Remodel contingency: how much to set aside (and when to spend it)

A contingency is money you set aside before work starts for things nobody can price yet: rot under the subfloor, wiring that isn't up to code, a pipe in the wall you planned to remove. It isn't money for upgrades. Keeping it separate is how a remodel finishes close to its number.

Short answer: plan for 10–20% of the construction cost, and lean toward the top of that range for older homes and for projects that open walls or move plumbing.

Where the 10–20% range comes from

Two independent sources land on the same range:

• HUD's FHA 203(k) renovation loans require a contingency reserve as a share of the repair costs. For homes 30 years or older, the reserve must be between 10% and 20%, with a minimum of 15% when the utilities aren't working. For newer homes, it's discretionary up to 20%, and required at 10–20% when there's evidence of termite damage (HUD FHA Connection).
• The National Kitchen & Bath Association's bath planner tells homeowners to "set aside some money for contingencies, perhaps 10% to 20% of your project" (NKBA Bath Planner).

Why you'll probably need it

In Houzz's 2026 U.S. Houzz & Home Study (renovation activity in 2025), 37% of renovating homeowners went over their planned spend, 35% came in on budget, and just 3% came in under. Among those who went over, the most common reasons were products or services costing more than expected (52%), pricier products and materials than planned (35%), more complex work than expected (32%), scope changes (31%), and unexpected construction issues (22%) (Houzz 2026 study, PDF).

Only some of those count as real contingency events. "Pricier materials" and "scope changes" are choices. A contingency that gets spent on choices won't be there when a real surprise shows up.

Picking your percentage

Use this as a starting point, not a rule:

Bathrooms deserve extra caution. NKBA warns that "there can be hidden water damage" in a bath once walls and floors are opened (NKBA Bath Planner). Angi prices water damage restoration at about $3.75–$7 per square foot (Angi).

Contingency vs. allowance

They're easy to mix up:

• An allowance is a placeholder price for a known item you haven't picked yet, like tile or light fixtures.
• A contingency is a reserve for unknown costs that may or may not happen.

AIA Contract Documents draws the line the same way (AIA). If your tile costs more than the allowance, that's an upgrade you chose, not a contingency event. More in allowances in a remodel contract.

How to do the math

Work backwards from what you can spend:

1. Start with the total you can actually commit. Houzz found 84% of renovating homeowners used savings, and 34% used credit cards (Houzz 2026).
2. Take the contingency off the top. $60,000 at 15% means $9,000 in reserve and $51,000 to design to.
3. Get bids against the $51,000, not the $60,000.

Treat the reserve as off-limits when you're choosing finishes.

Rules for spending it

• Write down every draw. Note the date, the reason, and the amount, and tie each one to a signed change order. See change orders.
• Upgrades come from somewhere else. If you want the better faucet, cut something else to pay for it.
• Check the balance at each milestone. After demo and rough-in, most hidden conditions are known. If the reserve is mostly untouched by then, you can decide whether to release some of it.

Track it in one place

RenoBinder's free plan keeps your planned budget, what you've committed, what you've paid, and approved change orders side by side. It shows you how far you've drifted before the final invoice does.

General information, not financial or professional advice.

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