How to Finance a Home Addition: 12 Options to Consider

Financing a home addition can seem overwhelming with home equity loans, HELOCs, construction loans, fha 203k, home improvement loans, credit cards, and RenoFi loans as common financing options for you to consider.

We’ll go over everything you need to know to build onto an existing space to create your own dream home and increase the value of your property and add the extra square footage it’s currently missing. Alternatively, you can see RenoFi loan rates here and we’ll walk you through all your loan options.

12 Ways To Finance A Home Addition

A RenoFi Loan

Instead of only using the equity you have in your house, RenoFi allows you to use the After Renovation Value (ARV) of your home as a lump sum at a fixed interest rate. For example, if RenoFi assesses your renovation plan and believes you will increase the value of your home from $600,000 to $750,000, RenoFi loans will allow you to take a loan against the future ARV (After Renovation Value) of your home of $750,000 this allows you to borrow up to 11x more than traditional loan options.

Let’s walk through an example where you want to spend $150,000 to renovate your new home and increase the value of your home by $150,000:

Scenario 1 (New Home Purchase): 

• Home price: $600,000
• Downpayment (20%): $120,000
• Current Mortgage Amount: $480,000

Example Home Equity Loan Amount: 

• $600,000 * 80% = $480,000 (80% of Total Home Value)
• $480,000 - $480,000 (Current Mortgage Balance) = $0 (Home Equity Loan Amount)

Example RenoFi Home Equity Loan Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $480,000 = $195,000 (RenoFi Home Equity Loan Amount)

Using a RenoFi Home Equity Loan you have increased your loan amount from $0 to $195,000. Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $195,000 because the RenoFi loan is written against your ARV (After Renovation Value).

Without RenoFi loans, you would not have been able to borrow the $150,000 needed to add the renovations that would increase the value of your home by $150,000. Now, with RenoFi loans, you are now able to get the loan you need to add the renovations you want to your home.

Scenario 2 (Recent Home Purchase): Assuming that you have now paid 10% of your mortgage:

• Home price: $600,000
• Current Mortgage Amount: $420,000

Example Home Equity Loan Amount: 

• Example Home Equity Loan % of Home Price: 80%

• Example Home Equity Loan Amount: 

  • $600,000 * 80% = $480,000 (80% of Total Home Value)
  • $480,000 - $420,000 (Current Mortgage Balance) = $60,000 (Home Equity Loan Amount)

Example RenoFi Home Equity Loan Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $420,000 = $255,000 (RenoFi Home Equity Loan Amount)

Using a RenoFi Home Equity Loan you have increased your loan amount from $60,000 to $255,000 (4.25x more). Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $255,000 because the RenoFi loan is written against your ARV (After Renovation Value). 

Here’s a summary of the difference between traditional and RenoFi home loans in table form: 

In addition to letting you borrow more money for your home renovations, RenoFi loans also offer:

• No draw periods
• No inspections
• No need to give up your original loan
• Higher borrowing limits

RenoFi loans are funded on the day the loan is closed and that is it. Take out the $195k and you get $195k in your bank and you have 20 years to pay off in equal monthly payments with interest and principal, just like a standard mortgage.

With terms up to 20 years and your loan based on the after renovation value, a RenoFi Loan allows you to take advantage of lower market rates compared to the higher interest rates of many of the alternatives.

If you already have a great rate locked in on your first mortgage, you’ll be relieved to hear that no refinancing is required. This is a second mortgage that’s perfectly suited to this type of project, which means you can keep your low rates and don’t have to start the clock again on your mortgage.

Put simply, for most homeowners, a RenoFi Loan offers the most money and lowest monthly payment and unlike some of the alternatives, there aren’t any inspections, contractor involvement, or draws to contend with.

Click here to see RenoFi loan rates

Here’s how these loans stack up against some of the other options that you’re probably considering:

Here are the need-to-know details:

• Loan amounts from $20k to $500k
• Low fixed interest rates like traditional home equity loans
• Repayment terms up to 20 years
• Ability to borrow up to 90% of the after renovation value
• The full loan amount available at closing

If you are curious to find out if this type of loan is right for you, why not speak to one of our advisors, or try out the RenoFi Loan Calculator to discover how much you could borrow.

