The best loan for basement remodeling or refinishing project

Deciding if you want a renovation

Need extra space? If you’re lucky enough to have a basement, the solution could literally be right under your feet. Basements have all the “bones” already in place—walls, floor, and ceiling; all you need to do is flesh it out and put the finishing touches on your dream space. You could be enjoying your newly finished basement in just a month or two.

Finishing a basement isn’t the most popular home improvement project—kitchen and bath remodels win in a landslide. But about a third of builders in the National Association of Homebuilders say it’s the number one request among their customers, perhaps because it has a pretty good return on investment when it comes time to sell your house. Most homeowners recoup between 70% and 80% of their costs—and realtors say that a finished basement is a huge plus for potential buyers.

But before you jump into adding that rec room or home theater, it’s a good idea to do your homework. There are lots of details that go into planning a room below grade—things like permits, building codes, and the ever-present issue of moisture. Plus, if you’re planning to turn your basement into an apartment suitable for rental, you’ve got a whole new set of potential pitfalls.

This guide won’t answer all your basement remodeling questions, but it will help you organize the process, avoid common trouble spots, and find the right financing solution when you’re ready to get started.

How much will it cost?

It’s pretty hard to put a price tag on your basement project—you could do a Kia-level basement remodel or you could go for the Mercedes-Benz version, depending on how much you want to spend. According to Remodeling Magazine’s annual Cost vs Value report, the average finished basement project cost about $71,000 in 2017.

On the other hand, Home Advisor suggests the typical range is between $10,000 and $28,000 to finish a basement, or between $20 to $35 a square foot, although costs of $50 a square foot or more aren’t uncommon if you’re using a contractor, designer, or other professionals to help with your project.

Here’s a look at some of the costs you’ll encounter when you finish your basement:

• Permits and inspections. Depending on where you live and the complexity of your project, expect to spend between $100 and $3,000 to get your paperwork in order. The permitting process is pretty intense, so you may want to have your contractor or designer handle the process for you.
• Framing. If you’re dividing a large space into separate rooms, or if you’re adding a bedroom and bath, for example, you may have more complex framing needs. And if there are existing rooms you want to get rid of, you’ll have demolition and disposal costs, unless you feel like tackling it yourself.
• Insulation and soundproofing. Planning to create a play space for the kids—or a game room for the adults? You may want to include some good soundproofing to help mute the din from down below. And insulation is definitely a good idea for managing your heating costs in chilly basement rooms.
• Plumbing. Extras like a bathroom or wet bar need a water supply and sewer lines, so you’ll need to hire a plumber to get the work done.
• Drywall and finishing. You’ll need walls, of course, but you may also want to add cabinetry, built-ins, and other custom details to make the space your own. These custom details can add thousands, even tens of thousands, to your project budget.

Recommendations for basement bedroom renovations

Lots of homeowners choose the basement when they need to add extra bedroom space for guests or a growing family. It makes good financial sense, too—realtors estimate that an extra 12’ x 12’ bedroom adds as much as $15,000 to your home’s market value.

But if that’s your plan, you do need to design and build it to conform with legal requirements for a bedroom in your location, at least if you want to claim it as one when it’s time to sell. The last thing you want is a lawsuit from a disgruntled buyer over misrepresenting your bedroom count!

Most states look at a number of things before a basement room can be legally called a bedroom:

• Your septic system capacity. Yes, that is really a thing. Each home’s septic system is designed with a certain number of bedrooms in mind. If you have a home with a three-bedroom septic system and you add another bedroom anywhere in the house, you still can’t legally call your home a four-bedroom house because your septic system and your bedroom count has to match.
• Proper permits. Remember the paperwork we discussed earlier? If you don’t have a permit on file for a bedroom addition or your basement project, you may run into trouble if you try to market your house as having the extra space.
• Square footage. Most states require at least 70 or 80 square feet before a room can legally be labeled a bedroom.
• A way out. Bedrooms must have two ways to escape in the event of an emergency, and one of them must be to the outdoors. Windows are the logical choice, but in a basement room, that can get tricky. The International Residential Code says that the window must be at least 20” wide and 27” tall and must be no more than 44” from the floor in order to meet the egress requirements.
• A source of heat. Bedrooms, like all living areas, need to have a heat source. A vent from your central heating and cooling system will suffice, or you can install a window heater if venting is a problem.

