My Perfect Mortgage
How Much Remodeling Is Too Much
6 minute read
June 19, 2023

You want to remodel your home, but the cost is always a factor. It usually makes sense to make improvements that will result in a corresponding increase in the value of your home.

For example, if a $10,000 renovation will add $10,000 to the value of the property, the project makes sense – at least financially. But how much remodeling is too much?

Know the market value of your home

Before you even pick up a hammer or a paintbrush, first know the value of your home. You can do this by checking online sources, such as or But please this will only be a general estimate of value.

That value will be based on public records containing information about the basics of your home like bedroom and bathroom count. But online assessment platforms don't know the condition of your home.

The best way to make an accurate valuation of your home is the either get a competitive market analysis from a real estate agent, or an appraisal. The appraisal costs between $300 and $500 but the competitive market analysis can be had for free. Either will value your home based on its actual condition.

Know how much each project will add to your home's value

This is a very difficult projection to make. Exactly how much each project will add to your property value largely depends upon what’s customary in your area. For example, finishing the basement could add $30,000 to the property value in one neighborhood, but only $15,000 in another.

If you have an appraisal done, you can ask the appraiser to provide you with a list of the added value that will result from each remodeling project. An appraiser can give you the increase in value to your home that will result from adding a room, remodeling the kitchen, or finishing the basement. Since any of those projects is likely to be costly, you’ll want to know exactly how much each will add to your home’s value.

Don't make your home the best one on the block

It sounds nice, right? Being the envy of all your neighbors is tempting, but over-improving your home can lead to a big financial loss.

Know the values in your neighborhood and the degree to which people are improving their homes.

You don't want to spend $100,000 on a full gut remodel when all your neighbors haven't even painted since 1990. A new buyer will be turned off by the neighborhood and you'll take a hefty loss on those improvements.

Establish an upper limit on what your home will be worth after all of the remodeling projects have been completed. Don't go overboard.

For example, if your home is worth $300,000, but the highest priced home in the neighborhood sold for $350,000, that will be the upper limit of your home’s value. In other words, no matter how many improvements you make to your home, and how much money you spend, it’s unlikely that your home will be worth more than $350,000.

In this example, the maximum that you should want to spend on remodeling is $50,000. Since your home is already worth $300,000, improving it by any more than $50,000 is very likely to be lost money.

You can find the highest prices in your neighborhood by checking recent closed sales on and Zillow. Both can show you what similar homes actually sold for, and sometimes will even have interior photos so you can see if the home had a remodeled kitchen, basement or other amenities when it sold.

Some improvements add more value than others

If you’re seriously concerned about value added with remodeling, you must be aware that certain improvements are more cost-effective than others.

One of the most effective improvements is painting the home. This gives the home a fresh look and hides a large number of small deficiencies. It’s practically a required job if you plan to sell your home. And it usually costs just a few thousand dollars if you hire a contractor. Updating the kitchen and bathrooms can also be cost-effective since both are primary rooms that “sell your home.”

But adding an extra bedroom to a four-bedroom home probably won’t add as much value as it will cost. That can also happen with finishing the basement. While the job may cost $30,000, it may only increase the value of your property by $15,000, for instance.

It may not be that cost alone determines how extensive your remodeling will be. If you decide that you need to finish the basement, recovering the cost on sale may not be that important.

But at the same time, you don’t want to get carried away either. You certainly don’t want to make $100,000 in improvements that will only yield a $25,000 increase in value. Not only will that result in a loss of money on the sale, but if you’re counting on financing to pay for improvements, you may not have sufficient equity to make all the renovations you want.

That brings us to another factor that shouldn’t be overlooked…

Tap into home equity

If you've decided to remodel, it's time to think about how to pay for it.

The average remodel can cost upwards of $70,000, which most people don't have just sitting around. Or do they?

According to Investopedia, the average mortgage holder now has $185,000 in home equity, a new record.

Homeowners can tap into up to 80% of their home's current value via a cash-out refinance. This loan works well if you need a large amount of money and you have significant equity in your home.

There's a better option, though, for those with less equity or don't want to refinance out of their low first mortgage rate. That's a home equity line of credit or HELOC.

Related: 100% LTV HELOCs

A HELOC is an additional loan, sometimes referred to as a second mortgage. It sits on top of your primary mortgage and doesn't disturb it.

A HELOC gives you access to your home equity in a lump sum, or you can draw as you need and only pay interest on the borrowed amount.

Some lenders offer home equity lines up to 100% of your home's value, so you can get a lot more cash than with a full cash-out refinance.

Submit your HELOC details to get started.

Too much remodeling means it's time to buy a new home

When it comes to home remodeling, there’s always a point of diminishing returns. If you need to make $100,000 worth of renovations to a $250,000 house – that will only be worth $300,000 on completion – it may be time to take a more logical step.

If it will cost you that much money to turn your current home into your dream home, it’s probably time to look for a new home entirely. The large cost of remodeling may indicate that you’ve simply outgrown your current home.

Before you begin taking on a major home remodeling job, first crunch some numbers and decide if it’s worth doing. It may be, but it also may be time to move.

See what kind of new home you can qualify for.

Our advise is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.