A Home Equity Loan

A home equity loan or allows you to tap into any equity you have already amassed through paying off your mortgage to release a lump sum that can then be used to pay for your addition. It uses a percentage of your home equity, but there is no draw period and you must begin making monthly payments as soon as you take out the loan.

You can quickly work out the amount of equity that’s in your home by simply deducting what you owe on your mortgage from the current value of your property. A property that’s worth $600k that has $480k outstanding on the mortgage has $120k equity.

You need to understand though that a typical home equity loan will only allow you to borrow up to 80% of the home’s value, meaning that if your property is worth $500k right now and your outstanding mortgage balance is $350k, the most you’ll be able to borrow is $50k.

But for many homeowners, there’s one huge problem with these loans, and the biggest downside is that if you haven’t owned your home for very long, chances are that you may not have accumulated much equity. Here are a couple examples to show you how the math breaks down:

Scenario 1 (New Home Purchase): For example, to make the math simple, let’s say you just purchased a $600,000 home:

• Home price: $600,000
• Downpayment (20%): $120,000
• Current Mortgage Amount: $480,000 You want to spend $150,000 to renovate your new home and increase the value of your home.

Traditional Home Equity Loan Terms:

A traditional Home Equity Loan may offer up to 80% of your home value as a second mortgage in the second lien position (second priority of debt that gets paid out after the 1st), depending on the first mortgage balance.

• Home price: $600,000
• Current Mortgage Balance: $480,000
• Example Home Equity Loan % of Home Price: 80%
• Example Home Equity Loan Amount:
• ** $600,000 * 80% = $480,000 (80% of Total Home Value)
• ** $480,000 - $480,000 (Current Mortgage Balance) = $0 (Home Equity Loan Amount) Using a traditional Home Equity Loan, you would be unable to borrow any money to renovate your new home.

Scenario 2 (Recent Home Purchase): Assuming that you have now paid 10% of your mortgage:

• Home price: $600,000
• Current Mortgage Amount: $420,000
• Example Home Equity Loan % of Home Price: 80%
• Example Home Equity Loan Amount:
• ** $600,000 * 80% = $480,000 (80% of Total Home Value)
• ** $480,000 - $420,000 (Current Mortgage Balance) = $60,000 (Home Equity Loan Amount)

Using a traditional Home Equity Loan, only after you paid 10% of your mortgage ($60,000), you would be able to borrow $60,000 for your renovations. However, you are still short $90,000 from the $150,000 that you want to spend renovating your home.

Just take a look at how long it can take to build up $100k equity:

Financing a home addition can be incredibly costly and often needs a large injection of cash and the reality is that those who have only recently bought their property and who haven’t yet got sufficient tappable equity, this isn’t going to be an option.

And even those who have equity available will find that an alternative such as a RenoFi Loan allows them to maximize their borrowing power and not feel any pressure to reduce the scope of their project, knowing that there’s a way to borrow all of the money that’s needed at the best possible rate.

Many homeowners don’t want to wait the many years it can take to build up enough equity, or have to compromise on the scope of the renovations, which often happens. We don’t think this is fair, and is one of the reasons why RenoFi was launched.

A home equity loan or home equity line of credit might be suitable financing options for some smaller projects for homeowners who have lived in their home for many years, but for most, they’re limiting.

RenoFi Home Equity Loan

Scenario 1 (New Home Purchase): Using the same example above where you want to spend $150,000 to renovate your new home and increase the value of your home by $150,000:

• Home price: $600,000
• Downpayment (20%): $120,000
• Current Mortgage Amount: $480,000

Example Home Equity Loan Amount: 

• $600,000 * 80% = $480,000 (80% of Total Home Value)
• $480,000 - $480,000 (Current Mortgage Balance) = $0 (Home Equity Loan Amount)

Example RenoFi Home Equity Loan Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $480,000 = $195,000 (RenoFi Home Equity Loan Amount)

Using a RenoFi Home Equity Loan you have increased your loan amount from $0 to $195,000. Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $195,000 because the RenoFi loan is written against your ARV (After Renovation Value).

