You may not be considering the loss in value your house will have when you do this. A 3 bed house has way more value than a 2 bed and a much smaller market of people to advertise to.

Actually, this was the first thing we thought of. And, we consulted our realtor and four others before we started talking to contractors.

Our house is currently 4 bed 1 bath. The homes in our neighborhood on our street all are either 4 bed 2+ bath, or 3 bed 2+ bath. We are literally the only one on the street (there are over 20 houses) with less than 2 bathrooms - even those with smaller square footage that sold within the past 2 years sold higher than we purchased our home.

The realtors we worked with told us that our town, for homes of our style, most homes (about 60%) have either have a master with an en suite bathroom or have a 3/4 bath on the first floor; our home has neither.

They did all tell us that the impact on our home value, while it will go up, will not "cover the cost" that we'd be putting into it. But, that a master with an en suite bathroom is a selling point for many people, especially in our town and especially in our neighborhood. They also said that those who look for homes with 4 bedrooms generally will and do notice that only one bathroom won't cut it if you ever plan on filling those bedrooms, whether with guests or with children. And, due to the layout of our home, there is nowhere else to put a bathroom unless we were to put on an addition.

Anyway, I'm not asking about if this change will have a great ROI. I'm just asking what type of loan options we have.

Thanks anyway for the feedback. I'll consider the line of credit option.