The short answer: Plan on setting aside about 10 to 20 percent of your construction cost for surprises. That’s the range the National Association of the Remodeling Industry (NARI) recommends, and it lines up with what major renovation loan programs require. Stay near 10 percent for cosmetic work in a newer home with every finish already chosen. Move toward 20 percent for an older home, work that opens walls or floors, or plans that are still loose.
“How much contingency are you building into your rehab budget these days?” A real estate investor asked exactly that on BiggerPockets this October, and the answers ran from 10 percent to “20-30%” on plumbing and electrical alone.
Homeowners have good reason to ask. In the 2026 U.S. Houzz & Home Study, which covered renovations done in 2025, 37 percent of renovating homeowners went over budget. Let’s look at where a sensible number comes from, what should move yours up or down, and how to keep the cushion from disappearing on things that aren’t surprises at all.
What is a remodel contingency, and what isn’t it?
A contingency is money you set aside for costs nobody could reasonably know before work started. It isn’t money for upgrades, and it isn’t a padded price.
It helps to separate four ideas that often get blurred:
| Term | What it covers | Example |
|---|---|---|
| Contingency | True unknowns found during the work | Rotted subfloor under the old tub, a drain line that has to be replaced |
| Allowance | A placeholder in the bid for an item you haven’t picked yet | $1,500 for a vanity you’ll choose later |
| Change order | A written change to the contract’s scope, price, or schedule | Adding a shower niche after framing |
| Upgrade | Something you decide you want that wasn’t in the plan | Switching to a pricier tile mid-project |
A contingency often pays for change orders caused by hidden conditions. It shouldn’t pay for upgrades. Mixing the two is one of the fastest ways to run out of cushion.
How much do lenders and industry groups say to set aside?
There’s no single legal number for a private remodel, but there are useful benchmarks. NARI’s homeowner budgeting guide recommends building in a contingency of 10 to 20 percent for issues like outdated wiring or material delays. Renovation loan programs, which have every reason to plan for surprises, land in the same range.
| Source | Contingency guideline | Notes |
|---|---|---|
| NARI homeowner budgeting tips | 10% to 20% | General recommendation for remodels |
| FHA Standard 203(k) (HUD) | 10% to 20% required for homes 30 years or older | 15% minimum if utilities aren’t working; optional up to 20% for newer homes |
| Freddie Mac CHOICERenovation | At least 10%, no more than 20% | 15% minimum if utilities aren’t working |
| Fannie Mae HomeStyle Renovation | 10% required on 2 to 4 unit properties, up to 15% | Not required for single-unit homes, though a lender may add one |
Notice the pattern: the loan programs ask for more cushion when a house is older or its basic systems aren’t working. That’s a good clue for your own budget.
What should push my number up or down?
Use this table to place your project in the range.
| Factor | Closer to 10% | Closer to 20% (or more) |
|---|---|---|
| Age of the home | Newer home with updated systems | Older home, especially one with original plumbing or wiring |
| Type of work | Cosmetic: paint, cabinets, counters, fixtures in the same spots | Opening walls, floors, or ceilings; moving plumbing; structural changes |
| Plans and selections | Drawings complete and every finish chosen | Plans still loose, or many allowances still open |
| Known history | Records of past work and permits | Past DIY work, unpermitted additions, or signs of old leaks |
| Wet areas | No water damage found | Bathrooms, kitchens, or anywhere water may have gotten into framing |
| Your flexibility | Willing to cut scope if needed | Every item on the list is a must-have |
If your project lands in the right-hand column on several rows, the low end of the range probably isn’t enough.
Why do older homes need a bigger cushion?
Because more of what matters is hidden, and more of it is original.
When walls come open in an older home, a remodel can turn up undersized wiring, worn galvanized or cast iron pipes, framing damaged by past leaks, or work done without permits that now has to be corrected. There’s also lead paint: under federal EPA rules, work that disturbs more than six square feet of paint per room inside a home built before 1978 generally has to be done by a lead-safe certified firm, which can add steps and cost.