Without RenoFi loans, you would not have been able to borrow the $150,000 needed to add the renovations that would increase the value of your home by $150,000. Now, with RenoFi loans, you are now able to get the loan you need to add the renovations you want to your home.

Scenario 2 (Recent Home Purchase): Assuming that you have now paid 10% of your mortgage:

• Home price: $600,000
• Current Mortgage Amount: $420,000

Example Home Equity Loan Amount: 

• Example Home Equity Loan % of Home Price: 80%
• Example Home Equity Loan Amount: 
• • $600,000 * 80% = $480,000 (80% of Total Home Value)
  • $480,000 - $420,000 (Current Mortgage Balance) = $60,000 (Home Equity Loan Amount)

Example RenoFi Home Equity Loan Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $420,000 = $255,000 (RenoFi Home Equity Loan Amount)

Using a RenoFi Home Equity Loan you have increased your loan amount from $60,000 to $255,000 (4.25x more). Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $255,000 because the RenoFi loan is written against your ARV (After Renovation Value). 

Here’s a summary of the difference between traditional and RenoFi home loans in table form: 

In addition to letting you borrow more money for your home renovations, RenoFi loans also offer:

• No draw periods
• No inspections
• No need to give up your original loan
• Higher borrowing limits

RenoFi loans are funded on the day the loan is closed and that is it. Take out the $195k and you get $195k in your bank and you have 20 years to pay off in equal monthly payments with interest and principal, just like a standard mortgage.

A Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC), unlike home equity loans, is more of a credit card. Generally, a homeowner can conveniently withdraw cash against your home equity with variable or fixed interest rates. HELOC loans are secured by your home. With a HELOC, you can access the funds at any time over a draw period of 10 years. During this 10 year period, the minimum payments are typically low and may include payments on the interest depending on the terms of your HELOC. During the repayment period, the principal and interest are grouped into a monthly payment, usually over 20 years.

You can borrow up to 85% of your home’s market value, less the total amount you still owe on the mortgage. This can be a great option if you have built a substantial amount of equity into your home and require a large amount of money to facilitate extensive renovation projects you have on your list. To be eligible for this type of financing, most lenders prefer clients with at least 20% equity in their homes. 

A HELOC allows you to be flexible on when you use your funds, but you still need to put up your house as collateral, which means that the bank may take your home if you fail to make payments on time.

RenoFi Home Equity Line of Credit (HELOC)

RenoFi also offers a HELOC product that is similar to a traditional HELOC, but uses the after renovation value of your home.

Scenario 1 (New Home Purchase): Using the same example above of borrowing $150,000 for renovations to increase the value of your home by $150,000:

• Home price: $600,000
• Downpayment (20%): $120,000
• Current Mortgage Amount: $480,000

Example Home Equity Line of Credit Amount: 

• $600,000 * 80% = $480,000 (80% of Total Home Value)
• $480,000 - $480,000 (Current Mortgage Balance) = $0 (Home Equity Line of Credit Amount)

Example RenoFi Home Equity Line of Credit Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $480,000 = $195,000 (RenoFi Home Equity Line of Credit Amount)

Using a RenoFi Home Equity Line of Credit you have increased your loan amount from $0 to $195,000. Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $195,000 because the RenoFi loan is written against your ARV (After Renovation Value).

RenoFi HELOCs provide a line of credit secured by your current home.

• Example RenoFi HELOC Terms:

  • Years to use credit line: 10 Years

    • Interest Only Period: 10 Years

  • Credit Amount: $195,000

  • Repayment Term: 15 years

In this example, you’ll have 10 years to use your credit of $195,000. Within those 10 years, just like a credit card, if you borrow against the credit line and pay it back, you will not pay interest.

However, for anything borrowed against your credit, that you do not pay off immediately, you will only pay interest during the first 10 years and then interest and principal after year 10.

