How Much Does It Cost to Finish a Basement?

April 10, 2023 - 8 min read

If you have an unfinished lower level, you likely have a lot of flexibility to add extra living space to your home. In fact, you can transform your unfinished basement into many options, including a TV room, workout area, game zone, home office, and more. But you may be wondering: How much does it cost to finish a basement?

Take the time to learn more about how to build a basement, finished basement costs, proper budgeting, financing options, and more.

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Reasons for finishing your basement

Your lower level can represent an untapped treasure. Areas upstairs you don’t have space for can instead be designated downstairs, assuming you have ample room. A finished basement offers tantalizing possibilities, from creating a home theater and hobby room to adding a home gym, extra bedroom, or guest quarters.

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Finishing a basement remains a popular choice among homeowners. According to the National Association of Home Builders, two-thirds of homeowners consider a finished basement a worthy way to add extra square footage to their home; three-quarters view it as a way to add value to their residence in the event of a sale.

Converting a basement to a living area was ranked as a top four interior remodel project based on return on investment (ROI), per the 2022 Remodeling Impact Report.

“Finishing a basement has become increasingly popular among homeowners, especially since the pandemic,” says Andre Kazimierski, CEO of Chicago-based Improovy. “I think this is likely because more people have the time to commit to larger home projects lately. Also, finished basements are increasingly popular areas for entertainment centers, guest housing, and so on.”

How much value does finishing a basement add?

“Basement finishing adds significant value to your home by increasing the square footage of your residence by up to 10%, or in some cases, up to 20%,” says Cam Dowski, founder of WeBuyHousesChicago.

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The 2022 Remodeling Impact Report mentioned above estimated that you can likely recoup 86% of this project cost when it’s time to sell your home. HomeAdvisor, on the other hand, reports that finishing a basement of 400 to 1,500 square feet offers a possible return on investment of up to 75%.

“A finished basement adds more livable square footage to your home, which can attract more buyers and increase your resale value,” agrees interior designer Artem Kropovinsky with Arsight in New York City.

Remodeling a basement versus finishing a basement

The main difference between finishing and remodeling your basement is that the former involves creating a new living space from scratch (within an existing footprint), while remodeling consists of updating an existing living space. If your basement is already finished, you may want to consider remodeling it to modernize the space for your current needs and lifestyle.

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“Finishing a basement usually costs more than remodeling because it requires more materials and labor. However, it can provide more benefits – such as a higher return on investment, greater customization options, and improved energy efficiency,” adds Kropovinsky.

Factors to consider when finishing a basement

There are several important considerations to ponder before pulling the trigger on a basement finishing the project.

“Think about your project scope – how much square footage is needed to be finished and the associated costs. Permits may also be necessary, which can increase expenses,” Dowski notes. “It’s equally essential to estimate your budget, as costs can vary significantly based on the size and scope of the project and the time it will take to complete it.”

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Furthermore, when determining how much does it cost to finish a basement, give thought to the kind of materials and finishes you desire for your walls, floors, ceilings, fixtures, and other basement elements. Better quality materials will raise the price tag.

The amenities you crave will also need to be thoroughly considered. Some features add more value to a finished basement than others.

“I recommend adding windows or skylights to make your basement feel brighter and more spacious. Also, I would choose durable and attractive flooring such as vinyl planks, laminate, or epoxy that can enhance the look and feel of your basement,” advises Kropovinsky. “Adding insulation and vapor barriers to your walls can prevent moisture problems, while adding drywall or paneling can create a smooth surface for painting or wallpapering. And when it comes to lighting, installing recessed lights or pendant lights can create different moods and effects in your basement.”

Mike Qiu, the owner of, says the best-finished basements that command higher resale value include those with ample storage, good lighting, comfortable seating, and quality flooring.

“Additional features such as a bathroom, wet bar, or fireplace may also add value to a finished basement,” Qiu continues.

How much does it cost to finish a basement?

The price tag involved with finishing a basement can range significantly depending on the size of your basement, labor costs, materials used, and other factors.

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So how much does it cost to finish a basement? Expect to pay between $7 to $25 per square foot, on average, according to HomeAdvisor, which estimates the average basement refinishing project to cost $2,800 to $33,985 ($18,395 on average).

“The lowest cost I would expect to finish a basement may be between $10,000 and $20,000, which would likely include using only basic materials and completing the project without any fancy amenities or popular features,” says Dowski. “A mid-range basement finishing could cost between $25,000 and $50,000 and involves using more elaborate materials and installing desirable upgrades like a pool table or wet bar. And the highest cost – over $75,000 – may include utilizing more expensive materials and implementing amenities like a home cinema or elevator.”

How to pay for finishing a basement

While each option has its pros and cons, popular means to pay for basement finishing include:

  • A personal loan
  • Cash-out refinance
  • Home equity loan
  • Home equity line of credit
  • Credit cards
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Personal loan

A personal loan, sometimes referred to as a signature loan, is a type of unsecured loan. This form of financing doesn’t require collateral like your home to secure repayment. The lender usually only needs your signature and promise to repay what you borrow.