You may have heard that bedrooms must have a closet in order to meet the legal definition; that may be true in some locations, but in general, as long as the space is large enough to accommodate an armoire or other storage solution, you’re probably covered.

What are my options?

We’d be the first to tell you that the best plan is always to pay cash to finish your basement if you can; you avoid the extra finance charges and other fees that add hundreds or thousands to your project.

That said, most people don’t have $50,000 sitting in the bank for pricey home improvement projects, so financing is the next best thing.

We’ll explain your options and help you decide which one is best for your situation.

How does a personal home improvement loan work?

You can get a personal home improvement loan regardless of whether you have home equity or not—it’s an unsecured loan, which means your signature, good credit, and proof of income are all you need to qualify.

Most lending partners will loan you up to $35,000 (up to $100,000 with some lenders). It’s a simple and painless process; most approved applicants are funded within 1-3 days. And unlike a home equity loan where you can spend thousands in application costs and fees, you’ll only pay a simple loan origination fee once your loan is disbursed.

Home equity loans

• Fixed, reliable monthly payments that don’t change over the life of your loan. If you like predictability in your budget, this is a great choice for you.
• No prepayment penalty, so if you sell your home or get a nice income tax refund, you can pay off your loan balance and your lender won’t penalize you for being financially responsible.

When do personal home improvement loans make sense? When you need a fairly large sum of money to finish your basement and you need reliable monthly payments to make your budget work. They’re also a great choice when you lack adequate equity in your home to complete the work—or you don’t want to put your home at risk with a home equity loan.

How do home improvement credit cards work?

We’ll be honest—unless you’re doing a relatively minor project, such as finishing a bedroom in the basement or installing a wet bar or home theater, a home improvement credit card may not be your best option.

Home improvement credit cards are best when you need a smaller amount of money and you can pay it back relatively quickly, preferably within the 0% introductory rate period, which generally lasts just 6 to 18 months.

That’s because home improvement credit cards have the highest interest rate of all your financing options, typically between 15% and 24%, and that can send your monthly payments through the roof. If you prefer predictability, you probably won’t get it with a home improvement credit card.

On the other hand, if you’re a DIY-er or you’re not sure how much money you need for your basement remodel, home improvement credit cards can be the most convenient and flexible financing solution.

Just like any other major credit cards, when you’re approved for a home improvement credit card, you’ll be given a credit limit, which means you can spend as much as you want up to that limit. You can run to the home improvement store whenever you need materials and supplies and just pay for your purchase with plastic. And as you pay down your balance, you free up more credit for additional purchases.

Of course, that’s a bit of a mixed blessing, because it means you’re free to exceed your carefully planned basement budget with extra goodies you didn’t plan for. If that sounds like you, think twice before financing your basement remodel with a credit card.

Finally, a lot of contractors and home improvement professionals add a 5% surcharge to your bill if you pay with plastic, so if you’re using skilled craftsmen to finish your basement, be sure to ask before you whip out your credit card.

How to request lending to finance my project

If you’re ready to roll on financing your basement, Hearth makes it easy for you to find and compare options on personal home improvement loans and home improvement credit cards. In just 60 seconds, you can complete our secure online loan request and see your options in just a few hours. Best of all, it won’t affect your credit score.

Considerations before starting your project

If you’re about to spend $50,000 or more to finish your basement, you should take a few steps before you start to make sure your project isn’t wrecked by undiscovered problems and hasty planning.

Reduce humidity and add lighting for ambiance

Before starting your project, you want to reduce humidity in your basement. Dampness may be sign of mold growth or water damage. So check with your plumber to make sure everything is well sealed and leak free. Also, unless you really want a cave-like man cave, spend some time planning your basement lighting so the space is well-lit and inviting. You’ll need more fixtures per square foot than in other areas of your home; work with your electrician to make sure you have adequate wiring in place to handle the additional lighting.

Basements generally have poor headroom

Most building codes specify about 7 to 7-½ feet of ceiling clearance, which may be a problem if you have hanging duct work or pipes. You may have to move these fixtures to get the necessary clearance, which can add a lot to your finishing costs. Some homeowners actually dig down to lower the floor in order to get the ceiling space, but that’s a hugely expensive remedy of last resort.

Your contractor will usually do a thorough basement inspection before you begin your project to identify any major issues; be sure to ask about potential moisture problems and how you’ll address the headroom issue if your ceiling clearance will be close.