How to Decide Whether to Build an Addition to Your Home

Consider the added value to your home from the addition, which you will recoup when it comes time to sell. The cost of the extra square footage is never wasted in terms of the financial payback you will receive. Don't assume the payback will be 100 percent -- that if you spend $80,000 adding a family room, your home will immediately increase in value by that amount. Statistics on the sales of remodeled homes show that the payback is less than 100 percent for most remodeling projects. In some instances, room additions may only return about two-thirds of the project cost at the sale of the home.

Calculate the impact on your monthly payments, if you will be financing the project through a home equity line of credit or refinancing the entire property. An addition to your home can cost $50,000 to $100,000 or more. The payment increase will reduce the amount of funds you have for savings and investments. If the higher payments will put a strain on your budget, you may want to reconsider the addition until your total family income is higher.

Decide how long you most likely will be living there. If you intend to stay in the home for a long time, 10 years or more, then the decision to build an addition can be made on the basis of how much more enjoyment you will get out of the home rather than the primary consideration being the financial payback when you sell.

Determine how critical the need is that the home addition will address. Many times young homeowners find they are outgrowing their home because their family is growing. Adding a bedroom can enable each child to have his own room rather than a crowded situation of sharing. After living in a home for awhile, homeowners sometimes spot flaws in the design that can be addressed through an addition. The family room might be much too small or narrow, for example, or the dining room inadequate in size for entertaining.