How Much Can You Afford?
This question alone is enough to strike fear into anyone's heart. The truth is not many people enjoy establishing a remodeling budget-and many just don't. Many homeowners prefer to call a remodeling contractor and expect him or her to create the budget for them, which is not the best way to begin. How do you start off right? You can begin by taking these four easy steps in the right direction:
Step One: Decide how long you plan on staying in your home. The length of time you intend to stay in a home will affect how much money you should invest in it. If you are going to stay in the home for more than ten years, you should spend as much as you are able to create the home of your dreams. However, if you are planning on moving in the near future, you should take care not to over-build for your neighborhood. Look into the real estate comparisons for your area and keep your investment in line with the average home sales price. You don't want to invest thousands of dollars you won't be able to recoup at closing.
Step Two: Make a list of all your debts. You should include any debts you pay on a monthly basis, such as mortgages, car loans, credit cards, and any other items with a fixed monthly payment. This list should not include payments for groceries, utilities, telephone services, or other general expenses. Call this list your monthly expenses.
Step Three: Determine your total gross monthly income. Include all sources of income that you would list on a loan application.
Step Four: Complete the following worksheet to determine how much you can afford to pay for your remodeling project on a monthly basis. These formulas are used when the remodeling project is going to be financed. Warning: Cash is not always the best option!
How Much Can You Afford?
