Home addition: costs, planning and insurance | key4

Home addition – what you need to consider when it comes to costs, planning and insurance.

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12.09.2023 | 3 minutes

Adding on to an existing home is a popular way to expand living space and increase property value. But any extension to a home should be carefully planned. You can calculate how much financing you’ll need for an addition to the house in advance and ensure that you’re in compliance with all important regulations. We explain what you need to know if you do decide to add on to your home.

The main points at a glance

  • When adding on to your home, you must plan carefully in advance to ensure you satisfy important regulations (such as applying for a building permit).
  • The costs of a home extension depend on a range of factors such as size, material and method of construction. An architectural firm can help you with planning.
  • There are many ways to finance an addition to an existing home – whether through savings or by increasing a mortgage. It’s best you seek advice.
  • Before you start construction, check that all the required insurance policies, such as liability, construction and building insurance, are up to date.

Home addition: planning basics

A home extension is as complex a project as building a new house, at least in terms of the planning it takes. Before you start adding on to an existing house, you should clear up the following for the building permit and cost estimate:

  • Planning by architects: Qualified professionals are trained to determine how much flexibility you have around boundary distances, building and zoning ordinances. They compile all the plans and documents you’ll need for the building permit. Based on the estimate by the architect’s office, you’ll already have an idea of how much the extension will cost.
  • Financing: The financing of a home addition should be clear from the very start. Such a project can become expensive. Do you have enough reserves? Or maybe you want to increase an existing mortgage? Clarify in advance what requirements you’ll need to meet.
  • Insurance: For a project this big, you as builder want to know that you’re adequately insured. Construction insurance and builder’s liability insurance are especially important. You’ll also need to report to the cantonal building insurance (mandatory in most cantons). Since a home addition in itself represents an increase in value, the changes made must be reported to the insurance companies to avoid a shortfall in coverage.
  • Skilled tradespeople: After planning, your project should of course be carried out by professionals. As with a new building or renovation, an addition to a house also requires the services of various expert craftspeople. At our partner Houzy, you can find qualified skilled tradespeople in your region. Get free quotes in just a few clicks.

UBS Switzerland AG (“UBS”) has a stake in Houzy AG (“Houzy”). Through its strategic partnership with Houzy, UBS aims to expand its range in the Home & Living ecosystem. By clicking on this link, you will leave the UBS website. UBS has no influence on the data processing of the Houzy website and therefore does not assume any liability for it. UBS is generally not liable for services provided by Houzy.

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The following is a closer look at the factors related to planning a home addition.

Obtain a building permit for the home addition

A later addition to an existing house requires a new building permit. The framework is provided by the detailed building regulations for the respective zone or the building regulations of the municipality. An extension to a house must meet a wide range of requirements in terms of building law, energy legislation, noise protection, fire protection and more. Depending on the location, the need to protect cultural heritage and historical monuments may also play a role. It pays to check with the relevant authority in advance.

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Home addition: choosing an architectural firm

The architect’s office is your right hand you when you build an addition to your house. The office checks all the structural conditions, develops a design for the extension according to your wishes and finally submits the building application to the authorities. Ideally, you should work with the same firm that built the house. Recommendations from the neighborhood or from friends and acquaintances can also be helpful. Or you can look in a central database, such as the Swiss Society of Engineers and Architects (SIA).

Financing the addition to a house

The cost of a home extension depends on many factors: primarily, the size and volume of the extension, the materials and construction method used, and the necessary structural adjustments. To clarify the budget and the overall costs in advance, you should seek advice from an architectural firm or a construction company. As soon as you have gathered the basic information about the cost estimate, planning documents and project description, you can work out suitable financing.

Home addition: financing costs from savings

For many private individuals, buying a home is the biggest investment of their lives. Ongoing maintenance and value preservation must be guaranteed for the long term. You should be able to pay for incidental costs, periodic maintenance and minor work out of your savings or current income. To be equipped for all eventualities, most homeowners put additional funds into their fund or savings account. Once you’ve set aside enough money, you can use it to finance your building project, or at least a significant part of it.

Increasing a mortgage for the home addition

When it comes to adding on to an existing home, homeowners will often want to talk to their bank. After all, costs can quickly exceed your annual budget. The obvious thing to do is to increase your existing mortgage. But there are two limitations that you need to remember:

  • The “golden rule” of mortgage financing still applies: The newly approved overall mortgage for residential property may not exceed a maximum of 80 percent of the property value. For vacation homes, the loan-to-value ratio is 60 percent. What matters is the effective increase in value the bank assumes. You’ll have more room for maneuver if you’ve already made some repayments and the current loan-to-value ratio is below 80 percent. You must also prove you can afford it. After the mortgage has been increased, the running costs for interest, amortization and ancillary costs must not exceed one third of your gross income (calculated with a long-term imputed interest rate).
  • Please note that the bank can review your overall situation. If the value of the property and/or your income situation has changed, a reassessment may be necessary. From the age of 55 or 60, you should make sure you can still afford the financing and the amount of the mortgage even after you retire. Read our article to learn more about mortgages in retirement.

