Here's Why You May Want to Put Off Home Renovations Right Now

They could end up costing you more.

Renovating a home is one of those things you need to put a lot of thought into before moving forward. That's because home renovations can be expensive even in the best of economic times. And right now, you might pay a lot more to renovate thanks to surging inflation.

A Houzz survey of nearly 4,000 homeowners conducted in October 2022 found that most homeowners will move forward with their 2023 home remodeling plans despite inflation and other challenges, like lingering supply chain shortages. But you may want to postpone your home renovation plans not just due to these issues, but another big one that could hurt you financially.

Borrowing costs are way up

The Federal Reserve raised interest rates seven times in 2022 in an effort to combat inflation. And in doing so, it's made the cost of borrowing more expensive.

The Fed doesn't set consumer interest rates directly, which means it won't dictate what the rate on your mortgage or credit card is. But when the Fed raises its benchmark interest rate, the cost of consumer borrowing tends to increase nonetheless.

Meanwhile, many homeowners can't afford home renovations outright. Rather, they need to borrow money to finance them, whether in the form of a personal loan, home equity loan, or home equity line of credit (HELOC). But because borrowing rates are higher these days, if you take out pretty much any type of loan to finance your home improvements, you're going to end up spending more. And that's a great reason to wait.

Hold off on home projects that aren't so pressing

You might have an issue with your home that's seriously impacting your quality of life and comfort. And that's the sort of renovation you may want to move forward with, despite inflation and higher borrowing costs.

Let's say your kitchen is tiny and dated. You have very little counter space, which makes it hard to prepare food, and your oven isn't reliable, which makes it hard to cook food. Worse yet, your fridge keeps failing on you, forcing you to throw out food due to safety issues. That's the sort of renovation you may not want to postpone, because your kitchen is something you use daily and it needs to be functional.

But let's say you've been wanting to remodel your office by adding new floors and built-in shelving. If your office is perfectly functional right now, you may want to wait on that project.

Similarly, you may be thinking of upgrading your wooden deck to a composite deck so it's easier to maintain. But if there's nothing wrong with your existing deck and it can easily last another season without any issues, then you may want to hold off on that project until financing it becomes less expensive.

All told, any sort of home remodel or renovation has the potential to cost a lot of money. So you don't need to make things even more expensive by borrowing at a time when interest rates are up. Pressing projects may be worth pursuing despite the higher cost, but you're probably better off waiting on anything that isn't really essential.