Home Improvement Loans to Build an Addition to Your House
Building an addition to your home can create value, but can also cost thousands of dollars. If you need financing for an addition, personal loans and home equity loans can be worthwhile options.
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While a home addition can improve your living space, it can also be a great way to increase the value of your home. Some common additions to your home can include adding an extra bedroom, office, or bathroom.
Although a home addition can be a big project, oftentimes it is easier than selling your home and moving. Depending on the size and type of addition you want, the project can be expensive.
Below, we will cover the average costs of a home addition, as well as financing options that can be used to cover those costs.
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How Much Does An Addition Cost?
The average cost of a home addition as of June 19th is about $45,408, according to HomeAdvisor. These projects can typically range from $5,000 to $125,000 when factoring in the type of addition, location of your home, materials used, and labor.
Here are some other examples with average costs of the project:
| Type of Addition | Average Cost |
| Bedroom | $32,000 – $80,000 |
| Bathroom | $25,000 – $75,000 |
| Master suite (bedroom & bath) | $25,000 – $100,000 |
| Kitchen | $48,000 – $95,000 |
| Family or living room | $17,300 – $43,200 |
| Bonus room over garage | $45,000 |
| Laundry room | $2,000 – $10,000 |
| Dining room | $17,920 – $44,800 |
| Mudroom | $3,000 – $7,200 |
Average costs are collected from HomeAdvisor.
For many homeowners, these costs require additional financing. The options below can be a good place to start.
How to Finance a Home Addition
There are several financing options, including home addition loans, that can be used to cover the costs of your home improvement project. Make sure to compare each option before deciding on which is best for you.
Personal Loans
Personal loans are usually unsecured loans. This means that they do not have an asset, like your home, serving as collateral for the loan. Therefore, personal loans can have a higher interest rate than secured loans.
Personal loans are popular for covering home improvement costs because they can be used for any purpose and funds can be received relatively quickly.
If you are building a major home addition, make sure to consider the loan amounts available to you from personal loan lenders. These amounts are typically lower than those from a home equity loan which we will discuss lower on the page.
Here are two highly-rated personal loan partners of ours that offer home addition loans.
 |  | |
|---|---|---|
| Rates (APR) | 3.49% – 19.99%* with AutoPay | 7.99% – 35.97% |
| Loan Amounts | $5,000 – $100,000 | $1,000 – $35,000 |
| Repayment Terms | 24 – 144 months** | 36 or 60 months |
| Minimum Credit Score | 660 | 620 |
If you want to compare other options, you can check out our guides to the best home improvement loans and best personal loans.
Home Equity Loan or Home Equity Line of Credit (HELOC)
Both a home equity loan and line of credit can be used to borrow against the equity you have built up in your home. Home equity loans are secured and your home will serve as collateral on the loan.
One benefit of using a home equity loan or line of credit for a home addition is that the interest on these loans is tax-deductible so long as the loan money is used for an IRS-approved use, such as to buy, build, or substantially improve the taxpayer’s home.
If you need a large loan amount, home equity loans can be a good option. Here are two highly-rated home equity partners of ours offering loans that can be used for home additions.
 |  | |
|---|---|---|
| Product | Home equity loan | HELOC |
| Rates (APR) | As low as 5.205% | 4.99% – 13.25% |
| Loan Amounts | $20,000 – $500,000 | $15,000 – $150,000 |
| Eligibility Criteria | Minimum credit score: 640 Maximum loan-to-value: 90% | Minimum credit score: 620 Maximum loan-to-value: 80% |
If you’d like to compare other options, you can check out our guides to the best home equity loans and the best home equity lines of credit.
Other Home Addition Financing Options
Saving Your Money
Most people probably don’t have an average of $45,408 sitting in a savings account to use on a home addition. If you want to avoid paying interest on a loan to afford your addition, waiting until you save the money you need is the best option. This, however, might take longer than you are willing to wait.
Manufacturer financing
You might also be able to get some type of financing from the home builder or home improvement center that you use to complete the project. This could be a good deal if you can get a large enough loan at a reasonable interest rate. Check the terms, however, because many of these loans come with high interest rates, which can be costly.
Bottom Line
If you don’t have the cash for your home addition and don’t want to wait to save for it, a home addition loan can be a good option. Both personal loans and home equity loans have relatively low interest rates and can be used for these types of projects.
Before making a decision, be sure to compare your options so you know you chose the right option for your needs.
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
**Payment example: Monthly payments for a $10,000 loan at 5.95% APR with a term of three years would result in 36 monthly payments of $303.99.