Withdrawing retirement savings

You can use your own pension savings (assets in the pension fund and pillar 3) for a home extension. A withdrawal is possible every five years, and the minimum is CHF 20,000. You are also obligated to use this “cash injection” only for value-adding investments, and not for maintenance. With respect to pension fund assets, remember that certain restrictions apply from the age of 50. However, you can withdraw funds from pillar 3a at any time in the five years before ordinary retirement. All withdrawals are taxed, but at a reduced rate. Please note the following:

  • In any event, the property must be owner-occupied residential property (no vacation apartments or investment properties).
  • In principle, you have a choice between an advance withdrawal or a pledge. In the latter case, the amount in question is pledged to the bank. Most banks will loan a higher amount based on this collateral.
  • If you want to draw on money that is already pledged, you need the bank to approve it. As with any increase in a mortgage, the bank will check the dossier again (affordability, maximum loan-to-value of 80 percent of the property value).
  • Think about your own retirement savings and financial security, especially if withdrawing monies from your pension fund: if you don’t pay the amount you withdraw back into the pension fund, you’ll have to live with a lower pension later on. Depending on the pension fund and regulations, this may also have an impact on risk benefits in the event of disability or death. Seek out advice in this regard and plan ahead.

Build an energy-efficient addition and apply for a subsidy

In practice, it is often the case that the project leads to further improvements, conversions and extensions. Some homeowners take the opportunity to renovate the building envelope or to supplement the extension with a solar photovoltaic system on the roof. Most cantons offer financial support if the addition to an existing house simultaneously improves energy efficiency and reduces CO2 emissions.

  • Use the UBS Renovation Calculator to get an overview: calculate your property’s estimated energy use and renovation requirements as well as its CO2 emissions free of charge in just a few steps.
  • The building program is an important point of contact for funding in the course of making renovations. This institution, which is run jointly by the Confederation and the cantons, is committed to reducing energy consumption and CO2 emissions. The website Energiefranken.ch offers a search function for all funding programs throughout Switzerland – based on the location of your property.
  • If you want to get an overview of energy efficiency first, order a cantonal building energy certificate (GEAK) to get advice. The result is categorized from A (very energy efficient) to G (low energy efficiency). Some cantons require this certificate anyway in connection with subsidies. In many places, this analysis is supported with a grant.
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Finally, it is good to know that you can deduct the cost of property maintenance from your income taxes. Most cantons publish a detailed catalog on their website of which measures are tax-deductible and which are not. The value-adding portion of a home extension cannot be claimed here, but you should still keep all invoices and receipts. You can later claim your expenses against tax on any gain you make on the property.

In general, energy-saving investments can be deducted at 100 percent from taxable income for both federal and cantonal tax purposes. You can find out more about this here.

Home addition: taking out and adjusting insurance

Once you’ve wrapped up financing for the extension, you should check what construction insurance you need. This mainly concerns the owner’s and contractor’s liability insurance, construction insurance and coverage for fire and natural hazards.

Liability for an extension to existing house

Most personal liability insurance policies offer sufficient coverage for minor renovation and maintenance work for private residential property. This means that homeowners are well insured. However, from construction costs of CHF 200,000 to 250,000, you’ll need to take out additional contractor’s liability insurance (depending on the insurance conditions).

Accidents can happen on any construction site. As the principal (building owner), you are liable for damage to third parties and third-party property. Check with your insurance company and ask for coverage if necessary. Observe the terms and conditions of your insurance.

Depending on the project, you may want more coverage. Tricky work on the foundation or inadequate supervision by the contracted engineering firm may not be covered or may result in reduced benefits. Depending on the project, you may want more coverage.

Construction insurance for a home addition

We also recommend taking out construction insurance. This provides you with optimum coverage if parts of your house or property are damaged during construction work. Construction insurance would, for example, cover the damage if a water pipe is damaged during drilling work. Construction insurance is a kind of “fully comprehensive insurance” for your property during construction work. It also covers vandalism or theft on construction sites.

Home addition: building insurance

Most cantons require compulsory building insurance against fire and natural hazards such as flood, storm, etc. From a certain size (e.g., in the canton of Zurich from an increase in value of at least CHF 50,000), the project must be reported to the responsible insurance company.

Every conversion or addition makes the property more usable and contributes to a better quality of life. Financially, this is also associated with an increase in value. It’s important that the insurance company knows the difference between the previous and the new insurance value. If you don’t have the insured amount adjusted, you’ll be underinsured in the event of a claim.

Summary of home additions: don’t move, add on

You feel comfortable in your house, but would like more living space? You don’t have to look for a new house immediately. Check whether an addition to your existing house is doable – this can open many possibilities. It’s important you find out in advance what regulations apply and what it takes to finance a house extension. You can get help with planning from your bank and architectural firms.


The exact price for an extension to a house must always be calculated individually, as particular requirements and design options vary greatly. You can only get accurate cost information by obtaining and comparing quotes from different construction companies. Hiring an architectural firm can also be a big help.

When planning an addition, we recommend you consult an architectural firm. Architects can provide you with full advice on the many options available and show you which options are realistic for your property and budget. And you’ll also get assistance with formalities such as applying for a building permit.

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