If you live in a home for a long enough time, you’re eventually going to have to make repairs to it. It comes with the territory when you’re a homeowner.
According to a recent survey, about 30% of homeowners have to make at least one plumbing-related repair each year. This same survey also found that about 20 to 25% of homeowners have to make repairs to either their heating or cooling systems each year.
In a perfect world, you’ll be able to pay cash for home repairs. But you may also need to look into different financing options for home repairs. Securing a home repair loan will help you get your hands on the cash you’ll need to complete home repairs.
Want to learn how to finance home repairs? We’ve compiled a list of the various types of home repair loans that you may be able to obtain when you need cash to finish home repairs. Check them out below.
Dipping Into Your Savings Account
Do you have a bunch of money stashed away in a savings account right now? If you do, you can bypass all the other financing options for home repairs on this list and use that money to your advantage by “borrowing” money from yourself.
By using your own money to pay for home repairs, you can avoid having to pay interest on any money that you might borrow otherwise. It’s why it’s an ideal way to foot the bill for home repairs.
Just make sure that you aren’t going to put yourself into a precarious position by spending some or even all of the money in your savings account. You could find yourself in a tough spot later if you don’t have any money saved up because of a home repair bill.
Putting Together a Savings Plan
Unfortunately, paying for home repairs with cash that you already have on hand isn’t going to be an option for everyone. In recent years, reports have revealed that right around 60% of Americans have less than $500 in their savings accounts.
But that doesn’t necessarily mean that you can’t still pay for home repairs in cash. You might just have to take steps to save up the money that you’ll need to cover the costs associated with these home repairs.
If you know that you’re going to be, say, remodeling your kitchen in the not-too-distant future, you should figure out how much you’ll have to save to get the job done. You should then calculate how much time you’ll need to spend saving to come up with that specific amount of money.
You’ll need to be patient when paying for home repairs in this way. But it’s a great option to have since it’ll help you steer clear of having to pay interest on other financing options for home repairs.
Applying for a Personal Loan
Every year, about 20% of Americans take out personal loans for one reason or another. Some of them do it to pay for emergency car repairs, while others do it to pay off medical bills.
Additionally, there are homeowners who will take out personal loans for the purpose of paying for home repairs. You can use a personal loan to pay for things like electrical repairs, plumbing repairs, roofing repairs, and more.
Many personal loan lenders won’t even bother to ask you what you plan on using a personal loan for. As long as you’re able to qualify for a personal loan through them, they’ll send one in your direction and allow you to use it in whatever way you would like.
Taking Out a Home Repair Loan
A lot of banks, credit unions, online lenders, etc. have realized that many of their customers have started to borrow money to pay for home repairs. As a result, they’ve begun to offer personal loans that are designed to help people pay for home repairs.
These personal loans are called home repair loans, and you might be able to qualify for one through a bank, credit union, online lender, etc. provided you have a high enough credit score.
The great thing about home repair loans is that they’re unsecured, so you won’t have to put your home up as collateral when buying one. You’ll also typically be able to obtain the financing you’ll need fast after qualifying for a home repair loan.
Securing a Home Equity Line of Credit (HELOC)
If you’ve lived in a home for more than a few years now, you’ve built up some equity in it. Why not use this equity to your advantage when you’re trying to pull off home repairs?
If you have equity in your home, you might be able to secure what is known as a home equity line of credit, or a HELOC. HELOCs are secured loans that will force you to put your home up as collateral. But they’ll provide you with flexibility that you won’t find with many of the other financing options for home repairs since they’ll set you up with a revolving line of credit.
You’ve worked hard to pay down the total amount of money that you owed on your home when you first bought it. You can reward yourself for doing this by utilizing the equity that you have in your home when you need to make home repairs.
Obtaining a Home Equity Loan
Some people confuse HELOCs and home equity loans since they both have the words “home equity” in them. But home equity loans, which are also sometimes called second mortgages, differ from HELOCs in a few key ways.
