Financing a Home Extension Project

There are times in life when you benefit from perfect timing. That was the case when we built our house about six years ago. We’ve been lucky enough to own a rather big house for a rather small price. Our goal was to raise our future family in it and still is.

Why a Home Extension?

As the years have gone by, we realised we might end up not having enough space. If all goes well, we would love to have a family of four children. Of course, just one at a time (hopefully!), but we haven’t change our minds yet. Although we know it might not be essential, we prefer having the possibility for each of our kids to have their own bedroom, especially when they get into their teenage years.

Since I also work from home, I need an extra room for my office. At the moment, it is upstairs. I could surely move it down to the basement, but it wouldn’t be a smart move for my mental health! 😉 I need to be able to see the sunlight while I work, otherwise I’d quickly turn crazy.

There is a bedroom in the basement, but it is currently a play area that we won’t be able to get rid of for many years; not as long as we have young kids!

All this put together, we are left with only three bedrooms, including ours. If we really end up having four children, we would need two more. That’s why we thought about a home extension. You can see below my elaborate architect skills done with Paint! 😉 Still, it gives a good idea of what we could get done to create a large bedroom. Two children could share this one until we can move one into the basement.

How to Finance It?

The project is there and quite exciting, the hard part is how to finance it. We expect the cost to be somewhere between $40-50k. It’s definitely a challenge to accumulate such savings with a family to support. Yet we know that it is still cheaper than buying a new house. We’ve been looking at houses for sale that have the desired number of rooms and they’re simply too expensive.

1. Plan Ahead

When it comes to finance, it’s never too soon to start planning such an expense. We don’t think we will need this extension for another five years. That’s why the time has come for us to make serious plans.

2. Look at Financing Tools

Ideally, of course, we would like to have no debt at all. However, I don’t think it would be realistic for us to think we won’t need financing to get it done.

We currently have a home equity line of credit. One possibility would be to make higher transfers into that line of credit in order to liberate some funds for later. However, it would mean at least 10 years more to pay off our mortgage. It’s still worth looking into, which you can do if you click here.

A completely new home loan, meaning refinancing, is something else to look at. I’m not sure if it would be more advantageous than using our line of credit in terms of interest and years, though.

Another financing tool would be a personal loan. I’m not really interested in contracting a personal loan on top of a home loan, especially knowing that most personal loans have higher interests than do home loans.

Investment withdrawal could be considered by some people, too. I must admit that I find this technique risky. What are the chances to gain your investment back in the same period of time? Will it mean a late retirement? I’d feel insecure to use our retirement savings.

Did I forget something? How would you finance such a project? Please share your ideas!

Image credit: Renovation plan by myself using original from here, home extension

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