Resource Guide
How to Finance a Home Addition in Fort Worth and DFW
Most homeowners don't pay cash for home addition construction. Here are the most common financing options, how they work, and how to decide which is right for your project.
Home Equity Loan (Second Mortgage)
A home equity loan lets you borrow against your home equity as a lump sum, with a fixed interest rate and fixed monthly payment.
Best for: Projects with a well-defined, fixed budget. You know what you're building, you know roughly what it costs, and you want predictable monthly payments.
Typical loan amounts: $60,000–$400,000 depending on your equity position. Most lenders will loan up to 80–90% of your home's appraised value minus your current mortgage balance.
Drawback: You receive the full amount upfront and pay interest on all of it immediately, even if construction takes months.
HELOC (Home Equity Line of Credit)
A HELOC is a revolving line of credit secured by your home equity. You draw from it as needed and only pay interest on what you've used.
Best for: Projects where costs are disbursed over time. You draw as the project progresses, reducing interest costs vs. a lump-sum home equity loan.
How it works: Lender approves a credit limit. You draw during a "draw period" (typically 5–10 years) and repay during a "repayment period." Interest rates are variable.
Drawback: Variable rate means your payment can change if interest rates rise.
Construction-to-Permanent Loan
A construction loan funds the build in stages (draws), then converts to a permanent mortgage when construction is complete.
Best for: Larger projects ($150,000+) — especially second story additions. The loan converts to a standard mortgage, which may be tax-deductible.
Drawback: More documentation required. Lender will require plans, permits, and a cost breakdown from your contractor. Not all lenders offer this product.
Cash-Out Refinance
You refinance your mortgage at a higher balance and receive the difference in cash. Works well when current market rates are close to your existing rate.
Best for: Homeowners with significant equity and a current mortgage rate close to market rates.
Drawback: Not ideal if your current mortgage rate is significantly lower than market rates.
Home Renovation Loans
FHA 203(k) loans and Fannie Mae HomeStyle loans roll the cost of construction into your mortgage. More complex to obtain but purpose-built for home improvement projects.
We can refer you to lenders we've worked with on DFW home addition projects who specialize in renovation financing.