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  • Hunter Lancaster

How To Finance A Home Addition

Updated: Jun 12

Thinking about adding more space to your house is pretty exciting. It can make your home bigger and even raise its value. But the most important question is, how are you going to pay for it? Whether you are dreaming of an extra bedroom, a handy storage area, or just a bigger kitchen, the benefits are clear. But the excitement of planning your new space can quickly meet the reality of the costs involved. Figuring out how to pay for a home addition is a big part of making your dreams come true. It can be expensive, and that's where different financing options come in. Luckily, there are various ways to fund your home expansion. 

Our guide is here to help you navigate through these choices and provide the information you need. We want to make sure you feel confident and informed when it comes to financing your home addition. So, let's dive in and explore the best ways to turn your home improvement dreams into a reality you can afford!

How Much Does a Home Addition Cost?

Home Addition Cost

In Florida, adding more space to your home can cost you anywhere from $85 to $350 per square foot. The total expense depends on factors like how big the project is, whether you get professionals involved, the finishes you choose, and other stuff. For example, if you are thinking about putting in a new bathroom, it might cost you between $75 and $280 per square foot. But if it's a bedroom you want to add, it could cost you around $90 to $190 per square foot. Keep in mind that building materials have gotten more expensive lately because of supply issues and inflation. So, even if you are planning a simple addition like a porch or a small backyard extension, the home addition cost could be more than you first thought.

Different Options For Financing A Home Addition

Financing A Home

1. Home Equity Line of Credit (HELOC): Considering a Home Equity Line of Credit (HELOC) is a good way to fund your home addition. It works like a credit line, similar to a personal one, but with your home as security. The amount you can borrow depends on how much equity you have in your home, usually around 10% to 20%. 

One benefit is that the interest rate is often lower as compared to a regular personal line of credit. But keep in mind that if you can't make your payments, the lender could take your home. Also, if you sell your home, you will need to pay off any remaining balance on the HELOC. 

2. Cash-Out Refinance: If you have managed to build up some equity in your home, you might want to consider using a cash-out refinance to help fund your home addition. This involves swapping your current mortgage for a larger one, and the extra money becomes a lump sum that you can use for your project. Lenders usually limit this type of refinance to 80% of your home's equity, known as the loan-to-value ratio (LTV). 

When you apply, lenders will check your home's current value, LTV, and other factors, along with your credit. Keep in mind that this process takes a bit longer than getting a credit card or personal loan. You will also need to cover closing costs and possibly other fees. Plus, your new loan will have a different term and interest rate based on the current market rates.

3. Home Equity Loan: Thinking about a home equity loan is another way to finance your home addition which is similar to a HELOC (Home Equity Line of Credit). This loan allows you to borrow against your home's equity, typically requiring 10% to 20% equity for eligibility. What makes it different is that you pay it back in regular monthly amounts over 5 to 30 years, getting all the money at once. 

Since it's a secured loan, the interest rate could be lower. But be careful; missing payments could lead to foreclosure, and if you sell your home, you will need to pay off what's left on the loan. Keep in mind, the application process might take a bit longer than an unsecured loan.

4. Construction/Renovation Loan: A Construction/Renovation loan, usually meant for building new homes, can also be a good choice if you are adding on to your house. Unlike regular loans, this type considers the future value of your property after the addition, potentially letting you borrow more. It's handy if you don't have a lot of equity in your home or if your project is pricey. Just keep in mind that these loans vary, and you should understand their terms. 

Some may have the lender controlling the money during construction, and there might be rules on how you use the funds. Plus, different loans have different time frames, so it's important to know all the details. 

5. Personal Loan: If you don't want to use your home as collateral, getting a personal loan is a great way to finance your home addition. With personal loans, you get flexible repayment terms that fit your budget, and there's no risk of losing your house. But keep in mind that most lenders will check your credit score, credit history, and how well you can repay the loan before approving it. 

So, make sure your credit score is good and you are managing your debts well before applying for a personal loan. That way, you will have a better chance of getting the money you need.

