Ultimate Guide to Finishing a Basement

Giovanni Valle is a licensed architect and LEED-accredited professional and is certified by the National Council of Architectural Registration Boards (NCARB). He is the author and managing editor of various digital publications, including BuilderSpace, Your Own Architect, and Interiors Place.

Do you find yourself wishing for a bit more space in your home? Do you want to build a home cinema or an office space? Putting in the work required to finish your basement could help you bring your dreams to life.

Finishing a basement starts with coming up with a design concept and setting aside a budget for the job. You’ll also need to find out the building codes in your jurisdiction and get permits. The refinishing starts with repairs and progresses to finishing the walls and ceiling, ending with the floor.

This guide will cover everything you need to know about converting your basement to a comfortable space you’ll love. We’ll cover everything from planning to execution of the project. And if you’re on a budget, watch out for the funding section.

How To Plan To Finish Your Basement

Refinishing your basement is a major home improvement project that requires adequate planning to get proper value for money. The plan for the project should roughly follow the steps below:

Decide on the goal. Why are you embarking on this project? Do you want an extra livable room in the house? Do you want to convert your basement to an entertainment hub? Your goal for the project will determine where you’ll look for design inspiration. It will also influence your overall budget.
Design the basement. Designing your basement can be as simple as a rough sketch on a piece of paper, but if you’ve got the skills, you can create a professional design that you’ll hand off to the contractor. Look around online for inspiration. There are tons of previously finished projects and concepts to analyze and come up with something.
Hire a Contractor. This guide contains enough information to go the DIY route with your basement refinishing. Still, for most people, the best approach to take is to hire a contractor with experience in this type of home remodeling project. A qualified contractor can help you with design and will also provide guidance on permits, building codes, and other such details.
Supervise the Project. The basement refinishing project will start with basics like repairs and waterproofing, then progress to finishing the walls, ceilings, and floors. Between the stages, and depending on your chosen design, there will be some plumbing and electrical work.
Move in. Once the basement refinishing is done, the contractor will let you know when it’s safe to use the space. When you go in for the first time, go over everything to ensure the project was carried out to perfection.

Finishing a Basement To Code

As we mentioned earlier, finishing a basement is a major remodeling project. This means there are codes to adhere to or risk failing inspections. The exact codes will vary from one place to another, but they often cover the following areas:

Insulation. The codes typically require insulation barriers when refinishing a basement. The local or state codes will highlight the bare minimums expected with the insulation.
Structural adjustments. If your project involves changes to load-bearing walls or support columns, you have to check what your local building department has to say about it.
Electrical and plumbing fittings. Again local and state codes will have rules on what you can do on the electrical side of things with your project. There’s usually a recommendation on the spacing between outlets, the use of circuit breakers, and more. The situation is the same as plumbing. Some states have codes on basement bathroom measurements.

To finish a basement to code, therefore, you need to research extensively on what is expected of you by your local and state laws. The time you’ll spend on navigating this process is one of the reasons why finishing a basement is rarely a DIY project.

The Steps to Finishing a Basement

Finishing a basement can be broken down into four different stages, starting from the preparation down to finishing the floor. We will go over these stages in the following sections.

The Preparation Stage

During this stage, you should do the following:

Get the Necessary Permits

As we touched on briefly above, getting permits for this job is important and often compulsory in many places. You could do the job without a permit, but that will most likely lead to issues in the future. If you’re working with a contractor, they’ll likely handle this part for you. No professional contractor will work on a basement finishing project without the necessary permits, except where none is required.

Check the Building Department of your local government website to see what it says.

Get Rid of the Dampness

Before you get to the stage of installing drywall in your basement, you need to confirm that there’s no dampness. Take the right steps to ensure the area is waterproof. Dealing with dampness in a basement often involves using a sump pump, a dehumidifier, or paying for complete basement waterproofing. The severity of the situation will determine the right solution.

You can sort minor cases with a few hundred dollars, but severe cases requiring professional waterproofing will cost thousands.

