Our construction company recently completed a major remodel and energy retrofit of a split-level home in northern Vermont. In addition to requesting a long list of interior improvements, the owners wanted to reduce their energy costs by adding more insulation and replacing their leaky single-pane windows. The key to keeping the project within the budget was adding the insulation from the outside in order to preserve as much of the interior finish as possible.

Working with architect David Pill, we considered a number of options for retrofitting the exterior insulation. On previous projects, we had wrapped walls with one or two layers of blueboard, then fastened the siding to furring strips installed over the foam. But with that method, it's tricky to properly flash window and door openings to the drainage plane. And unless you actually need an air gap behind the siding, furring strips are also problematic: They have to be screened to keep bugs out, and keeping them flat - to avoid dips and bumps in the siding when the furring has been screwed through a couple of inches of foam - can be difficult.

We also considered retrofitting nailbase or SIPs panels, because either one would eliminate the need for furring strips. However, the cost would have been prohibitive on this project, so we improvised a similar - but less expensive - detail that we could build on site. First, we'd wrap the walls with 4-inch-thick polyiso roofing panels, which would substantially increase the wall's R-value, minimize thermal bridging, and help air-seal the home. Then we would fasten continuous OSB sheathing instead of furring strips directly over the foam. The walls would then be flat and ready for housewrap, flashing, and siding.

From the Ground Up

Because the homeowners had reported some damp areas in their ground-floor rooms, we first excavated a trench to the depth of the footing around the entire building. This enabled us to examine the foundation walls and make sure they were well-insulated and waterproof. The existing 1 1/2-inch-thick layer of EPS foam was deteriorating and virtually useless, so we replaced it with two layers of 1 1/2-inch XPS foam, which has a higher R-value per inch than EPS foam (R-5 vs. R-3.6) and a lower water-absorption rate. To air-seal the assembly, we oriented the first layer of foam vertically and the second horizontally, staggering the seams between the layers and sealing all the joints in both layers with spray foam.

Walkout door. Around the existing walkout basement door, we left a uniform gap between the foam and the door's vinyl cladding, which we later trimmed out with cedar casings and returns. To protect the foam from impact damage around the door, we covered areas that would be exposed after finish grading with a layer of 1/2-inch cement backerboard glued with thinset to the foam.

Waterproofing. We waterproofed the foundation foam from the footing to about 1 inch below final finish grade with Colphene ICF peel-and-stick membrane (800/356-3521, soprema.us). To protect the above-grade portion of the foam, we troweled on three coats of Prepcoat B2000 parging (888/238-6345, durock.ca), lapping the parging over the waterproofing membrane an inch or so. We scarified the foam slightly before parging to improve adhesion, and embedded fiberglass mesh into the first coat for reinforcement. The two additional thin coats evened out the finish.

Rigid Foam Insulation

We wrapped the walls with 4-inch-thick sheets of IkoTherm, a rigid polyisocyanurate foam with an R-value of 6 per inch (888/766-2468, iko.com). These panels have a fiberglass facing bonded to both sides of the foam, making them more compatible with construction adhesive than foil-faced foams. Although they're generally used to insulate roof decks, we found that the 2x4 panels were readily available, easy to handle, and faster to install than a double layer of 2-inch-thick foam.

Unlike shingles or clapboards, vertical cedar siding creates a relatively flat wall plane, so we were able to glue the foam directly to it using low-VOC Titebond Greenchoice construction adhesive (888/533-9043, titebondgreenchoice.com). First we applied glue to the cedar siding, using a quart for every five panels; then we bedded each panel in the adhesive and temporarily held it in place with a few 7-inch HeadLok SIP panel screws driven through small plywood cleats. The cleats allowed us to pull the insulation panels tight to the siding without breaking through the facing. After giving the glue a night to set up, we began installing the sheathing, removing the cleats as we went.

We held the bottom edge of the foam panels 3/4 inch above the top edge of the XPS foundation foam, creating a gap that we would later fill with spray foam - to make sure the vulnerable joint at the rim joist was thoroughly air-sealed. We also spaced the foam panels at least 1„4 inch apart from each other and away from any penetrations, again creating a joint that we would later fill with spray foam. We cut and fit the foam board around the truss tails, filling in the gaps with spray foam to seal off the attic. The large 4x8 panels may expand and contract a little with temperature changes, but we're confident the spray foam will be flexible enough to remain adhered to the panel edges.