6. Savings: Saving up money is the smartest and safest way to fund your home addition. It might seem a bit old-fashioned, but using your own money for a home project is pretty satisfying. You don't have to stress about paying back a loan or dealing with a big credit card bill after the renovation is done. 

How much you need to save depends on the type and size of the project. It's a good idea to start with smaller, less expensive projects first. By doing so, you can enhance your home without encountering financial worries once the renovation is complete. 

7. Credit Cards: If you have a small home addition project that's not too expensive, using a credit card can be a good way to pay for it. Some cards let you pay without interest for the first few months. It's even better if you can get a card with a 0 percent introductory APR. Just be careful not to spend too much, so you don't end up stuck in a cycle of debt!

Popular Home Additions

Popular Home Additions

Some of the popular home additions and their estimated costs are discussed below. Keep in mind that these are just general estimates; the real cost can vary based on your specific plans and where you live. It's always a good idea to get the right home builder involved for accurate costs that match your home addition goals.

1. Sunroom Addition: If you are looking to bring the outside vibes into your home, think about adding a sunroom. Sunrooms are like flexible extra spaces that are usually separate from the main part of the house. You can use it as a relaxing spot, a home gym, or even for growing plants indoors. Adding a sunroom comes with benefits like lots of natural light, great views, a connection to nature, and an easy flow between indoor and outdoor living. The cost of building a sunroom can range from $85 to $420 per square foot, and the final price depends on your requirements, materials used, size of the sunroom, and other factors. 

2. Second Story Addition: If you want more room in your house but don't want to expand the ground floor, think about adding a second story. This kind of addition lets you create a whole new floor on top of your current home. The good things about this are that you get more living space, room for extra bedrooms, better views, and a nicer look for your house. On average, adding a second story can cost between $90 and $320 per square foot. But remember, the total cost can change based on how big the space is and what features you want in the new addition.

3. Bathroom Addition: If you are thinking about adding another bathroom, it might seem like a small addition at first. But the truth is, it can get expensive quickly because of all the plumbing needed. Adding a bathroom to your home can cost you between $180 and $260 per square foot. The cost can vary a lot based on how big you want the bathroom to be, how close it is to existing plumbing and the materials and fixtures you pick.

4. Kitchen Addition: Every year, more than 10 million kitchens in the United States get a makeover. If you have been dreaming of a bigger kitchen but have never had enough space, consider adding an extension. You can expand your kitchen to provide more room for spacious countertops and extra cabinet storage. In Florida, the cost of a kitchen extension can range from $180 to $350 per square foot.

5. Basement Conversion: If you need more room but can't expand your home, turning your basement into a living area is a great solution. It's a cost-effective way to add space, whether for a home office or a guest suite, and it blends seamlessly with your existing home. On average, converting your basement can cost between $90 and $540 per square foot, depending on factors like the size of the existing space and your specific needs. This price covers tasks such as digging out the crawl space, setting up drainage and plumbing, building the foundation, and strengthening the home structure.


Finding the right way to finance your home addition is important, and it's necessary to understand the various options available. Whether you are considering Home Equity Lines of Credit (HELOC), Cash-Out Refinances, Home Equity Loans, or Construction/Renovation Loans, each choice comes with its pros and cons. Take your time considering the factors to pick what suits your needs best. Once you have your finances sorted, the next big step is choosing a professional contractor to bring your plans to life. Think about going with EG Homes Florida for your home addition project. 

Our Delray Beach's Home Additions team of experts works directly with you to create the best possible design. We will understand your requirements, thoroughly inspect the workplace, and then plan the design so that you get the best value for your money and space. Moreover, we will provide you with our cost estimates and make sure that they fit your budget. 

With EG Homes Florida, you not only get the extra space you need but also boost the value of your home. Home addition is a smart investment for your future, and we are here to help turn your ideas into a real and valuable upgrade. Make a wise choice, invest in your home's potential, and let us be the ones to bring your vision to life, creating a lasting and valuable improvement for your home.


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