Time Magazine recently ran a fascinating piece about bathroom renovations, and readers from coast to coast were quite surprised by some of the findings. Namely, that a cash-out refinance tapping into a homeowner’s equity could cover the entire cost, with plenty left over.

Whether it’s a high tech steam shower, a clawfoot tub, or an impeccable marble tile layout, a cash-out refinance can typically close in under 45 days and pay for it all. And here’s the kicker: on top of enjoying your newfound Shangri-La of a powder room, you’ll also be looking at a substantially increased property value for your home.

On average, bathroom renovations tally up a substantial ROI, or return-on-investment. HomeGuide recently found that percentage typically landed between 60 and 68% depending on which specific upgrades the homeowner goes for in the renovation.

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Cash-Out Refi or Home Equity Loan?

Homeowners usually pick between these two options when they’re seeking capital to make home improvements, whether it’s a bathroom, kitchen, basement, swimming pool, a theater room, extra floor, or even an extra wing.

With cash-out refi rates under 5.5% still available, many homeowners are wondering whether they should go for a fixed rate loan, or an adjustable option, and whether a cash-out refi or a home equity loan makes more sense for their particular situation.

For a bathroom renovation, you can expect to pay somewhere between 5 and 10% of your property’s total value for the entire remodel. The National Kitchen and Bath Association came up with those numbers after studying remodel breakdowns in every state. To give you an idea of what you may be looking at, if you’re living in a $300,000 home, expect your bathroom remodel to come in somewhere between $15,000 and $30,000.

Materials, Labor, Square Footage, Oh My!

When it comes to budgeting for your remodel, many factors come into play. From the materials you choose, to the size of your bathroom, to the labor costs (the more time, the more expensive)... there’s a whole lot to figure out!

One option is a DIY project, more commonly known as “do-it-yourself.” This of course requires the knowledge and skills of construction, plumbing, and design, all of which can be self-taught if you have the determination.

Doing the labor yourself could save you thousands in labor costs, and could also have the added silver lining benefit of being a ton of fun! First thing’s first though - you’ll want to see how much cash you’ll need for the remodel, which means comparing a few different lenders’ quotes and estimates side-by-side, to see how much equity you can tap into, and how low of a rate you can get on your cash-out refi.

More Lenders Means More Options

More options means more leverage. Take control of your negotiating power by comparing multiple rate quotes all in one place, and if you see a rate under 5.5% offered, you may want to jump on it. The recently volatile market has some experts predicting rates will hit 7% or higher by year’s end, so the time to act is most definitely now.

If you can avoid hiring a contractor or plumber for your bathroom remodel, great. But you may need their help to get the job done. Some things you could do yourself include painting walls, swapping out fixtures like sink faucets, and refinishing your bathtub.

If you need to install an entirely new shower, retile the floor, or knock down walls and cabinets and put in new ones, you may need to call in the experts. As Allie Weiss, the U.S. digital director of Architectural Digest, put it: "Bathroom remodels may range in scale from a simple refresh, with cosmetic fixes like painting cabinets and replacing mirrors, to a gut renovation that involves installing a luxe new shower, replacing your sink, retiling, and more. Replacing dated plumbing fixtures is a common and usually easy-to-execute project, as is adding in additional storage and repainting to make a lackluster bathroom feel fresh."

Looking at the Total Cost

While it may be a bit pricey, a bathroom remodel can really pay off, as future homebuyers will tend to place the most aesthetic and functional value on bathrooms and kitchens. You’ll want your powder room to be aesthetically pleasing, modern, and warm.

With recent supply chain issues, inflation, and labor concerns, the economic market has been generally volatile, with rising costs seemingly everywhere you look. If you have to stay in a hotel during a remodel, that’s an additional cost you’ll want to factor in when you’re working out your project’s budget.

Ultimately, if you’re executing a cash-out refinance to cover the cost of your home renovation, it’s about comparing offers and quotes. The difference between getting a 5% rate instead of a 7% rate is enormous, and most market experts say the same thing: due your due diligence first, and your renovation second.

That’s the best way to ensure your home renovation will be the biggest success story possible.

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