Scenario 2 (Recent Home Purchase): Assuming that you have now paid 10% of your mortgage:

• Home price: $600,000
• Current Mortgage Amount: $420,000

Example Home Equity Line of Credit Amount: 

• Example Home Equity Line of Credit % of Home Price: 80%

• Example Home Equity Line of Credit Amount: 

  • $600,000 * 80% = $480,000 (80% of Total Home Value)
  • $480,000 - $420,000 (Current Mortgage Balance) = $60,000 (Home Equity Line of Credit Amount)

Example RenoFi Home Equity Line of Credit Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $420,000 = $255,000 (RenoFi Home Equity Line of Credit Amount)

Using a RenoFi Home Equity Line of Credit you have increased your loan amount from $60,000 to $255,000 (4.25x more). Not only are you now able to borrow the $150,000 you wanted to renovate your home, but you can now borrow up to $255,000 because the RenoFi loan is written against your ARV (After Renovation Value). 

In addition to letting you borrow more money for your home renovations, RenoFi loans also offer:

• No draw periods
• No inspections
• No need to give up your original loan
• Higher borrowing limits

A Cash-Out Refinance

A cash-out refinance involves refinancing your mortgage. By replacing your existing mortgage with a loan for a higher amount, you are then free to use the excess money to finance your home addition project.

But yet again, the issue with this option to finance an addition to your home is that it requires you to have generated significant equity in your property. Equity that many homeowners haven’t built up.

That said, even if this is the case and you have lived in your home for many years, the amount that can be released with a cash-out refinance is often capped by lenders at 80% of your home’s current value, again offering far less borrowing power in comparison to a RenoFi Loan.

RenoFi Cash Out Refinance

Instead of only using the equity you have in your house, RenoFi allows you to use the After Renovation Value (ARV) of your home as a lump sum at a fixed interest rate.

Let’s imagine a scenario where you want to spend $150,000 to renovate your new home and increase the value of your home by $150,000:

Scenario 1 (New Home Purchase): 

• Home price: $600,000
• Downpayment (20%): $120,000
• Current Mortgage Amount: $480,000

Example Cash Out Refinance Amount: 

• $600,000 * 80% = $480,000 (80% of Total Home Value)
• $480,000 - $480,000 (Current Mortgage Balance) = $0 (Cash Out Refinance Amount)

Example RenoFi Cash Out Refinance Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $480,000 = $195,000 (RenoFi Cash Out Refinance Amount)

By writing a loan against your equity in the after-renovation value of your home, RenoFi allows you to borrow funds for renovation against $750,000 versus $600,000. This increases your loan amount from $0 to $195,000, allowing you to borrow infinitely more than a traditional Cash Out Refinance for renovations.

This allows you to receive the $150,000 you were looking for with house renovations and even offer $45,000 above what you were asking for in case you needed more money for renovations.

Scenario 2 (Recent Home Purchase): Assuming that you have now paid 10% of your mortgage:

• Home price: $600,000
• Current Mortgage Amount: $420,000

Example Cash Out Refinance Amount: 

• Example Home Equity Loan % of Home Price: 80%

• Example Home Equity Loan Amount: 

  • $600,000 * 80% = $480,000 (80% of Total Home Value)
  • $480,000 - $420,000 (Current Mortgage Balance) = $60,000 (Cash Out Refinance Amount)

Example RenoFi Cash Out Refinance Amount:

• Assuming that your renovation project will add $150,000 to your home value

• After Renovation Value of Your Home: $750,000

• RenoFi Loan Amount: 

  • $750,000 * 90% = $675,000 (90% of Total Home Value)
  • $675,000 - $420,000 = $255,000 (RenoFi Cash Out Refinance Amount)

Using a RenoFi Cash Out Refinance, you have increased your loan amount from $60,000 to $255,000 because the RenoFi loan is written against the assessed after renovation value (ARV) of $750,000.

Again in this scenario, using RenoFi you are able to borrow significantly more than traditional loan options and borrow the $150,000 you are looking for to make your renovations and even have the option to receive $105,000 on top of the $150,000.

In addition to letting you borrow more money for your home renovations, RenoFi loans also offer:

• No draw periods
• No inspections
• No need to give up your original loan
• Higher borrowing limits

A Construction Loan

Construction loans were originally created to fund new home builds, but are also a popular method for financing major home renovations. Construction loans are based on the future value of your home after the proposed renovation or construction project, and combine a traditional mortgage with an added loan to fund improvements.

