Basement renovations with financing: How to pay for finishing a basement

Want to transform your otherwise wasted basement space into a functional room that becomes almost like a second family room? A living space where you can get together over a game of pinball or a baseball game on TV? You need to think of a basement remodel. And, what better way to begin your home improvement project than through basement remodel financing. 

Remodeling your basement can add immense value to your home — while improving your house’s functionality. 

When it comes to basement financing, it’s crucial that you shop carefully and select the best basement remodel financing. It’s a good idea to choose a financing option that provides you the maximum flexibility in terms of the loan amount, the interest rates, and the loan term. 

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How much should I budget for a basement remodel?  

Choosing to finish a basement offers a number of benefits not the least of which is the ability to tailor your project to the size of your budget. A basement remodel takes advantage of space within the home that is already enclosed thereby reducing budget needs for building structural walls, floors, and roofs from scratch. The basement remodel budget is then more driven by the types of finishes and fixtures a homeowner might prefer – including drop ceiling versus drywall, hardwood versus vinyl tile, bathroom and plumbing versus not, and so on.

Is finishing a basement a good investment?  

Finishing a basement can be a great investment — both in terms of value-added to the home and in enjoyment and usefulness for the homeowner.  As families are spending more and more time at home, a basement remodel can enable them to dedicate space for parents who are working remotely, children who are working remotely, and extended families who may be combining households.

While finishing a basement may not add dollar-for-dollar value to a home it is likely that it will help the home sell faster when the time is right, could provide income in the form of separately rented living space, and also increase personal enjoyment while living there.

Read more: Kitchen remodel financing & loan options

How to pay for finishing a basement?

Wondering, what is the best way to finance, what loan is the best type for basement finishing? Well, financing a basement remodel is an important consideration with options including personal loans, home equity loans, contractor financing, and credit cards.

Each loan type has advantages and disadvantages. However, a personal loan frequently offers the most flexibility as far as homeowners being able to qualify along with the stability of a fixed monthly payment and loan term.

A personal loan is advantageous in that there is no lien filed against the property, there are no requirements for how much equity a homeowner needs to have and there is no concern about payments increasing if interest rates rise.

The homeowner who obtains a personal loan can budget for exactly what the project will cost on a monthly basis and knows exactly when the project will be paid off – generally much more quickly than other types of financing.

The downside to personal loans is that, because they are “unsecured”, interest rates may be higher than home equity loans.

Read more: Kitchen countertop financing

Pros and cons to getting a loan to finish basement

Basement financing pros 

• You are able to finance a large home improvement project over time without needing to write one lump-sum check.
• Financing a project will allow for greater scope, increasing the usability and, likely, a financial return in increased home value.
• A personal loan is particularly attractive in case there are no minimum requirements for how much equity a homeowner must-have. Moreover, income and credit qualifications tend to be easier to meet. Payments and interest rates are fixed for the life of the loan, and failure to repay the loan does not put the home at risk.

Basement financing cons

• A homeowner needs to make room in their monthly budget for loan repayment.
• In the case of a Home Equity Loan, a lien is generally filed against the home which means that failure to pay can put the home at risk. 
• Financing the project, while allowing for a more polished one offering maximum utility, can also encourage the homeowner to exceed their desired budget.

Read more: Home addition loans: Financing a home addition

What is the most expensive part of finishing a basement?

Finishing a basement can vary widely in scope and cost.  As a homeowner is considering the elements of their project, they should be aware that adding plumbing requirements such as for a basement bathroom, basement kitchen/kitchenette or wet bar are likely to add significant expense.  Having a basement plumbed can add to the usefulness of the space, significantly, but comes with additional inspections, professionals, and materials.

Another potentially expensive consideration is whether a new HVAC unit will be required for the finished space. Many finished basements are able to “tap into” existing HVAC units (which should be done by a licensed professional to ensure the unit can handle the new load appropriately) but many cannot.

The size of the space to be finished, output capacity, age of existing HVAC, and desire to climate control the newly finished space are all factors that drive whether new HVAC and ductwork will be needed.