Settle on the Materials

The materials you’ll use in your basement finishing project go a long way in determining how much the project will cost you. You should spend as much time as you need at this stage.

Do you want an exposed ceiling? Will you use laminate flooring or carpet? Will you plaster or use drywall? Your budget will be affected by the answer you choose in these decisions. When picking the materials, you should make sure to consider the following:

The trim options
The paint choices
Location of the utilities
The flooring option
The wall material
The type of insulation
The ceiling design

There will be other micro-decisions in between during the project, but the options you choose in those main talking points are the most important.

Get the Tools Together

There are lots of tools required for finishing a basement. You probably have some of the smaller ones, but for heavier tools, you have to rent them from a home improvement business. Of course, if you’re working with a contractor, you won’t need to worry about this as they will have the tools they need.

Some of the tools you’ll need include the following:

Safety gear (coveralls, goggles, earplugs, dust mask, gloves, etc.)
Nail gun
Drill
Ladder
Hammer
Circular saw
Caulk gun
Adhesive for insulation
Orbital sander
Utility Knife
Level
Tape measure

The Wall Finishing Stage

Once you’ve secured the materials, permits and ensured that the basement is dry and damp proof, it’s time to get to the nitty-gritty of the project. Here are some of the things you should do when it comes to the wall finishing stage.

Fixing the Insulation

There are different materials you can use when insulating your basement wall. Still, many people choose the simplest option: polystyrene foam, especially those going the DIY route with this project. To install the insulation, here’s what you should do.

Measure the space from your ceiling to the floor, but cut out a quarter of an inch. Cut the insulation using a utility knife to the remaining length.
Hold the cut-out material to the wall to check for fitting.
Coat the back with the adhesive for the insulation.
Press the insulation to the wall and wait for a few minutes (the exact wait time will be indicated on the adhesive pack).
Repeat the process until you’ve covered every part of the wall.
The seams between the insulation board and the floor, ceilings, and corners should be filled with caulk.

Don’t forget to wear protective gear when handling polystyrene insulation material.

Framing the Wall

This is one of the stages of the basement finishing project that will be very challenging for an average DIY enthusiast. We’ll cover the steps needed below, but you shouldn’t hesitate to bring in a professional if it all feels overwhelming to you.

Start by drawing a line on the floor around four inches away from the walls, intersecting the walls at 90 degrees.
Measure the wall and cut two 2×4 wood pieces to the measured length. One of the cut woods will be the bottom plate, while the other will be the top plate.
The plates should contain marks every 16 inches(41 cm) to make room for stud placement.
Ensure the bottom plate is in tune with the line you’ve drawn in step one above and secure it using a drill and nails.
Install the top plate just as you’ve done with the bottom, but you’ll have to use a nail gun to hold it in place instead of the drill.
Ensure the plates are level. You can use a piece of wood to realign the spacing if necessary.
Measure the space between the two plates and cut studs to this length.
Install the studs, ensuring that they are in line with the 16-inch (41-cm) markings made above.
Using the nail gun, insert nails on each side of the stud, maintaining a 45-degree angle.
Repeat the steps until you’ve completed the framing of your wall.

Installing Utilities

Once you’ve framed the wall, it is time to install any air duct, plumbing, or electric fittings that have to run through the walls before closing the wall frame. This is one part of the project you can’t complete by yourself. Most states require you to hire a professional to handle the utilities part of the basement finishing.

Mounting the Drywall

Once the utilities have been installed, it is time to close up the frames. This process involves lots of cutting and measurement, so you should keep the utility knife and tape measure close.

Choose between a vertical or horizontal drywall installation based on what best fits the space.
Measure your drywall segments, ensuring that the end is on a stud.
Cut out parts of the drywall where utilities have to be exposed.
Use drywall screws to make sure the drywall is secured on the stud.
Fill up seams and cover up screw heads using drywall mud.
Use drywall tape on the seams to complete the process.

