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Home Additions: What You Need to Know


Mar 28, 2020 by Maurie Backman

There may come a point when you feel you're outgrowing your home, and once that happens, you have two choices: You can move to a larger house, or you can add square footage to your current house. The latter can be accomplished with a home addition, so if you're itching for more living space, it pays to consider one.

What types of home additions are there?

As the name implies, a home addition is a means of building onto an existing house. A home addition can be a smaller project, like adding a sunroom, or it can be more extensive, like adding a master suite or an in-law suite with a kitchen and bathroom.

If you don't need a lot of extra living space but could benefit from having one extra room, then a room addition or bump-out is probably the right project for you. Though you may be able to tackle this sort of project yourself, especially if there's no wiring or plumbing involved, it often pays to hire a general contractor with experience building onto a home.

If you need a lot more living space, you can consider a multi-room or two-story addition built onto the side of your house or added on behind your house. Not only could that give you a lot more square footage but it could also allow you to enjoy features your house may not have previously had. For example, if your house is missing a family room, an addition could make one possible. And if you need an extra bedroom or two because you've expanded your family, a multistory addition could solve that problem.

This type of addition, however, isn't something most homeowners can tackle themselves. Rather, you may need an architect, structural engineer, and construction supervisor to oversee your remodeling project and a host of contractors to get the job done.

What are the benefits of home additions?

There are plenty of good reasons to increase your home's square footage with an addition:

1. You'll get extra living space without the hassle of moving. Moving can be costly and time-consuming, so building onto your existing house means you don't have to deal with that.

2. You'll get to stay in your neighborhood. You're not guaranteed to find a larger house in the neighborhood you love. If you're willing to embark on a major renovation, you'll get the option to stay put.

3. You could increase the value of your home. The more living space you have, the more appealing your house will be should you decide to sell it.

4. You can retain hard-to-find features. Maybe your house has a fabulous kitchen, great curb appeal, or a spacious master bedroom with an even more impressive walk-in closet. An addition will give you extra space without having to give those things up.

5. You won't have to apply for a new mortgage. If you need more space and move to get it, you'll need a new home loan. If you stay put, you don't need to go through that hassle (though you'll probably need to apply for some type of loan to pay for an extensive remodeling project like an addition).

What are the drawbacks of home additions?

Though adding living space to your existing house can be a smart move, there are downsides to consider as well:

1. You may not get your investment back. Any remodeling project comes with the risk that you won't manage to recoup the money you sink into it. This holds true for home additions as well.

2. You'll eat into your outdoor space. Whether you're adding a single bedroom to your home or putting on a two-story addition, the more you expand, the less outdoor space you'll have. If your house doesn't sit on a larger lot, you may find that in gaining square footage inside you make your backyard too small for comfort. And if you have children, this is an especially big concern.

3. You'll need to live in a construction zone for a while. A major remodel like a home addition takes time. If you decide to move forward, you could wind up dealing with noise, dust, debris, and the hassle of having contractors in and out of your house all the time.

How can you finance a home addition?

Home additions tend to be very expensive. As such, you may not be able to pay for one outright. There are several financing options you can explore to pay for a home addition, including:

1. A home equity loan. Here, you get to borrow against the equity you have in your property. A home equity loan is a fixed-rate loan that's fairly easy to qualify for since your house is used as collateral; you can get one even if your credit score isn't all that great. And the interest on a home equity loan is usually quite reasonable.

2. A home equity line of credit. Rather than take out a renovation loan, you can apply for a line of credit based on the equity you have in your house. That way, you can draw against it as needed, and you'll only have to pay back the amount you actually borrow.

3. Cash-out refinancing. With a cash-out refinance, you refinance your mortgage but borrow an amount that's greater than your remaining loan balance. The difference gets paid to you, and you can treat it as a home improvement loan.

4. A personal loan. A personal loan lets you borrow money for any purpose you'd like. You need good credit to qualify for a personal loan, but it's a fairly affordable way to borrow as well.

No matter what financing options you explore, don't make the mistake of putting a home addition on a credit card and paying it off over time. Doing so could hurt your credit score and cost untold amounts of interest.

Is a home addition right for you?

Adding square footage to your house is a reasonable option if you need more space and have a large enough property to build onto. Just be sure to weigh the pros and cons involved before making your decision.

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