Read more: Flooring financing for good & bad credit

Cost of finishing a 1000 sq. ft. basement

Finishing a basement means transforming an unfinished basement into a livable space. This usually includes waterproofing, plumbing, wiring, building wall cabinets, lighting, adding egress windows, and installing an HVAC system.

The average cost of finishing a basement is between $32 and $47 per square foot, or between $22,000 and $46,000, depending on factors such as the layout, whether drywall and framing are needed, materials used and labor costs in your area.

The national average cost to finish a 1000 square foot basement is $38,000. The cost of finishing a basement with an open plan will be $2000 to $5000 less than a basement with rooms and a kitchen.

Is finishing the basement a good investment?

The short answer is a resounding “Yes!” Finishing your basement will definitely add to the value of your home, with the return of investment being between 70% to 75% on average. This means that if you spend $20,000 finishing your basement, the value of your home will appreciate by a whopping $14,000 at least. 

Read more: Basement layout by our expert architect

Can you finish a basement for $10,000?

It may be possible to finish a basement for $10,000 but it will mean strictly adhering to certain ground rules to make it work.

1. Choose who you work with

The first step is to carefully choose the right contractor to work with. Pick a contractor you can trust, and who understands both your vision and your budget for finishing your basement. It is important to choose a contractor who has ample experience finishing basements and is willing to make your project work within the constraints of your budget.

2. Basement renovations with financing: Buy smart

There are a lot of things you will need to buy in bulk, such as insulation, drywall, false flooring, paint, and more. Make sure you choose the most affordable options in order to stick to your budget. Get multiple quotes before you settle on a supplier, and don’t be afraid to haggle.

3. Prioritize purchases

Remember, you’re working with a fixed budget of $10,000. This means you can’t go overboard buying all the luxuries you may eventually want to furnish your basement with. Instead, prioritize your purchases and buy what is essential. Once you’re done making sure your basement is completely furnished and inhabitable, you can use whatever funds you have left behind to splurge on luxuries.

How long does it take to finish a basement?

A loan to finish basement could take anywhere between four to eight weeks to finish. This is, of course, considering you’re converting the basement into a fully inhabitable space, including a kitchen and a bathroom.

A 1000 square foot basement can be finished in around 4 weeks. Here’s a break up of each step of the remodeling process and the time taken.

1. It will take between two and three days to frame the basement wall.
2. Finishing electrical work will take two days.
3. Installing drywall in the basement will take up to three days.
4. Mudding and sanding the walls will take around six days.
5. Painting the basement walls will take around four days.
6. Finishing the flooring will take between three and four days.
7. It will take three days to finish the trimming and baseboards. 

How much does it cost to frame and drywall a basement?

Let us break down the cost of framing, insulating, and installing drywall in a basement.

Framing

The first step in finishing a basement is to frame the basement walls. To frame basement walls with 2’ x 4’ wood will put you down around $2.50 a square foot. This frame is anchored to the floor and usually extends around 3” from the wall. The frame has studs attached to help install the drywall. Provisions for windows are made during the framing process.

Insulation

Insulation serves three purposes: it helps control temperature, moisture and acts as a soundproofing agent. Closed-cell foam insulation which is sprayed on will cost you between $32 and $82.50 per cubic feet. Foam is the preferred insulation for basements due to the fact that it is not air permeable.

Drywall installation

To drywall a basement and finish it, including joint tape, mud and sanding will cost upwards of $1.60 per square foot installed. The total cost will depend on the number of walls in your basement that need to be drywalled. Open floor plans will cost less than basements with multiple rooms.

To calculate the number of panels of drywall you will need, derive the total perimeter by adding the width of each wall together and divide that by 4’, which is the width of each panel. Moisture-resistant drywall panels will cost you between $11 and $25 per standard panel.

Conclusion

Basement renovations with financing can be extraordinarily rewarding from an enjoyment perspective as well as from a home value perspective.  Financing your project through Kukun’s partners can help ensure that a homeowner enjoys the maximum benefit from their basement remodel project and that they can budget exactly what will be needed.

Read more: Bathroom remodel & renovation financing options

Written by Ramona Sinha. November 14, 2020

Ramona is a content writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. An avid traveler, she’s a digital nomad at heart and an animal lover from the depths of her soul.