Paint the Wall

Painting the basement wall is the easiest step of this stage. Sand down areas with caked drywall mud to ensure the painting remains smooth. Start with a layer of primer, and then apply two coats of paint to complete the process. The paint color you choose should tie into the bigger design aesthetics you’re aiming for with the project.

The Ceiling Finishing Stage

When it comes to finishing your basement ceiling, there are three approaches you can take. You can leave it open (useful if you want to achieve an industrial look), use a drop ceiling, or use drywall cut-outs on it. The hardest option is drywalling the ceiling, while a drop-ceiling fit is the preferred option for most people undertaking this type of project.

Going With a Drop-Ceiling Installation

A drop-ceiling installation involves fixing a second ceiling beneath the existing ceiling (which is the floor of the room directly above the basement). This approach allows you to maintain access to any utilities already existing on the structural ceiling. You need an installation kit if you choose this approach. The kits are often a collection of interlocking tiles and frames.

The installation process will depend on the kit you’ve picked, but it will most likely involve the following steps:

Fix the L-channel frames across the wall.
Fix the T-channel frames across floor joists, ensuring that they are connected to the L-channels above.
Put the T-channel cross frames into the right position between the normal T-channels.
Install the ceiling tiles into the frame when complete.

Choosing the Dry-Wall Approach

The process of installing a drywall ceiling in your basement is similar to what you’d do when installing basement walls. The steps to follow include the following:

Create holes in the drywall sheet to make room for utilities.
Apply some adhesive to the joists where the drywall sheets will go, starting from the corners and moving outward.
Install the drywall on the adhesive and wait for it to dry. You’ll need an extra pair of hands to hold both extremes of the sheet in place while you wait.
Hold the drywall to the joists by nailing or screwing the sheets every seven inches across the walls. With interior joists, you can nail or screw every 12 inches (30.5 cm).
Continue the process until you’ve properly covered the ceiling with sheets of drywall.
Fill out the spaces left by the nail or screw heads with some drywall mud.
Use drywall paint on the seams and paint over the dry mud for a clean look.

Choosing the Open Ceiling Approach

As we mentioned above, this is the easiest option to follow. If you don’t mind the industrial appearance, this approach will also save you a lot of time. The downside is that the piping and wood beams may look unsightly to other people you may have in the basement from time to time. You can mask those elements by spray painting everything with a dark color. This way, they’ll be harder to see, especially in low-light conditions.

The Floor Finishing Stage

With your basement walls and ceilings finished, the next step of the finishing project is your floor. Not sure of what floor material to use? You can choose either laminate or carpet, like more than half of homeowners.

Regardless of the option you choose, the process of installation is typically the same. It starts with installing the subflooring to ensure dryness and improve comfort. Once you’re done with the subflooring, you can proceed with installing the floor option you’ve chosen.

When choosing the basement flooring to use, be sure to consider the use of the floor. If you’ll get a lot of traffic in the basement (such as with a movie room or a bar), it’s probably not a good idea to go with the cheapest laminate flooring you can find.

The Estimated Cost of Finishing a Basement

On average, you should expect to spend around $25-$50 per square foot to finish a basement. However, if you choose to go with costly flooring or ceiling materials or install exotic fittings such as lightings, the overall cost will go up. This is also true if you choose a basement design that will require a lot of work.

If you stick to the basics at every level, you should expect to spend a total of around $30,000-$40,000 on the basement finish. This should cover everything, including the ceilings, walls and floors.

Will a Finished Basement Improve the Value of Your Home?

Most people in the market for a property will favor homes with finished basements over those without such a finish. This means that the money you’ll spend on the process can go a long way towards making your home a top choice when you put it up for rent or sale. On average, finished basements have a 79% rate of return, which means that you may end up getting back over $30,000 if you spent $40,000 on the project.

How To Afford a Basement Finishing

With the average cost of basement finishing costing up to $40,000, you may be wondering how you can afford the project. This section will put all your options on the table.

Contractor In-House Funding

If you choose to work with a contractor for the basement refinishing project, you should explore those with in-house funding options. These contractors work together with a finance company to provide customers with interest-free loans.

