Insulation is used in all buildings to increase energy efficiency. It blocks out heat or cold, allowing you to maintain a more comfortable internal temperature. The insulation also serves as a barrier against moisture and air flow between the outside and the inside, and if not installed properly, might cause damage to your home.
When layering a roll of insulation on top of another, you should not use the paper face of the insulation at all. If possible, it is better to buy it without the facing. The is because the first layer of insulation already has facing on it, and adding another facing might trap moisture in between and cause mold growth. If you are working with insulation with the paper covering and are placing it over other insulation, slice the paper with a knife to create slits, and then face it outward toward you.
Exterior Walls -- Toward the Wall
If there is no other vapor barrier along the outer part of the house, such as around skylight openings or vents that could allow air flow, then the facing side of the insulation should face the outside and not in toward the room. This will prevent air penetration into the interior. You also find this issue in the attic area along the roof rafters or half walls.
Exterior Walls -- Toward the Room
In most cases, facing should be pointing in toward the room along exterior walls. This is because it is used as a vapor barrier between the wall construction and the drywall or other wall covering. It is not the true vapor barrier, which is actually a sheeting put along the outside of the home before it is covered with siding, but it does act as an extra stopping point to protect the drywall.
If the space is cool, such as a basement, and has an issue with condensation developing on the walls, the facing is placed toward the wall to keep the moisture from getting into the insulation. This is only done if the basement is being finished for use as a living space. In these areas the most common insulation is a foam board insulation with facing, instead of a rolled batting.
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