Four Steps to Budgeting for Your New Home Addition Project

Are you thinking about adding a new room or even a new wing onto your home? A new addition is an excellent way to make your existing home more functional for your family’s current needs. It eliminates the need to relocate to a new home, and it also could potentially boost your property value dramatically. Paying for this very large project is often a concern. By walking through a few straightforward steps, you can more easily find the funds needed to get the ball rolling on your new home addition project.

Understand the Scope of Your Project

Before you can know if you have enough cash on hand to complete your new home addition project, you need to understand exactly what you plan to accomplish through this project. For example, what dimensions are needed for the new room or wing? What finishes will be used on the interior? Are your electrical and HVAC systems suitable for accommodating the additional demand that these new spaces would generate? When you define your needs and desires upfront, you can more successfully obtain accurate quotes from contractors for the work that needs to be done.

Gather Quotes from Reputable Contractors

With a clear picture of the scope of your project in mind, research reputable contractors in your area, and ask them to visit your home for a consultation and quote. Some contractors may advise you about improved or more strategic ways to accomplish your goals. For example, a contractor may tell you that adding a room onto one side of the house would be much more expensive to do because of the design of the roof. He may advise you to consider adding a room to another side of the house to save money. Be open to these recommendations so that you can keep expenses as low as possible.

Analyze Financing and Funding Options

After you have taken time to thoroughly screen and vet contractors and to request bids for your project, you will have a reasonable idea about how much money is needed for your project. Determine how much of your cash on hand you wish to invest in the home addition project. While using some of your cash is a smart idea, avoid investing so much of your money into the project that you are cash poor. You also need to consider locating affordable financing for your project. One idea is to apply for a home equity loan, or you could get a cash-out refinance mortgage. Understand how these new expenses will alter your budget going forward.

Find Ways to Save

If you plan to finance any portion of your new home addition project, you need to ensure that the new payment will be affordable for your budget. It is wise to scale back on regular budget expenses as much as possible to compensate for this new expense in your budget. Another idea is to reduce spending several months or more before you begin the construction process. By cutting back on expenses, you may be able to save more cash that can be used to pay for this project. This can decrease the amount of money that you need to borrow to pay for the new addition.

The only thing stopping you from proceeding with the construction of a new room or wing on your home may be funding. Paying for this significant project usually requires planning and strategizing. However, when you approach this step in the process thoughtfully and take your time pulling together funding from the right places, you could find the money that you need to get started.

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