None of this means your house has these problems. It means nobody can promise it doesn’t until the walls are open, and that’s exactly what a contingency is for. Our breakdown of what drives the cost of a bathroom remodel in Southern California shows how hidden conditions behind tile and drywall can move a budget.
How do I figure out my number?
Here’s a simple approach, with an example. The numbers below are made up to show the math, not a price for any real project.
- Start with the construction contract. Say your signed contract is $60,000.
- Pick a percentage from the table above. For a kitchen in an older home with walls coming out, you might choose 15 percent: $9,000.
- Check the risky line items separately. Some investors on the BiggerPockets thread size the cushion line by line, putting more behind plumbing and electrical than behind paint. If your plumbing and electrical are a large share of the job, consider nudging the total up.
- Add the costs outside the contract. Design, engineering, permit fees, appliances you buy yourself, and temporary living or storage costs aren’t construction costs, but they’re part of your total project budget. Give them their own line.
- Keep a time cushion too. Surprises usually add days as well as dollars. One BiggerPockets reply called a “10% contingency and no schedule buffer” underfunded.
Then make sure the money is actually available when bills come due. In the Houzz study, 84 percent of renovating homeowners used savings, and 34 percent used credit cards, up 5 points from the year before.
Who should hold the contingency, me or the contractor?
Either can work, as long as everyone knows the rules.
You hold it. The contract covers the defined scope, and you keep the cushion separate. Any extra work comes through a written change order that you approve before it starts. In California, a home improvement change order has to be in writing and signed before the changed work begins, with the scope, the price, and the effect on payments or the completion date. Our guide to what a change order is and how to avoid surprise costs explains the rules.
It’s a line in the contract. Some contracts carry a contingency line. If yours does, ask how it gets used, who approves each draw, whether you see the backup, and what happens to money that isn’t spent.
How do I keep my contingency from turning into an upgrade fund?
This is where most cushions disappear. A licensed general contractor quoted by Livingetc in September 2026 put it plainly: “The mistake is letting the contingency become an upgrade fund.”
- Keep the contingency in its own account or its own line in your budget.
- Spend it only on conditions nobody could have known about.
- Put upgrades on a separate wish list with its own money, or wait until the job is nearly done.
- Make your finish selections before demolition, so allowances don’t quietly grow.
- Decide in advance which items you’d cut if a big surprise shows up.
- Ask your contractor for a written change order and price before any extra work.
What can I do myself, and where does a pro help?
On your own: set your total budget, rank your priorities, gather records of past work and permits on the house, and make your selections early.
With a contractor or design team: a detailed scope and line-item estimate, a look at access points like the attic or crawl space before you sign, and a realistic read on which parts of your project carry the most unknowns.
Frequently asked questions
What percentage should I set aside for remodel contingency? Usually 10 to 20 percent of the construction cost. Go lower for cosmetic work in a newer home and higher for older homes or work that opens walls.
Is 10 percent contingency enough? It can be for cosmetic work with every selection made. For older homes, kitchens, baths, or structural changes, many budgets need more.
Is contingency the same as an allowance? No. An allowance is a placeholder price for an item you haven’t chosen. A contingency covers unknowns found during the work.
Do renovation loans require a contingency? Some do. FHA 203(k) and Freddie Mac CHOICERenovation set 10 to 20 percent ranges in many cases, and Fannie Mae HomeStyle requires one on 2 to 4 unit properties.
What happens if I don’t use my contingency? If you hold it yourself, it stays with you. If it’s a line in your contract, the contract should say what happens to unused funds, so ask before you sign.
Building your remodel budget?
A good contingency starts with a clear scope. The more that’s decided and priced before work starts, the more your cushion can be saved for real surprises.
De Sisto Construction, Inc. is a California licensed general contractor (CSLB #803545) serving greater Los Angeles and Orange County since 2001. We put together step-by-step outlines and line-item project costing, so you can see where the unknowns are before you set your number. Learn more about our residential remodeling services, including kitchen and bathroom renovations and room additions.
Want help building a realistic remodel budget? Give us a call at 562-425-1050 or email us at info@desistogc.com (dcidirect.net)