While there’s no place like Home Sweet Home, there’s a lot of stuff in a house that can break or need maintenance over time. Small things like ripped screens or peeling paint or a hole in your drywall can be fixed fairly easily and inexpensively. But move up to a major appliance failure, a leaky roof, or replacing your water supply line, and you may find yourself staring at an unplanned expense that you don’t have the money to pay for right now.
You wouldn’t be alone. Half of U. S. homeowners have less than $1,000 saved,1 yet many home repairs can run into the thousands of dollars. Suddenly, how to pay for pricey home repairs becomes job #1, before you can even think about the repairs themselves.
7 options for financing home repairs
Figuring out the financing that is right for your situation depends on the urgency of the repairs you need to make. Government loans and grants, for example, can take weeks to get approved — time you may not have if your roof or AC needs replacing. Other ways of getting money for repairs are much faster and may be preferred if you’re dealing with an emergency home repair. So keep timing in mind as you read through these seven ways to pay for home repairs.
1. Government loans and grants
The U.S. government’s Section 504 Home Repair program lends money to qualified homeowners to repair, improve or modernize homes. If you’re over 62, you may be eligible for a grant. As you can imagine, there are specific rules and requirements you must meet, but if you do, you could get a low-interest loan of up to $20,000 or a grant of up to $7,500.2
2. Homeowners insurance
If the repair you find yourself having to make is the result of damage from an event covered by your homeowners insurance policy, like a fire, hail storm, burglary or asteroid (seriously, most policies cover damage from asteroids), your policy may end up paying for some or all of the repairs. Replacing an old appliance or your 30-year-old roof would not typically be covered by normal homeowners insurance policies. But if there’s a doubt, check your policy or ask your insurance company.
3. Home equity lines of credit (HELOCs)
A home equity line of credit is a revolving credit line that is secured by your home and is most often used for major purchases. HELOC credit limits are calculated by subtracting what you owe on your home from its appraised value. In general, the more equity you have in your home (i.e., the less you owe), the larger the line of credit lenders may offer you. Read up on what you should know about home equity lines of credit. Remember, though, that you’re using your home as collateral, so if you default on the loan, you may be forced to sell your home. If you do want to explore HELOCs further, shop around for the best rates, and read the lenders’ terms carefully. Used correctly, HELOCs can be a great resource to help you pay for home repair projects.
4. Home equity loans
Similar to HELOCs, a home equity loan requires you to have a certain amount of equity in your home. Home equity loans also use your home as collateral, to guarantee the money you borrow. Unlike a revolving line of credit, though, you get your home equity loan in one lump sum and agree to make equal monthly payments over a fixed term — a lot like your original mortgage. Shopping around and reading the terms carefully is the best way to ensure you get the best home equity loan available to you. Read more about using your home’s equity to pay for home repairs and other expenses.
5. Personal loans
One of the quickest ways to get the money you need to make emergency home repairs is a personal loan. Read the difference between home equity loans and personal loans to see which one makes the most sense for your situation. If you’re approved for a personal loan from OneMain Financial, you can potentially get the money you need the same day you’re approved.
6. Credit cards
Putting a $6,000 HVAC replacement on your credit card isn’t an ideal way to pay for home repairs. For one, credit cards' interest rates are often higher than those of personal loans and home equity lines of credit. What's more, most are revolving accounts without a fixed monthly payment, so you run the risk of making a large repair even larger if you can’t pay off the full amount before the interest charges kick in.
If using a credit card is the only option you have at your disposal, and your home is unsafe or uninhabitable without making the repair, try to make using a card a short-term solution. For example, put the charge on a credit card while you try to arrange better financing like a personal loan, HELOC, or help from a government program. And don’t forget, it never hurts to call your credit card company to explain your situation and ask them to lower your interest rate — you may be surprised at their willingness to help.
If you’re like most people, you don’t have savings that could cover a home repair of one or two thousand dollars. Maybe you do have some savings, but weren’t planning to use it for something as unexciting as a new washing machine or rain gutters. Only you can weigh the benefit of making the repair you need against using or not using your savings. Think twice, though, before you take on debt just to preserve savings — this is one of the reasons people save, for this proverbial “rainy day.”
And that’s why having an emergency fund can be a financial lifesaver. Even if you don’t have the full amount for the needed repair, paying part of it with savings is a great way to minimize the impact that financing the remainder of the repair will have on your financial well-being. What’s more, you can sometimes get a better deal from contractors if you pay them in cash, so explore all of your options if you have some or all of the cost of the repair on hand as cash.
How will you pay for your home repair projects?
Whichever option you decide to pursue, be diligent in deciding how you’re going to make the repair. Get two or more quotes from local contractors and let them know you’re doing so. They’ll put together their best price in an attempt to get the work. Shop around for great deals on appliances — look for sales at retailers, no-interest financing promotions or free installation offers. If you’re replacing an appliance, heat pump or furnace, consider buying used — many appliances that you’ll find in second-hand stores or warehouses actually have good years of life left in them. Many were simply taken out of service because the homeowner was upgrading.
Through it all, keep a cool head, weigh your options, do your homework on rates and terms, ask for better prices, and be creative in mixing and matching financing options. Home ownership is a big responsibility, and emergency repairs are part of it. Armed with the right information, you can find a way to pay for home repairs to make Home Sweet Home sweet again.
1 https://www.businesswire.com/news/home/20150820005914/en/25-Percent-Homeowners-Savings-Emergency-Home-Repairs 2 https://www.rd.usda.gov/programs-services/single-family-housing-repair-loans-grants