There are 2 types of construction loans:

1. Construction to Permanent Loan: these loans start at construction loans, but convert into a regular mortgage once the project is complete.
2. Stand-Alone construciton loans: these loans must be paid off or refinanced immediately after the construction period ends

Construction loan pros:

• Flexible draw schedules: you only borrow what you need and avoid unncessary interest costs
• Potentially higher loan amounts: typically allow you to borrow more than traditional equity options
• Specific to construction: Are tailored directly to home building or renovation specific purposes

Construction loan cons:

• High closing costs: loans are based on hte new value of your mortgage and home addition budget, versus just the renovations
• High Lender fees: lender fees are typically higher on construction loan than any other loan
• High interest rates
• Short term loan: only lasts 12-18 months
• Complex approvals: lenders may require detailed construction plans, budgets, and timelines
• Forced to refinance your home: this can often lead to higher rates than your current rate leading to higher monthly payments

FHA 203k or Fannie Mae HomeStyle Loan

FHA 203k or Fannie Mae Homestyle loans are two very similar government-sponsored loans that are often used by potential homebuyers who want to simultaneously finance the cost of buying a new home, alongside releasing cash to make improvements. They can also be used to refinance an existing home and add renovation costs to your mortgage.

These loans let you borrow against the predicted value of your home after work has finished in the same way that a RenoFi Loan does, therefore increasing your borrowing power. But the complexities of trying to take out one of these types of loans may leave your head spinning and put many people off.

The process is far from straightforward. There is a long list of qualifying criteria, and the steps for both an FHA 203k or Fannie Mae HomeStyle loan can be lengthy and complicated, however given their lower credit score requirement than other options, they’re sometimes the only financing method available to someone with a poor credit history that is looking to borrow based on their home’s after renovation value.

Take a look at our FHA 203k loans vs Fannie Mae HomeStyle loans guide to learn more.

A Personal Loan / Home Improvement Loan

You’ve probably come across home improvement loans and seen these recommended as a great way to finance an addition. But what you’re probably not aware of is that these are commonly unsecured personal loans that are marketed at those who are looking for a way to finance a home improvement project.

A personal loan is typically a streamlined process based on your credit history and income and provides a simple and fast route to accessing cash.

However, for most homeowners, neither personal loans or home improvement loans (or credit cards, which it’s worth mentioning here as they’re sometimes used to pay for smaller home improvement projects) are going to be the best way to finance an addition for two reasons: limited borrowing power and a high interest rate.

Of course, a higher interest rate means higher monthly payments and it’s worth noting that these can often be somewhere between 8% and 15%. On credit cards, this will usually be even higher.

A personal loan will also typically have far shorter repayment terms than other loan options, further increasing your monthly payments.

That said, because of the quick and simple application process and the ease to obtain, personal loans can be tempting for lower-cost projects that other options wouldn’t be suited to, despite not being the best financing option for most homeowners looking to finance an addition.

Credit Card

For very small projects like replacing a door, a credit card may be all you need. You can use credit to pay your balance in full every month which allows you to avoid interest charges, but typically has higher interest rates than any other type of financing.

Cash

If you have the cash to pay for the renovation, you can just use cash in order to purchase all the materials and labor for the renovation, but typically acquiring hundreds of thousands in cash takes a long time.

What’s The Best Way To Finance An Addition?

We believe that, for most homeowners at least, the most appealing way to finance an addition to your home is through a RenoFi Loan, given that it combines all the best features of other loans on the market.

They are the only home addition financing option to include all of the following benefits:

1. A loan based on the after renovation value
2. The potential to borrow up to 90% of the after renovation value of your home
3. No refinancing required
4. No inspections and draws needed

Just because you haven’t built up sufficient tappable equity to get a home equity loan or line of credit, it doesn’t mean you should be forced to reduce the scope of your project. And with other options available, you don’t have to.

But we cannot stress enough the importance of taking the time to fully understand the different financing options that are available to you and to know the pros and cons of each.

And this means asking yourself the following questions so that you can determine which route to go down:

• How much is your addition going to cost?
• How much equity do you have in your home?
• What’s your credit score and credit history?
• Do you have any other debt on other loans and credit cards?
• What is the maximum monthly payment you can afford?
• How long do you want to repay the loan over?

