Is your home a bit too small for your needs? Is a growing family causing challenges that could be resolved by adding a new room, or even a new floor? In many cases, building home additions for your Rochester, NY, house is going to be the best option. It’s far less expensive than buying a new home and will also add substantial value to your property going forward.
A well-designed Rochester home addition can look like it was always part of your home while expanding your floor space and opening up new potential. However, it won’t be cheap. A typical home addition will run five figures, with the exact amount depending on how much space you’re adding and how long the construction will take. It’s a big investment, but it will pay off – once you’ve found a way to pay for it.
So, in this article, we wanted to talk about financing: How should you go about determining a budget, and what types of financing options are available. Let’s take a look!
Determining the scope and budget
Before looking into financing your Rochester home addition, you need to know what you’re actually going to do, and what it’s likely to cost.
For home additions, there are three basic categories:
1 – Micro-additions
This is the smallest-scale and cheapest option for a home addition. Rather than a full new room, it instead involves extending one particular room to add some floor space. For example, dining rooms are a popular option. A “bump out” extending the dining area by a few feet – or creating a breakfast nook – can make your dining area more spacious, without requiring a huge investment.
2 – Story additions
If your foundations and existing support structure can handle it, adding a new story on top of your existing home is a totally viable option. The new story can be as wide as the story below, or only be a partial story. Plus, story additions are less expensive than you might think. They’re easier to add than a full room since they’re just building on the existing structures and support.
3 – Full addition
A full addition means adding at least one entirely new enclosed room to the home. This is the most expensive option since it will require digging out and extending the foundation, as well as fully attaching the new room(s) to the existing structure. However, many people don’t particularly want another floor, especially if they only want one new room, so this remains a popular option.
Once you have a good idea of what type of home addition you want, you can start calling around to contractors and getting estimates. Look for a bid that’s in the middle of the pack, and it’ll give you a good overall estimate of the full costs.
Financing Your Home Additions in Rochester, NY
So, once you know the cost, how can you go about paying for the additions? You’ve got several options here.
1 – Cash
If you’re flush, cash is always king. This will also be the cheapest option in the long run, since you won’t be taking out a loan or paying interest on your payments. If you don’t have enough to pay for the full upgrade, you can still contribute a big down payment to reduce the long-term costs.
2 – Home Equity Line of Credit (HELOC)
One of the more common ways of finding funding for a home addition is through a HELOC loan. Basically, you borrow against the accumulated value of your home as a way of funding the upgrade, knowing that it will increase your home’s value in the long run.
The downside, of course, is that your home is the collateral – so you have to maintain payments or risk foreclosure. Also, this does require your home to be valuable enough for the lender to consider it worth the risk.
3 – Construction Loans
Another option is to go to a bank, or similar institution, and simply take out a loan for the cost of construction. However, this is a sub-optimal solution for many people. For one thing, it typically requires the contractor to co-sign on the loan, which they may not be willing to do.
Also, it may lead to your home being refinanced at a higher rate, and the overall fees and closing costs can also add substantially to the price tag.
4 – Government loans
The government maintains multiple operations, including the Federal Housing Authority (FHA) and Fannie Mae, which can potentially provide low-interest loans for home construction. If you qualify, these can be a great deal… if you qualify. The application process is typically difficult, and the loans are primarily intended for low-income or first-time homeowners. Still, this can be a great option for those who can get into the programs.
5- Cash-out refinancing
If you’ve owned your home for an extended period and it has sizable existing equity, you may be able to take advantage of cash-out refinancing. It would be a new mortgage that pays off your existing mortgage and then adds more to the top of the loan, which you cash out to fund the upgrades. Whether you end up with a higher interest rate or not will depend on your credit rating and your home’s overall value.
6 – Credit cards
Of course, if you’ve got good credit, you could potentially pay for the upgrade via credit cards. The advantage here is that you’re not putting your home on the line, since it’s typically collateral in other types of home improvement loans. The downside is that credit cards almost always carry higher interest rates than other types of home improvement financing, so you may end up paying more in the long run.
If you’re looking to install home additions in your Rochester, NY, house, Spartacus Construction can make it happen! We’ll help you settle on a budget, and also recommend options for financing. Contact us for a free consultation and estimate!