It’s often easier to qualify for a personal loan for basement finishing. In addition, you could receive the cash within only a few days. But note that a personal loan is considered a higher risk to the lender because no collateral is required. As a result, the lender may charge you a higher interest rate for a personal loan than you would get for other types of financing.

Personal loans may also put your credit score at risk, especially if you don’t repay the loan punctually or comply with its terms. It could be more difficult to get other types of credit in the future if your credit score drops.

Cash-out refinance

A cash-out refinance replaces your existing home loan with a new, bigger mortgage loan. The difference between your new loan amount and your old one is given back to you as cash during closing. A cash-out refi enables you to withdraw equity from your home and apply it to any transaction you like, including paying to finish your basement, often for a lower interest rate than you’d get with other types of loans.

Just be aware that cash-out refi rates are slightly higher than traditional mortgage refinance rates. Your refinance rate will depend on your credit profile and how much cash you take out. Typically, you can cash out up to 80% of your home’s equity. Also, your new loan will be larger than the one it is replacing, which means you’ll pay more in mortgage interest over the life of the loan. However, since mortgage rates tend to be lower than personal loan or credit card rates, cash-out refinancing can be a better way to finance a major project like a basement finishing.

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Home equity loan

Another way to tap into your home’s equity is via a home equity loan, often available at a low fixed interest rate. Commonly referred to as a “second mortgage,” a home equity loan is usually a smaller second loan taken out in addition to your existing mortgage loan. This permits you to extract your home’s value without altering the rate or terms on your primary mortgage. You can also take out a home equity loan if your home is fully paid off and borrow only the amount you want to cash out.

Many homeowners choose a home equity loan because it often provides a lower interest rate than other types of financing, including credit cards and personal loans. Don’t forget, however, that you will need to use your home as collateral; if you don’t repay your debt as promised, you could lose your home to foreclosure.

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Home equity line of credit (HELOC)

A home equity line of credit works like a credit card, to some extent. It’s a revolving line of credit that has a spending limit ceiling. If and when you require cash, you can draw on the line up to your credit limit. As you pay down the balance (with interest), your available credit replenishes.

On the downside, you can only draw from the credit limit for a set amount of time (known as the “draw period”); after that expires, you can no longer borrow money and must repay the outstanding balance. You will also need to use your home as collateral to secure the loan. But the good news is that you may be charged a lower interest rate than a credit card or personal loan.

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Credit cards

The easiest, quickest, and most convenient way to fund the finishing of your basement is to simply use new or existing credit cards. Depending on your card’s borrowing limit, you may be able to charge thousands that can go toward your basement finishing. But that will come at a steep price, as many credit cards charge the highest interest of all forms of financing unless you repay your balance due in full early on.

Try exploring credit cards that offer a 0% introductory APR for a limited period, which can be a smart option if you intend to repay your outstanding balance relatively quickly.

Next steps in finishing your basement

Weigh the advantages and disadvantages of finishing a basement carefully before committing to this expensive endeavor. Think ahead about future needs and wants for that downstairs space versus current needs/wants, and if and how your family may grow or shrink over that time.

If you are ready to start a basement finishing, shop around carefully for contractors and get several price quotes. Likewise, explore different financing options and compare rates and terms thoroughly.

Frequently asked questions

How much does it cost to finish a basement?

It could cost between $7 to $25 per square foot, on average, to finish a basement, per HomeAdvisor, which estimates the average basement refinishing project may set you back $2800 to $33,985 ($18,395 on average).

Is it worth the money to finish a basement?

The 2022 Remodeling Impact Report indicates that converting a basement to a living area was ranked as a top four interior remodel project based on return on investment (ROI); this study notes that you can likely recoup up to 86% of this project cost when it’s time to sell your home. But even if ROI is not important to you, finishing a basement can improve livability, functionality, enjoyment, and quality of life for your family and guests.

What costs the most when finishing a basement?

The different costs involved with finishing a basement can vary significantly depending on multiple factors. But suppose your unfinished basement requires adding new plumbing and/or electrical and installing new walls, ceilings, and/or flooring, and you prefer higher-end materials and finishes. In that case, you will certainly pay more than you would for a basic finishing with fewer amenities.

What adds the most value to a basement?

According to experts interviewed, adding desired amenities like a bathroom, bedroom, natural light via new windows and skylights, durable and attractive flooring, walls to separate spaces, and ample artificial lighting will likely add the most value to a finished basement.

Is a HELOC a good idea to finance the finishing of a basement?

A home equity line of credit (HELOC) is a worthy financing option to pay for a basement finishing. That’s because a HELOC may cost you less in interest charged versus other financing vehicles like a personal loan or credit card. Plus, you can draw from your line of credit any time and at multiple intervals. But you will need to put up your home as collateral.

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Erik J. Martin
Authored By: Erik J. Martin
The Mortgage Reports contributor
Erik J. Martin has written on real estate, business, tech and other topics for Reader's Digest, AARP The Magazine, and The Chicago Tribune.
Aleksandra Kadzielawski
Reviewed By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree from DePaul University. She is also a licensed real estate agent and a member of the National Association of Realtors (NAR).