This approach is convenient because the contractor will have a better idea of how much you need to borrow for a project and what you can achieve with a specific loan amount. However, you need to pay attention to the terms of repayment to ensure you won’t get into situations such as paying interest on the entire balance. You should also ensure the contractor isn’t marking up rates for projects to encourage you to borrow a bit more money.

A Personal Loan

There’s no limit to what you can use a personal loan for, so you can get one for a basement refinishing project. The loans are provided by a credit union, a bank, or an online lender, and you can pay them back in monthly installments spread across 2-5 years.

The advantage of this type of loan is that it allows you to spread out your basement refinishing cost over the medium to long term. You can also calculate upfront how much you have to budget per month as repayment. On the flip side, you have to pay interest rates that will start counting as soon as the loan is approved. You may also need to pay up to 10% of the total loan as origination fees.

The Limited FHA 203k Loan

The FHA 203k loan is a facility backed by the government and made for homeowners that can afford the down payment of 3.5% with a credit score of at least 580. The standard loan option is limited to $5,000, while the Limited FHA 203k can provide loans up to $35,000.

The benefit of this loan is that the interest rate is typically the lowest, and you’re not required to pay any fees. This means you can complete the basement finishing without spending any money from your pocket. However, you should be willing to undergo rigorous scrutiny to ensure you meet the requirements for this loan.

Home Equity Line of Credit

Known as HELOC, this type of loan is tied to the equity of your home. You can get up to 80% of your home’s value (minus any outstanding mortgage) as a loan. This option is popular amongst people engaging in projects like basement refinishing because the approval is fairly quick, and you may get a tax deduction. The interest rates and payments are also a lot better than what you’re likely to get when using a credit card.

The downside to using a HELOC loan is that you can’t afford to default on payments as you’ll damage your credit score and face foreclosure in worst-case scenarios. Also, the interest rates will fluctuate (often within a cap set by the lender).

Choosing a Contractor for Your Basement Finishing Project

As you’ve seen above, you may not be able to complete this project on your own, so you’ll need to hire a contractor. When you look at how much basement finishing costs on average, you’d do your best to choose a qualified contractor. Here are some questions that will help in your selection process.

How old is the company? All new companies have to start with someone, but would you like to be that test subject? You should only look at companies with at least five years of verifiable experience in basement finishing.
Are they specialists? A business that focuses solely on basement finishing will most likely deliver better results than a general contractor that does everything.
Are they licensed? If you choose a contractor without the right licenses, you could be in a tight spot if something goes wrong. You will find it harder to get compensation as the only way to get back anything at all will be to go to the civil court.
Are they insured? If they are insured, make sure the cover is at least worth the value of your home. You don’t want to be on the hook for injuries that may happen to a worker during the basement finishing project.
Do they have a verifiable portfolio? The best companies will have a portfolio of past projects they’ve worked on. Go over them to see if the contractor can handle your brief. You may also get some inspiration on how to proceed with your basement design.
What is the project schedule? There should be a timeline for the project. It’s not going to be set in stone, but you should at least have an estimate of how long it will take for you to start using the basement.
Will they handle permits? Most licensed contractors will not have any problems with getting the necessary permits for you.
Will they offer a detailed design and a guaranteed quote? The design will show you every detail about the basement refinishing, while the guaranteed quote will protect you against any unexpected expense. If you’re taking financing for this project, it’s good to be certain about the cost upfront.
What are the conditions for making a change to the design? Basement finishing projects don’t always go in a straight line. You will most likely change your mind about something over the course of the project. The best contractors won’t have a problem with that and won’t charge you any penalty fees.

Final Words

A properly finished basement will not only bring you immense satisfaction at achieving a desire; it can also add real value to your home. From securing a new living space to creating a home office, the time, energy, and money that will go into this project will almost always pay off nicely in the end—whether by increasing comfort in your home or making the home more valuable in the market.

Don’t forget to choose a good contractor for the project if the DIY approach on this is a bit too much for you.