origination fees and processing fees, which can amount to 1-2% of the total loan amount. Lenders typically require appraisal and inspection fees to determine the viability of your home's addition, so expect to pay these fees. It is a good idea to be prepared to have 10 to 15 percent extra funds, even if you don't need it, in case you change your mind and want upgrades or any changes that affect the price. There is a lot to be considered when building, do your homework and perhaps get a couple of quotes. Be considerate and let the contractor know you are getting another quote. They will appreciate it.
TAXES AND INSURANCE
With a home addition, you can expect your insurance premiums to increase. Your premiums may increase significantly depending on the replacement cost for the new addition. This depends on your insurance provider, but a good way to ballpark your new premium is to take your home's value and add in a replacement cost of 125% of the new addition's price. For example, for a home that was originally valued at $200,000, adding a $100,000 addition raises the value to $325,000 in total, so you can expect your premiums to jump a good 50%. It is a good idea to contact your provider before starting the project. Taxes follow a similar logic but also depend on many other factors. A value will be stated for the new addition on your building permit application. This amount will be added to your home's valuation for the following tax year, which typically increases your annual property taxes. However, taxes change year-by-year based on the housing market — for a home's value that's skyrocketed based on a real estate bubble, you may see a significant increase. Vice versa, a slumping real estate market may see your taxes experience only a minimal
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