How to make a home renovation budget

Which home renovation projects should you prioritize? 

You may be considering several different renovation projects for your home, but because there’s a budget, you have to choose wisely. Focus on the most pressing work, then think about what will add the most value to your home. That way, your renovations will become an investment.

Conduct a full inspection of your home and make a list of all the renovation work you would like to do or should do. If needed, get help from a building inspector, contractor or architect, as they have the expertise needed to figure out what needs to be repaired or redone. If you just bought an older house, you can check the pre-purchase home inspection report, which outlines all the work that needs to be done. 

Urgent renovations

Before attending to how your house looks, you should focus on improving your property’s sealing, isolation and energy performance. This may include: 

• Fixing issues in the isolation in different rooms. 
• Repairing a leaky roof. 
• Replacing windows or doors that let cold air in. 
• Optimizing inadequate ventilation that prevents humidity from exiting the bathroom or kitchen.
• Updating the electrical circuits, which must be up to standard to ensure your family’s safety.  

These elements are invisible, but crucial to your comfort. Plus, these improvements will help keep your home in good shape. 

Renovations that pay off

If there aren’t any urgent repairs, some types of renovations pay off more than others. Prioritizing the right kinds of improvements will increase your chances of getting a better return on investment when you sell your house. 

The Appraisal Institute of Canada listed the top five renovations with the highest return on investment, which are: 

• Renovating or updating the kitchen. 
• Renovating or updating the bathroom. 
• Repainting the interior and exterior of the home in tones with wide-ranging market appeal. 
• Updating the décor (replacing the lighting and plumbing fixtures, the counters, damaged or faulty flooring, etc.). 
• Decluttering the place (removing excess items that prevent you from showcasing your home). 

You may also consider renovations that will improve your comfort and the home’s use and convenience, like finishing the basement, furnishing the backyard, adding a sunroom or a patio, etc. 

Esthetic renovations

While clearly visible, contrary to more pressing work, esthetic renovations add little value to your home. These include redecorating, or adding a fountain or new shutters in front of the house. That being said, if there isn’t any critical work that’s needed and you have the money for these kinds of renovations, then go for it. 

How much should I budget for renovation?  

Keep your home’s resale value in mind when planning your budget. For example, the kitchen represents 10% to 15% of a property’s value. If you want to renovate it, limit your expenses to that proportion of the home’s value. If a house is worth $300,000, renovating the kitchen should then cost $30,000 to $45,000.

If you’re redoing the bathroom, which is another major part of the home that can increase its resale value, calculate 5% to 10% of the property’s value for your budget. That means you can expect to spend $15,000 to $30,000 to renovate it entirely. 

Always remember that some kinds of renovations pay off more than others; avoid spending most of your budget on the wine cellar or on a new pool. 

How do you calculate home renovation costs? 

There are two ways to calculate the cost of your renovations: 

• Square foot calculation method: This involves evaluating the cost of your selected materials against the number of square feet being renovated. While the calculation is simple, this method has its limits: it’s only an approximation because as the number of square feet increases, the cost per square foot decreases. Also, this method doesn’t take into account any unexpected events.  
• Full-cost method: It takes into account the different professional trades that will be needed for your renovations as well as the cost of the required materials. You need to be very comfortable with renovations to use this method. A professional, qualified estimator can give you an accurate appraisal. 

Plan all of your expenses

Your renovation budget will hold up if you think of all the expenses incurred by the work, beyond the tools and materials. 

• Labour costs often represent half of the expenses when renovating, or sometimes even more if the project is more complex than expected. That being said, you don’t have to do it all yourself; you’re better off entrusting some parts of the work to professionals. 
• Getting a permit may be required by your municipality in order to conduct any work. Many cities have a fee based on every $1,000. Others charge a fixed price for a permit, which generally comes out to a few hundred dollars. Given the variation in prices, it’s best to check the regulations in effect in your municipality. For some types of renovations, you may not need a permit. Do your research before you begin. 
• Unexpected events may occur along the way. We recommend setting aside around 15% of the total cost of your renovations in case of nasty surprises (which often come up). For example, when renovating the kitchen, you may realize that you have to redo the electrical work.

Tip: No one is safe from an increase in the cost of materials, like lumber, doors and windows, or in the cost of labour. If you made your budget months in advance, reconfirm the costs before diving in. 

Take advantage of government renovation grants

You can reduce the cost of your renovations by taking advantage of grants offered by different levels of government. 

Research what’s available in Canada and in your home province. Don’t forget to check what your city may offer, too. 

Programs, grants and tax credits are often available for renovations aimed at optimizing a home’s energy efficiency, like replacing old windows or a heating system that uses oil, for example. 

The government of Quebec offers different kinds of financial assistance through its energy transition program. 

If you have mortgage insurance with the CMHC, please note that they also offer an incentive to optimize your energy efficiency. 

How do you make sure your renovation budget is realistic? 

• Before you start building, you often have to demolish. Set aside a certain amount for tearing down the area you’re renovating – that’s often when you’ll run into something unexpected (mold, water infiltration, damaged structure, etc.).
• Beware of thinking “while I’m at it…” Unplanned work that gets added along the way will increase your cost. A detailed plan of all the work to be done will allow you to avoid such a situation. Work being added along the way will make your bill go up. 
• Avoid comparing your project to someone else’s. Many factors influence the cost of a renovation, such as the surface area, the state of the home, the materials being used, the contractor, etc. 
• All quotes should be detailed and precise, listing all the steps and a specific amount that’s been set aside should any adjustments be required along the way. 
• Before starting any work, consider reviewing your home insurance coverage. For example, could you make a claim with your insurance for lodging costs should you need to leave your home during the renovations due to water filtration or mold? 

How do you save on renovation costs? 

• You can do certain things yourself, but the work must be done properly to avoid additional costs should any adjustments be necessary later on. For example, you could take care of demolition (and take the opportunity to sell certain items that are still in good condition). If you’re handy with a paintbrush and a roller, why not repaint the walls yourself? This could help you save big. 
• You could also reuse what’s already there. Are there any elements you could simply refurbish rather than replace altogether? Ask yourself if you could avoid major renovations. For example, instead of building an extension to your home, would reorganizing have the same effect? Or, do you really need to move a wall? In the bathroom, new faucets in place of the old ones could also save you a lot of money. 
• Give your furniture or your possessions (windows, wardrobes, kitchen cabinets, bathtub, etc.) a second life by selling them. You could cover part of your costs with the money you make from these sales. 
• Shop around for materials: Compare prices, check out seasonal sales, keep an eye on flyers, and take advantage of price-matching policies at certain stores. Same thing with your contractor – get a few quotes so you can compare costs. 
• Most of all, take your time. This will allow you to shop around for materials and professional services, properly evaluate the scope of the work, and find savings for whatever will cost the most. 

Tip: If you aren’t a professional with a permit or a warranty, please note that this may have a negative impact on the resale of your property. 

How do you finance your renovations? 

There are many financing options for your home renovation projects.

• Use your own money or your savings. 
• If you buy a home that needs renovations, you can add the money you need to your mortgage. 
• If you don’t have the money you need or if you need more money, you could remortgage your home. 
• You could also get a personal line of credit or a personal loan. 

Now that you’re better equipped to make your home renovation budget, all you have to do is meticulously keep track of your expenses throughout the project. That way, you’ll enjoy your renovations even more once they’re done. We’re here to answer your questions.

Explore financing solutions for your renovations.