How prepared are you for the unexpected? If you’re a homeowner, you might want to take stock.
According to a new study, only about 37% of homeowners have money set aside for repairs. And what’s worse? Most homeowners grossly underestimate what their future home improvement projects might cost.
Test your knowledge below.
What Improvements Really Cost
The study shows that homeowners are least knowledgable about cabinet refacing. Though the project can be a good way to upgrade cabinets without a full-scale replacement, the undertaking usually costs about $6,700 on average. Most homeowners undershot this price by 74%, estimating a mere $1,700 price tag.
Homeowners also aren’t up-to-speed on kitchen remodels, which they underestimated the average costs of by nearly 50%. While most homeowners predicted a cost of around $10,000, in reality, the average kitchen remodel costs nearly $20,000.
Here are some other common home improvement costs homeowners don’t seem to be prepared for:
- Building a deck – Predicted cost: $4,499, Real cost: $6,919
- Remodeling a bathroom – Predicted cost: $6,371, Real cost: $9,274
- AC installation – Predicted cost: $5,233, Real cost: $3,047
To pay for these projects and other repairs, the study shows that homeowners are most likely to use credit cards, personal loans, or home equity loans and lines of credit. Some would also consider cashing out an investment if necessary.
What It Means for Homeowners
The study highlights the need for better budgeting when it comes to home repairs and improvements — especially as labor and material costs rise.
As the study explains, “One common budgeting pitfall is forgetting to account for the cost of labor. Labor can account for over one-third of your total cost. In recent months, a labor shortage appears to be driving labor costs up. Likewise, rising costs of materials are pushing many homeowners over budget.”
Do you own a home? Are you planning any updates in the near future? Then make sure you know what you’re getting into price-wise, and have a savings plan in place to make it happen.
Other Options for Home Improvements
You might also consider a cash-out refinance if you have significant equity in your home. Cash-out refinances can give you the cash you need to pay for home repairs, make tuition payments, or even consolidate higher-interest debts. And with today’s historically low mortgage rates, it could even lower the interest you pay over the life of your loan.
Want to learn more about your options? Contact an Embrace Home Loans expert today.