First and foremost, home equity loans will provide you with locked-in interest rates that won’t change over time. This isn’t always the case with HELOCs.
Home equity loans also provide you with a lump sum of money right from the start and a definitive timeline as far as how long it’ll take to repay them. They’re excellent financing options for home repairs when you know precisely what they’re going to cost you.
You just want to remember that, like HELOCs, home equity loans are secured loans that will require you to put your house up as collateral. You’ll want to be sure that you can pay a home equity loan back so that you don’t lose your home when taking one out.
Looking Into the Possibility of a Cash-Out Refinance
Is the interest rate on your current mortgage a little bit on the higher side? If it is, you might want to look into potentially refinancing your home so that you can obtain a much better rate.
And while you’re at it, you might also want to look into doing a cash-out refinance so that you can obtain the money that you’re looking for to tackle home repairs. It’s easier to do this than you might think.
When you do a cash-out refinance, you’ll replace your original mortgage with a new mortgage that has different repayment terms attached to it. You could get yourself a better interest rate and a lump sum of cash that you need to complete home repairs at the same time.
Learning More About a Hard Money Loan
If your plan is to make home repairs to a house that you own and then sell it, you might not like a lot of the other financing options for home repairs found here. Many of them aren’t going to work well for those who only need short-term loans.
Instead of picking one of them, you should strongly consider going with 100% hard money financing. It is, hands down, one of the best options for those who are planning on fixing houses up and then selling them ASAP.
You may need to put down a sizable downpayment before obtaining a hard money loan. But it would still be well worth looking into doing it if you can swing it.
Trying to Qualify for a Government Loan
Believe it or not, the federal government might be willing to extend a loan to you so that you can pull off the home repairs that you have in mind. There is a HUD Title I Property Improvement Loan that some people will be able to qualify for.
Before you get too excited, you should know that this type of loan isn’t for anyone looking for over $25,000. That will be the cap that you’ll face when applying for this kind of loan.
You should also know that you aren’t going to be able to do certain types of home repairs with this type of loan. But it would still be worth looking into the HUD Title I Property Improvement Loan a little more if you aren’t familiar with it. It could be just what you need to take on home improvements without going too deep into debt.
Using a Credit Card
When you compare the interest rates on most credit cards to the interest rates on the financing options for home repairs listed here, you’ll find that there really isn’t any comparison. The rates on credit cards tend to be way higher than the rates on other types of loans.
But with that being said, using a credit card to pay for home repairs might be a good final option. If you can’t qualify for other types of funding for home repairs, your credit card company might not mind you charging these repairs to your card.
One piece of advice if you’re going to take this approach to pay for home repairs: You may want to look into applying for a credit card that comes with a temporary 0% interest rate. It’ll give you some time to pay down your balance before you get hit with a higher interest rate later on.
Borrowing Money From a Family Member or Friend
Generally speaking, you shouldn’t ever borrow cash from a family member or a friend if you can avoid it. You could ruin your relationships with the people that you love the most if you borrow money from them and can’t pay them back for whatever reason.
But if you’re really in a bind, you might have no other choice but to ask a family member or friend for a loan. You just want to make sure that you’re going to be able to repay it down the line.
Borrowing money from a family member or friend is likely going to make things uncomfortable for a little while. You’re going to tense up every time you’re in the same room as someone who is essentially serving as a lender to you.
Because of this, you need to put a foolproof plan into place for repaying a family member or friend if necessary. You should also keep in contact with them about the loan that they gave you and let them know if there is anything that might prevent you from paying them back as quickly as you anticipated.
Which of These Financing Options for Home Repairs Looks the Best to You?
If you need to make home repairs right now, there is no reason for you to sit there and say, “I can’t afford to do it.” There are more than enough financing options for home repairs out there.
You should make it your mission to find the financing options that will work best for your specific situation. It’ll help you secure the money that you need to make home repairs while putting you in a position to repay whichever loan option that you choose.
Discover more about taking out loans for home improvement projects by browsing through our other informative blog articles.