Addition - financing and where to start, like I’m five

[4133]

Hi, I’m a lurker and could use some advice. Thank you!

We are considering an addition to our home, which is 100 years old/3 bed/1 bath/1400 sq ft. It would be a two story addition, probably approx 24’ x 14’, and include a kitchen downstairs and a master bed and bath upstairs. We would turn our old kitchen into a powder room/laundry room/mud room combo. Our floors are original and would likely need to be replaced throughout the home (no subfloor, lots of previous damage, really big dips). And then we would put new siding on the house. So basically a ton of work.

(The other option is to move but we love our neighborhood and would happily stay forever.)

We own the home outright and have a “small” amount saved right now ($20k). Where should I start for financing? A HELOC? Do I just compare rates from different companies? We have always DIYed/paid in cash for other (small) projects, but I would like to do this before the kids are all teenagers.

Where should I start for the addition itself? Call different architects to get drawings?

Thank you again!

[origami]

Re: the financing. That sounds like a costly (but exciting!) project. If you could pay it off quickly, HELOCs are nice. But the interest rates are usually variable after an initial period. If this would take you years to pay off I’d look at getting a (partial) mortgage again. My HELOC has no closing costs, so that’s the other pro. But you’d need bank estimates to compare the higher interest rates vs mortgage fees to see which is better for this project.

[mrsukyankee]

4133, we used a small mortgage on our paid off home to finance a project. We ended up paying it off early, which was nice (we made sure that it was part of the mortgage). We were able to get a lower rate with a mortgage.

As for the project, we ended up getting an architect first (to do the drawings) and then the contractor to work with the architect (we needed an engineer too to deal with a lot of the beams and the like).

[dr.girlfriend]

We started with a contractor, to get a rough estimate on pricing and to make sure what we wanted was even doable. Some quotes were outright ridiculous (like, 150% of our home's purchase price) but we found a good contractor at a price we were comfortable with and used an architect he recommended. In the end we had to get variances from our zoning board, and also the architect had a lengthy family issue (her husband was terminally ill) that delayed things by almost two years, and we ended up being able to cashflow everything. However, we would have been prepared to get a HELOC. Be aware that the HELOC is limited to a certain percentage of your home's value even if you could afford more.

[froggy76]

I would talk to a handful of contractors first or design/build companies. You need to get a rough sense of price because it will likely cost much more than you expect! But then I'd find a really great architect and have them draw the plans. We just did our renovation with a design/build company and I think we could have gotten a better architect if we chose one that worked independently.

For financing, mortgage rates are SO low right now, I would consider just taking out a mortgage on the house rather than doing a HELOC. We had a mortgage on our house already, but did a cash-out refi to get some more cash to fund a portion of the project since we expanded the scope and hadn't quite saved enough.

[lo]

A couple years ago we looked into doing almost the exact same plan on our 100 year old1200 sq ft house and it was quoted over 200k, just FYI! Probably more expensive now! Anyway, we moved to a bigger house in the same neighborhood.

[4133]

Thanks everyone! And lo I’m wondering if that’s about where it will come in. I ran it (roughly) by our contractor and he guessed $125k but I’m sure that will change. Moving may make more sense but the idea of getting this place ready to sell stresses me out!

[boiler717]

Aug 10, 2021 17:47:25 GMT -5 4133 said:

Thanks everyone! And lo I’m wondering if that’s about where it will come in. I ran it (roughly) by our contractor and he guessed $125k but I’m sure that will change. Moving may make more sense but the idea of getting this place ready to sell stresses me out!

I agree with contractor first! I think that is super low but IDK. My friend is doing a second story addition (over and existing first floor addition) and it’s coming in close to $175k before even starting so likely $200k. This is for a primary suite, two smaller bedrooms with a JnJ bath, and a small laundry closet.

[ny96]

We’re starting a project similar to this and estimating it will cost between 400k to 500k. H is an architect and drew up the plans, but we recently met with our mortgage broker to discuss financing and we are now searching for contractors.