One 1950s style house.
One small dining area.
Eight people in the family.
Hmm…that math doesn’t add up.
How We Added On To Our Old House
We knew we needed more space, but I have to admit…the idea of even getting started was overwhelming. What are the steps to building an addition to your house?
I mean, could we even afford it?
If so, how would we get the money to cover everything?
Then, where do we even go from there?
But my biggest worries were… how to find trustworthy contractors? And what added expenses would crop up once we got started?
(That one ended up being a doozy. But I didn’t know how big of a doozy it would be until just a week ago.)
(But more on that later.)
Finding The Right Answers
We started this process in late 2020, which added even more wrinkles to the already tough process of adding on to a house.
Between pandemic rules, the boom in home construction, the rising costs of materials (especially things like wood), and (in some cases) the lack of materials, this process has taken 15 months…and it’s still not finished.
In our new/old kitchen, we still haven’t installed cabinets, countertops, or flooring yet.
I’ve been without a kitchen sink or dishwasher for two weeks, and there’s no end in sight. I won’t lie and say that’s been easy.
(More like frustrating and demoralizing.)
BUT…there’s still plenty of new things to appreciate and enjoy in our home. And that helps.
So, how did we make it all work?
Well, I started to write about the whole process of adding on to our house…and quickly realized that it’s waaaay too much information for one post.
So I’m breaking this down into a series of posts with all the steps for building an addition to your house.
Today, we’re just gonna focus on step one…
The First Step To Adding On To Your House: Finding The Money
The first thing I did when it came to finding the money for our home addition project was to pray.
That might not be popular with you, but it’s what I did, and it made all the difference.
Now, you should be warned that if you ask God to guide you (making sure this is the right choice for your family and then finding ways to make it work), He’s going to do things His way.
In several cases, it was painful. But it worked.
>>Figure Out The Bank Stuff
As much as I’d like to tell you we paid cash for the whole addition, that’s not how it happened.
Instead, we took advantage of low interest rates and higher than usual home values. A cash out refinance worked in our favor.
This worked for us, because we’d already paid down our mortgage quite a bit over the past 13 years. AND the price of homes in our area (probably in your area, too) have skyrocketed during the pandemic.
(Also, we have no intentions of selling our home, so we didn’t have to worry about prices settling back down in a year or two.)
The bank was willing to give us 80% of the equity we had in our home. That was based on the value that the bank’s home appraiser gave to our home in its current condition.
We used that 80% to pay off the old mortgage and pull out cash to put into a bank account.
We chose a local bank that we’ve used a couple of times in the past for mortgages and refinancing. They offer no closing costs, low fees, and (at the time) low rates.
By the way, refinancing gave us much better rates than a home equity loan or line of credit.
How Do You Know What Your Home Is Worth?
You can get a very generic idea by checking Zillow for your house value. (The value Zillow gave me was higher than what the bank said.)
Another very generic idea is to search for homes in your area on a local real estate site and see which homes are selling (make sure they have similar specs to your home…number of bedrooms and bathrooms, acreage, etc.).
Neither of these options are going to give you a real idea of what you can expect from your home value.
But if nothing else, it will tell you if you’re in the ballpark, or if you are two states away from the ballpark (and it’s not going to be worth your effort to try).
In the end, we were able to draw out enough cash to cover 2/3rds of the overall cost of the addition.
The mortgage we settled on raised our monthly payment a few hundred dollars, which was within our budget. (Yay!)
We chose a 20 year mortgage, which shaved a year off of the mortgage we had before. (We had refinanced in 2012 for those wondering why that math doesn’t add up.) Another yay!
We could afford that in our monthly budget, and I felt good about not adding years to our loan.
>>Open A New Account
We needed a place to deposit that chunk of cash, so we opened a new bank account.
Since we already use Capital One 360 for our savings, we just opened another account related to that one.
Unfortunately, on the Capital One 360 site I no longer see an option to open different accounts that are attached to your main savings account. Which stinks, because we’ve used that option quite a bit.
I like online banking because it has a slightly better interest rate than many brick and mortar banks.
But if I didn’t have that account, I would probably try to open a new bank account at a bank that offers an opening bonus.
Check the fine print on the offer. You should be able to meet the $1,500 minimum balance in the bank while you wait for all of your contractors to get to you.
So look for deals like that to add to your savings. And think outside the box.
>>Look For Random Cash
This is where God came in.
Several random chunks of cash came our way in early 2021. Unfortunately, many of those chunks came to us painfully.
- There was a pay freeze. Ouch.
But later, all that money came back to us in one lump sum. Yay! Since we weren’t counting on seeing that money, we had pinched pennies in our daily lives.
That meant we were able to deposit all of that lump sum into our house fund.
Kind of a forced savings, but it worked.
- We got the same government checks that most of the country got.
- In April, some guy decided to turn left right in front of my husband. So we got a lump sum for our totaled minivan.
(Which was nearly paid off. Because that’s how that always works.)
Happily, no one was hurt too badly. And we decided to save that lump sum in our house fund rather than use it for our next minivan.
- There were other random things that added up to a few thousand more bucks in our home addition account.
I was able to save up some money I’d made from the blog. We saved bits and pieces from Hubby’s paychecks.
Basically, I used many of the little ways we’ve always saved. (Grab a copy of the ebook to learn more about that.)
In the end, the amount we were able to save was almost exactly the amount we needed. (jaw drop!)
That’s How We Paid For Our Home Addition
Not the most creative way, but it worked for us.
It didn’t take a full day for my emotions to go from “Yay! We secured the money!” to “Uh, now what?”
Well, through trial and error, we figured it out! I’ll give you some time saving advice in the next step.
Do you have a more creative way to save for a home addition than what we found? Spill the beans! 🙂