House Additions: Costs, Financing, and Expert Advice

Adding onto your existing space to create your own dream home can both drastically increase the value of your property by increasing your home’s livable square footage. Whether it’s to accommodate your growing family or adapt to your changing needs, an addition can offer an incredible ROI both financially and functionally.

But knowing how to finance an addition can be tricky. A quick search will undoubtedly generate several ways to cover the costs of your project, and we know getting your head around the differences between them all can be very confusing. And making the wrong choice can increase your monthly payments and limit your borrowing power.

From a RenoFi Loan to a traditional home equity loan, a personal loan, a construction loan, and more, we’ll take you step-by-step through the different financing options available. And for newer homeowners, we’ll also cover how to finance a home addition without equity, so that you can determine the best route to help you borrow the money you need to cover your home addition costs.

Types of House Additions

A home addition is any project that increases its total living area — either horizontally or vertically. They come in all shapes, sizes, budgets, and purposes, which will all undoubtedly play a factor when deciding how to finance a home addition in the best way for you. 

According to HomeAdvisor, the average cost to build an addition or adding a room to your home is $46,343, with most projects coming in between $20,864 and $72,244 depending on the scope and specifications.

Below are three of the most common types of home addition:

Full Addition

The most typical of home additions are full or traditional. These are extra rooms and spaces added to the property, which expand the square footage. Depending on the scale of work, these also take the longest to complete and usually cost the most. This type of project also includes the likes of sunroom and garage additions.

Micro Addition

Rather than creating an entirely new room, micro additions, otherwise known as bump-out additions, extend from existing rooms. Therefore, they provide a simpler and cheaper option for those who don’t feel like they need as much extra space.

Second Story Addition

When building outwards isn’t available to you, a second story addition could be the best choice for creating more space. Perhaps the plot size your home stands on isn’t big enough, or you don’t want to sacrifice the yard space. It’s also worth noting that building up is often somewhat cheaper than adding on.

In many cases, building vertically can provide the ideal solution for additional bedrooms or bathrooms or even a master suite.

Room Additions

Whether it’s adding an in-law suite or new home office, a very common type of home addition is building a single room structure onto the side of the home. These additions are typically designed for a single function — like a bedroom, bathroom, or hobby room and can cost between $22,000 to $81,000.

Second-story Additions

When land is at a premium, a second-story addition can help homeowners significantly increase their living space without expanding the property’s footprint. These additions often double the amount of floor space (unless only a partial addition), and can significantly improve a home’s resale value. But these additions are also a major undertaking, usually requiring homeowners to live elsewhere during construction.

Bump-out Additions

Bump outs increase the layout of a specific room, such as expanding a kitchen to add an eat-in space or making a basement larger to accommodate more storage. It may only be an additional 50 square feet to add a walk-in shower to your Master bathroom. Since these additions are typically smaller, they usually tend to be less expensive. 

Sunroom or Conservatory Additions

A sunroom is usually a supplemental living space that is typically separated from the main part of the house. Designed to allow for a lot of natural light and often utilizing pre-fabricated materials, these spaces are extremely versatile — great for relaxation or indoor gardening.

Garage Conversions

A garage conversion transforms one- or two-vehicle attached garage into a finished, functional living space. This is done by adding flooring, installing a ceiling and installation, and replacing the garage door with a solid wall. In many cases, these spaces are used for in-law suites, but with a private entrance, it is also great for rental purposes.

Things To Considerations With House Additions

Before you make any concrete decisions regarding your home addition, you’ll want to make sure you’ve considered everything. So while you’re busy creating your wish-list and researching loan options, here are a few things you’ll also need to know.

Obtaining Permits. Every city and state will require their own permits for home addition projects with various rules and guidelines to obtain them. While your contractor will likely handle that part of the process for you, it helps to understand what you need as a checks and balances. You will also be the one paying for them, so the more you know, the better you can budget.

Working with Architects/Designers. While it’s not required to use an architect or professional designer to build an addition, it could offer some major benefits. A designer will help you ensure cohesion from your current home to your new space, while offering helpful recommendations and material alternatives that look great and save cost. An architect can help you make critical decisions regarding the functionality of your space and how to best add value to your new space in ways you may not have considered.

