Home Addition Financing

Can you finance a home addition?

Yes - because it is such a large project and a costly undertaking, most people have to look to financing to pay for a home addition. There are a range of options available to you for how you can finance your home addition, which we’ll guide you through below.

Which lenders finance home additions?

LightStream

LightStream

✔ Funding: Borrow $5,000 - $100,000
✔ Minimum Credit Score: 660
✔ APR: 2.49% - 19.99%
✔ Loan term: 2 - 7 years
✔ Funding turnaround: as soon as same business day

LightStream offers up to $100k personal loans as soon as same business day without origination fees and easy to use mobile app.

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Upgrade

Upgrade

✔ Funding: Borrow $1,000 - $50,000
✔ Minimum Credit Score: 660
✔ APR: 5.94% to 35.97%
✔ Loan term: 2 - 7 years
✔ Funding turnaround: as soon as next business day

Upgrade offers borrowers with fair credit scores to obtain loans up to $50k. Joint applications are allowed. Origination fees may apply.

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SoFi

SoFi

✔ Funding: Borrow $5,000 - $100,000
✔ Minimum Credit Score: 680
✔ APR: 4.99% to 19.53%
✔ Loan term: 2 - 7 years
✔ Funding turnaround: 1 - 3 business days

With SoFi personal loans, borrowers can get access to up to $100,000 with APR starting as low as 4.99% with extra bonus perks ($500 for each funded loan) and fast turnaround time. 24/7 customer support available.

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How much does a home addition cost?

The varies hugely depending on where you live, what kind of addition you want, and the current cost of materials. According to HomeAdvisor, the average cost of a home addition is $46,343, though they can be anywhere from $20,000 - $75,000, depending on what you want.

Are there different types of home addition?

There are 3 types of home addition:

• Full Addition: This is where extra rooms are added to the home, either on one floor or across multiple floors. This type of addition is the most extensive and thus most expensive.
• Micro Addition: This is where you extend the size of a room with a bump-out, rather than adding an entirely new room.
• Second Story Addition: If you have two floors but the first floor is larger than the second, you can extend the second story out so it matches the footprint of the ground floor.

What type of loan is best for a home addition?

• Financing through your contractor: Large contractors that specialize in home additions may work with a partner lender to help arrange financing for the project. If your contractor does offer this, make sure you compare what they’re offering you with external lenders so you can make sure you’re getting the project for the lowest total cost you can.
• Personal loan: If you are looking for a small extension or have a high enough income and good enough credit score to qualify for a large loan, a personal loan can be the best way to find the financing you need. These loans have the benefit of being unsecured, so you don’t need to leverage your home’s equity to get your finance, which will keep your home safe if you got into financial difficulty.
• HELOC: A home equity line of credit is one of the best ways to leverage your home equity to pay for the addition. This is where a lender gives you access to a line of credit with a maximum credit limit (like you have with a credit card) and only pay interest on the money you borrow. This can be a good option if you aren’t paying for the addition upfront.
• Home Equity Loan: This loan is another that leverages your home equity, but is essentially a second mortgage.
• Cash-Out Refinance: If you’re considering a home equity loan, also consider cash-out refinancing, which is remortgaging to see if you can release the equity in that way. For example, if your first loan was for $325,000, you could increase your mortgage to $400,000 for a large home addition (give or take some depending on how long you’ve had the original mortgage) and use the $75,000 to pay for the addition.
• Rural Housing Loan: If you have a relatively low income and live in a rural area, you may be able to qualify for a rural housing loan from (or guaranteed by) the government. To find out more about this option, click here.

How much can you borrow for a home addition?

This is (unfortunately!) the “how long is a piece of string?” question. It depends totally on your income, how much debt you have, where you live, what kind of home addition you want, and how much equity you can leverage in your home, if you plan to use that method to pay for the home addition. Personal loans generally offer up to $50,000 or $100,000, though you’ll need to be highly qualified to have a chance at getting these large amounts.