Is a 50% Deposit Required for a Remodeling Contract?

You’ll have to put some money down to start a remodeling contract, usually between 10% and 30%, but this range isn’t always the case. Your written contract should specify payment terms, such as when you'll pay future milestones. Setting clear expectations at the outset is a key to preventing contractor issues throughout your project. 

Up to a 50% Deposit Can Be Reasonable

Almost every contractor charges a homeowner a deposit on a remodeling contract. Up to 50% of the total project cost can be reasonable, although 10% to 30% is more common.

Your upfront deposit may go toward purchasing materials, pulling permits, and securing your spot on the contractor's schedule. Your deposit might be higher—closer to that 50% deposit—if you're ordering custom pieces or need sub-specialty contractors like electricians or plumbers. 

Be sure to review your contract and the reason for your deposit in detail. Check the contractor’s references and reviews, and ensure they are legitimate before signing any contracts.

It's a red flag if a contractor is asking for a deposit over 50% of the project cost. It's possible that this contractor isn't bonded, insured, or even a legitimate contractor. You don't want to end up with the contractor taking your deposit and leaving without doing any work. Even if the contractor is citing the need to buy materials, over 50% of the project price is too high. Reputable contractors have their own line of credit and business funds to secure materials and initial labor.

Tips for Handling Pay and Working With Contractors

We get it—all of this can be pretty confusing. But there are some go-to tips that will make your relationship with your contractor run smoothly. 

Pay Your Deposit With Credit Card or Check 

Be sure to pay your remodeling deposit with a credit card or check, and get a receipt. If you pay in cash, there's no paper trail and your contractor can more easily run with your money. 

Set Up Clear Payment Terms and Timeline

Your contract should outline when you owe your local contractor money and for what specifically. Your contractor should set milestones (not dates on the calendar), such as paying a certain amount when the project is 50% complete, then paying in full once the project is finished.

Depending on the size of your project, you might have two or more payment milestones. For smaller remodel jobs, there might be an initial payment, a halfway payment, and full payment upon completion. For longer jobs, such as a full kitchen renovation, you might make five different payments along the way.

Your contractor should have the business funds to carry your project through until the next milestone. They shouldn't be asking you to fund the upcoming parts of the project. Be sure not to let your payments get ahead of completed, approved, or inspected work. Paying for uncompleted work is a sign that your contractor may not have a solid business or strong finances.

Define How You’ll Handle Change Orders

If your contractor realizes your project needs more labor or different materials, will they get your approval first? Have a process in place for change orders—such as moving from laminate to granite countertops, or installing six can lights instead of four.

Your contract should state whether change orders and price increases need your approval ahead of time. Many remodeling projects have unforeseen costs, whether it’s for a necessary repair or an increase in material prices. Be sure you understand how increases and changes are handled before you’re shocked with a final bill. 

Interview More Than One Contractor

Before you commit to a general contractor near you, interview at least three pros and get estimates. Talk through how they generally approach a project and what their payment terms are. You want to feel a sense of trust with your contractor, especially if you'll be working with them for several months on an important reno project. 

If the contractor seems uncooperative from the start, it could be a sign that you'll experience more problems down the road.