So still go ahead with option 2 even though in future my room will be occupied by tenant anyways?

The lender should have told you; you didn't order checks so you might push back on paying for them. 

I want to take benefit of low interest rate but the 8-9K increase in loan amount plus additional charges about appraisals, etc is making me worry if I should go ahead or not.Thoughts and comments are welcomed.

If the "heir" is pushing for this, beware!

I was pushing it with my initial post.  

So looking ahead, I think it would be ideal to have separate utilities.

It’s so exciting but I know there are going to be rough patches, we’ve just gotta push through them and thanks to BP and everyone on here it makes it seem a little less worrisome!

Thank you for your service and great job thinking ahead. 

Original Projected sale was April but it was pushed back due to Covid, so we started selling the beginning of October 2020, had a good offer within a week on the market, Agreed with the price and contract was signed last week. 

It would keep your costs down (especially right now) so you can cash flow higher and pay it off quicker.Another route you can go is to utilize the Infinite Banking Concept to push the cash into the policy to kick start the compound growth and then borrow against it to buy the house.