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Fixing up your house is one of the great joys of homeownership.
But sometimes, home repairs and improvements come at a financially inopportune time.
Did you know that the average home repair and renovation project cost almost $10,000 last year?
That’s a manageable amount to cover in cash if you’ve been faithfully following the 1% rule as a homeowner; financial advisors recommend setting aside 1% of your home’s value each year for maintenance and repairs. In other words, if your house is worth $250,000, saving $2,500 a year for the inevitable repairs should cover most issues you encounter with your home.
But if you’re a relatively new homeowner, you may not have had time to build up adequate cash reserves to pay for a major repair, such as replacing a leaky roof. And if you’ve had a couple of critical issues in a row, you could be strapped for cash when an urgent repair comes along.
Fortunately, there are home repair financing solutions to suit just about every homeowner. This article will explain your options and help you determine which one is right for your budget and your home repair needs.
While it’s impossible to give precise numbers, since labor costs vary greatly by location, and material choices affect the final cost, here are average costs for some common repairs and renovations most homeowners will eventually face:
If you’re handy, you may be able to lower your costs by taking a DIY approach to some of your repair and renovation projects, although it’s always best to consult a professional before starting on a complex repair.
In general, you have four options for financing a home repair or renovation project; which one you choose depends on the total costs involved, your personal budget, how much time you have to complete the work, and your credit.
Here’s a quick look home repair financing options:
Try to pick projects that will cut your monthly expenses. Using energy-efficient air conditioners and heaters could actually reduce your monthly utilities–helping you recoup some or all of the cost of your upgrade.
In some cases, you may have another option, vendor financing, for your project. For example, if you need to replace your roof, your roofing company may finance the work.
The simple answer is “whenever you can.” If you have savings on hand to cover the amount of the repairs, it’s always a good idea to pay cash.
Some repairs can safely be postponed for a few months to allow you to sock away enough money to pay for them, but others simply can’t wait. Even a seemingly minor crack in your chimney could indicate a moisture issue that leaves your home vulnerable to structural damage, for example.
In general, it’s best to complete minor repairs as soon as they come up to prevent them from becoming catastrophic issues later on.
Home equity loans can be a great choice if you have adequate equity to cover the cost of your repairs. They generally have the lowest interest rates compared to other home repair financing options.
However, there are a few drawbacks to keep in mind before you jump into a home equity loan:
A zero-equity personal home improvement loan is basically a signature loan, which means your home or other collateral isn’t necessary to secure it. These loans are a great choice for larger projects of $1,500 or more when you need the money right away.
Other advantages to personal home improvement loans include:
Note, however, that most lenders require a credit score of at least 640 to qualify, so if your credit is a little shaky, a personal home improvement loan may not work for you. That said, if you do have bad credit, you may still be able to get a personal home improvement loan, but the interest rates will be quite a bit higher. If your credit needs work, it’s best to only finance truly urgent and necessary repairs that can’t be postponed.
Many lenders are offering 0% introductory interest rates for between 6 and 12 months on their home improvement credit cards, making them an extremely attractive option for smaller repairs you can pay off quickly.
Things to keep in mind when using a home improvement credit card to finance your home repairs:
Vendor financing can be one of the cheapest ways to get the money you need to complete a repair project; some vendors offer low interest rates and special prices on installation to customers who finance.
However, there are a few things to know before you use private vendor financing:
Be sure you understand all the terms of the financing contract before you accept vendor financing for your home repair project.
If you need financing for an urgent home repair and you don’t have the time or the equity to apply for a home equity loan, Hearth can help you find the best terms on a personal home improvement loan or home improvement credit card with our network of lending partners.
Click here to get personalized rates in 60 seconds without affecting your credit score.
Don’t let a small repair become a major catastrophe. Let Hearth help you get your project done quickly with a home improvement loan or credit card.