Where Do You Live?

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First, vinyl siding is not recommended for use down
south. It doesn't hold up well and that foam board
insulation acts as a vapor barrier. Since down south we
use no vapor barriers in our homes, the foam board
traps moisture in the walls and leads to a multitude
of problems. Not the least of which is rotting wood,
mold/mildew growth in walls, sick building syndrome,
and termites that are hard to eliminate.

If you're up north where it is common practice to install
interior vapor barriers then you won't have those
problems above. I agree with you, I'd remove at least
the first layer of siding and take a look at what's
behind it. For all you know you could have rotting
wood behind the asphalt. Your trim will fit better, too.
And the very slight amount of insulation that the
asphalt layer provides would be insignificant.

One last thing - have you considered using a cement-based
siding like Hardiplank? It should be much cheaper than
vinyl, won't ever rot, burn, or be affected by insects. And
it should hold a good paint job for 15-20 years.