Coordinating with Contractors. You and your contractor have to be on the same page in order for your working relationship to actually work. Every contractor will have their own communication style, so make sure it meets your needs. Ask who will be your daily point-of-contact, and determine project milestones ahead of time. Make sure everything is laid out and clearly identified in your contract, so there’s no discrepancies later on.

Structural feasibility. Consult your contractor (or 2-3) and invite them to come out and inspect your space. You’ll want to make sure that the visions you have for your addition are actually possible, and if they are, what kind of work and cost you’re getting into. There may be some load bearing walls you simply can’t remove or areas without plumbing or electric that will require more specialty subcontractors to complete.

Functional and design considerations. Do your own research online to see what you like and explore different designs with a professional so you know your options and what’s possible. Try  not to stray too far from your current home design and decor, so that the space feels more connected. While you want the addition to meet your needs, cohesion is important to ensure a seamless design that complements the spaces in your home that you already love.

3 Reasons Why A Home Addition Is A Great Idea

Your family may have outgrown your home, but you don’t want to move.

Maybe you have been promising yourself that dream kitchen for a while now. Maybe you want to create the space that each person in your family needs as your children grow into young adults.

Everyone has a different motivation for creating an addition to their home, but what are the main benefits of building onto your existing property?

1. Extra Living Space

One of the most common motivations for a home addition is simply to enjoy extra living space that can be tailored to personal needs. Unsurprisingly, increasing square footage is at the top of homeowners’ renovation wishlists.

2. Stay In The Neighborhood You Love

Not only can a home addition be cheaper and easier than moving, but perhaps you worry that finding another property in your desired area might be challenging given the housing stock shortage that we find ourselves in the midst of right now. Adding extra space to your existing property saves the disruption of uprooting from friends, neighbors, schools, and the amenities you currently enjoy in your current location.

3. Increase Your Home’s Value

While it is not always guaranteed, typically an addition to your home is going to be a financial investment that increases the overall value of the property. Even if you are not planning to move for a considerable amount of time, an impressive addition will add curb appeal if you do want to sell in the future.

Home Addition Costs in 2025

So how much does a home addition cost? According to HomeAdvisor, the average cost of a home addition or adding a room to your home is $46,343, with most projects coming in between $22,215 and $81,369 depending on the scope and specifications.

• Home office: $18,000 to $35,000. If you also want it to serve as a spare bedroom, it needs to be at least 70 square feet, have a window, and a closet
• Master bedroom: $25,000 to $100,000
• Bathroom: $20,000 to $60,000. Although it is one of the most expensive rooms to add, it can increase resale value by more than 50%
• Kitchen: Average of approx. $65,000. Gourmet kitchens with high-end appliances can reach $125,000+
• Second story: $100 to $500 per square foot, especially if a roof replacement is involved.

When determining how to pay for a home addition, you’re going to be faced with a number of different options, but they each come with their own advantages and disadvantages. So it’s important to have all the information possible and understand the differences.

Making the Best Decision for Your Home Additions

Regardless of the size and scope of your home addition, you want to finance it in the smartest way possible. We cannot stress enough the importance of taking the time to fully understand the different options that are available to you and to know the pros and cons of each. And this means asking yourself the following questions:

• How much is your addition going to cost?
• How much equity do you have in your home?
• What’s your credit score and credit history?
• Do you have any other debt on other loans and credit cards?
• What is the maximum monthly payment you can afford?
• How long do you want to repay the loan over?

When you have the answers, contact RenoFi for next steps. We can help you determine if one of our renovation loans is right for you. We can also connect you with local contractors and lenders within our extensive network so you can rest assured you’re getting the highest quality for competitive rates.

Check out our awesome monthly payment calculator to see instantly how RenoFi loans increase the amount you can borrow and what those rates may look like for you. And for more smart tips and information on getting the most ROI out of your new home additions as possible, contact RenoFi today. 

Home Addition Financing FAQs

Below you’ll find answers to some of the most common questions that homeowners have when considering different financing options for their addition.

If you would like to leverage maximum borrowing power while still taking advantage of the lowest interest rates and monthly payments, then we’d love to chat with you further about a RenoFi Loan.