects to increase the value of their home even more. More than half—52 percent—of consumers say they plan to take on a home improvement project in the next year. Kitchen and bathroom remodels lead in projects. (Read more: Design TV Shows Are Inspiring Optimistic Home Renovators)
But many consumers have failed to save enough. Sixty-four percent of consumers say their home improvement project will cost under $15,000. However, bathroom remodels can cost anywhere from $19,000 upwards to $61,000; significant kitchen remodels can cost upwards to $125,000, according to the study.
Given their low estimates for projects, homeowners are falling short in paying for their projects. Only a quarter say they’ll have enough funds to cover the likely cost of the project, the study showed.
“Home improvement projects can quickly add up and oftentimes cost more than someone anticipates,” says PK Parekh, senior vice president of Discover Home Equity Loans. “Which is why people should be financially prepared and determine which payment method makes the most sense within their own financial situation.”
Homeowners differ on how they’re financing their home improvement projects. Thirty-four percent prefer to use cash for a home improvement project, followed by 23 percent who say they plan to use a credit card. Other owners say they are considering borrowing against the equity in their home, such as through a home equity line of credit (18 percent), home equity loan (13 percent), or cash-out refinance (7 percent).