The Consumer's Almanac
Consumer Credit Education Foundation
Washington, DC

If you're finding the purchase of a new home an overwhelming prospect, you're not alone. For many people, an affordable alternative to buying a new home is to stay put and remodel their present house by adding more space or renovating. Home remodeling is a multi billion-dollar industry in the United States.

While remodeling can be less expensive than buying a new home, it still represents a considerable investment. As with most worthwhile projects, planning is essential. Please consider the following tips before starting your remodeling project:

Deal with a qualified and reliable remodeling contractor. It's best to get at least three estimates. Check each contractor's references with local home building and/or remodeling associations and previous customers. Avoid contractors who can't furnish a list of satisfied customers. Ask references the right questions:

• Was the work done on budget?

• Was the work done on time?

• Was the contractor tidy and courteous? The workers?

• Can the contractor handle finish carpentry work?

Do not sign a contract until you are absolutely confident you understand all the fine print. When possible, consult an attorney on contracts for major renovations. Default on a legal contract could result in a lien on your property, and, even worse, possible loss of your home to satisfy the debt.

Arrange the financing carefully. Few families pay for remodeling in cash. Many financial institutions offer second montages and home equity loans secured by your house. The interest charges on second mortgages and home equity loans are an income tax deduction.

Structure your contract so that the contractor will be paid in states: 30% prior to the project's start; 30% when the work is half done; and the remainder upon completion. Many states have statutes that require contractors to warranty their work.