NEW YORK (CNN/Money) - If you've ever survived a major home remodeling, you know the numbers add up fast.
There's the estimated cost when the project begins. Then there's the actual cost when the drywall is done.
Indeed, unexpected fees crop up daily on renovation jobs, and they can sap your bank account and enthusiasm faster than you can say, "rusty pipes."
The average household spends about $7,300 per year on home improvements, according to a report by the National Association of the Remodeling Industry, but most projects end up costing homeowners far more than the initial estimate.
The good news is, there are ways to keep your cool and stay on budget. Following are some expert tips on how to begin.
Chart your course
It's easy to get caught in the moment when you're going through a home remodeling. At some point along the way, you'll likely be tempted to upgrade your windows, carpet or tile. After all, what's another $1,000 when you're already putting such a dent in your savings?
It's that kind of thinking, however, that'll get you into trouble. Not only do last-minute changes add to the cost of materials, but they also often puts the project well behind schedule -- costing you more in contractor fees.
Paul Winans, owner of Oakland, Calif.-based Winans Construction and vice president of the National Association of the Remodeling Industry, said homeowners should make their choices and set them in stone before demolition begins. Decide in advance what you'll be using, from faucets to ceiling fans, and stick to the plan.
Check contractors' references
When choosing a contractor to handle the job, you'll also save time, money and headaches if you do your own background search.
"Get references from family and friends and interview these contractors -- checking is critical," said Winans. "A more expensive way to find out what they're like is to hire them."
The most important quality in a contractor is trust, not initial price. The lowest price doesn't always mean greater cost savings in the end, as untrustworthy contractors can slip in extra fees. "No amount of savings is going to make you feel better then," Winans said. "Trust is worth money."
|Cost-Effective Remodeling Tips
|||Look at time as an opportunity cost
|||Don't create a dream home unless you're there to stay
|||Don't finance with credit cards
|||Hire a contractor with design and building skills
|||Check contractor's references
|||Make decisions before beginning
Contractors who can work with the homeowner to create a design and also make the vision become a reality can generally give a more accurate price assessment earlier in the game. Hiring a contractor with both skills is a good way to manage costs and save in design fees.
A contractor from a design/build firm also will have his own subcontractors, whom he has worked with before, and can help to manage the project for you, said Mark Brick, president of Glendale, Wis.-based B&E General Contractors.
"It will all be in the plan, it will all be in the contract, and it will all be communicated from the beginning," he said. "There is no communication loss if you are with someone from the beginning."
Brick added that the cost from beginning to end with a design/build contractor generally varies less that 3 percent.
Stay in your home as long as you can
Another good way to save some cash is to set up a temporary living space in another part of your home when work gets underway -- as long as the project is contained. For example, if the construction is taking place in the kitchen, transform your living or dining room into a temporary kitchen. The workers can move some cabinets, a sink, refrigerator and stove into another room to create a functional kitchen .
While it may cost some additional dollars to shift the items, it will save money in the long run that otherwise would have to be spent eating out, staying at a hotel or renting an apartment -- which could set you back thousands of dollars.
"Look at it like camping," said Winans, who suggested taking a couple weekends away to stay sane.
Don't use credit cards
Most families have to find additional resources to help pay for remodeling costs up front, such as loans. But experts say it's best to avoid charging any portion of the project on credit cards, as interest rates are typically higher than on other loans -- and charging it basically means the homeowner is postponing the decision on how to pay for the work.
A better option would be to apply for a home equity loan, which usually can be obtained for up to 80 percent of the home's assessed value. You can then convert that loan into a new mortgage when the project is complete, keeping the interest rates low. A home equity loan for between $25,000 and $500,000 in New York would have an interest rate of 5 percent, according to a Citibank representative.
A Federal Housing Authority (FHA) 203K renovation loan (attached to a 203B mortgage) allows an individual buyer or non-profit organization to tack 110 percent of the cost of repairs on to the mortgage -- up to $250,000 -- according the Mortgage Bankers Association. But be careful not to borrow too much. If you fail to repay your loan on time, you risk losing your house.
Contractors say if money is an issue, and even when it isn't, it's important to know what is involved in the project before you begin. Homeowners should ask questions about the renovations to understand all costs involved, not only the price of the bathroom tile but also the pipes that will need to be replaced once the project starts, a renovation permit if necessary and plumber's fees.
It's good to have an idea of what the ideal bathroom would look like, but know that there may be costs you're not considering before speaking with the contractor, Winans said.
Know the retail price of items
Remodeling projects generally include the purchase of items like new light fixtures, faucet knobs and floor tiles -- and homeowners should know the retail price of these items before they sign on the dotted line, experts say.
If you're able to purchase products and appliances on your own for less, either through a membership club, special sale or careful shopping, the contractor will often agree to do the installation alone.
"Making selections up-front and knowing your retail allowance is important," Brick said. He suggested going into a plumbing or hardware store and pricing out the items that might play a role in the remodeling process to find out how much you would be willing to spend at retail value.
Planning to move? Go easy
The best way to approach remodeling is to update the areas in the home that will provide the best return-on-investment in a future sale, like making the front entry attractive as well as the bathrooms, kitchen and master bedroom -- all of which will allow you to recoup 80 percent or more of your expense on the resale market.
According to experts, it isn't worth the time and money to create your dream home unless you plan to stay for at least four to five years. "Just make it have generic appeal for buyers," Winans said.
Be aware that the biggest cost is time
Remember the old adage that "Time is Money"? Well, in the case of renovating a home it rings true -- and it's important to be aware that remodeling is no easy task.
"The biggest cost is the attention you have to give," Winans said. "If you think it's just spending money, you're wrong." He added that one person in a married couple generally ends up basically managing the remodeling as a second job, because it can become so time-consuming. Not surprisingly, renovating your home is also one of the leading sources of stress. You'll want to prepare yourself mentally and financially before you begin.
Get several estimates
Although you don't necessarily want to go with the lowest priced contractor for the job, it's always good to have several possibilities in mind. By keeping a record of the contractors you have met with, and what they charge, you can compare different elements of the project and make an informed decision. If they know you're getting other bids, they're also likely to keep the price competitive.
Once the numbers are down, check reputable sources, such as the Better Business Bureau, for price comparisons and consumer complaints, and to confirm the quality of contractors.