After 11 years in their Annandale, Va., home, Mike and Cherie Jacobs were ready for something bigger and better. But sacrificing their super-low mortgage rate to pay for this was out of the question. When the Jacobses bought their 1974 house in 2003 for $452,000, they took out a 30-year, fixed-rate mortgage at an annual percentage rate (APR) of 5.25 percent. In 2010, they refinanced, converting to a mortgage with a 4.25 APR. Three years later, they refinanced again, this time acquiring a mortgage with a 3.125 APR.

In 2014, when they explored options for moving or remodeling, prevailing interest rates for 30-year, fixed-rate home mortgages were 4.5 percent, says Mike Jacobs. Taking out a new mortgage would mean “a big loss of a good rate,” he says. To keep their prized mortgage, Mike and Cherie determined to stay put, adding onto their four-bedroom, 2,550-square-foot home and remodeling existing spaces. Last summer, they asked Schroeder Design/Build in Fairfax, to propose a remodeling design. At the top of their wish list were an upstairs laundry room; a spacious, well-appointed kitchen; and a new master bedroom and bath suite, including a remodeled bathroom and a new bedroom over the garage. The Schroeder team, led by general manager Andrew Schroeder, presented a preliminary design that included these features as well as a remodeled entryway and upgraded main floor spaces and bathrooms.

To pay for large remodeling projects such as this, homeowners often take out a construction or renovation loan, which entails refinancing with a mortgage that reflects the house’s estimated value post-remodel. Many lenders provide mortgages that cover up to 80 or 85 percent of the remodeled home’s value. The Jacobses had no problem convincing prospective lenders of the wisdom of retaining their low mortgage rate. Amit Kaim, vice president and senior loan officer with Atlantic Coast Mortgage in Fairfax and one of the lending professionals they consulted about financing the remodeling project, says, 3.125 percent “is a superb rate. I would want to keep it, too.”

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The couple talked to several lenders and scoured the Internet for financing options they liked that would safeguard their existing mortgage. Eventually, they found a solution through Mike’s credit union, obtaining $65,000 via a home equity line of credit (HELOC). They also borrowed $50,000 from Mike’s 401(k) retirement plan, a move some financial experts strongly discourage.

Because the $115,000 in funding fell short of the $165,000 needed, Schroeder trimmed the remodeling estimate to around $125,000 by eliminating the master bathroom remodel, built-ins for the master bedroom walk-in closets and a few other things. Mike and Cherie tapped into savings to supply the remaining $10,000 of the estimated remodeling cost not covered by loans.

As construction started, Schroeder discovered that the house needed a new roof, gutters and gutter guards — a $10,000 hit to the budget. In addition, the county required that a hardwired (rather than battery-powered) smoke alarm be installed for every bedroom and each floor. To cover all this plus a few improvements that they chose during the remodel, the Jacobses took out a $25,000 personal loan.