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A Guide to Financing Home Repair

The most unfortunate thing about owning a home is having to pay for repairs and renovations out of pocket. Renovations can be costly and time-consuming to make your home ready for sale, while emergency repairs can drain your bank account without warning. It is helpful to learn how to finance home repairs before they occur if you own a home or are planning to buy one. Saving money for a roofing project and using those funds is the best way to upgrade your home. However, that isn't always possible. Renovations and emergency expenses can require financing. However, if you are in good financial shape and the roofing project you plan to undertake will increase the value of your home, financing might be worth it.

Here are the 6 Ways to Finance Home Repairs:

1. Home Equity Line of Credit (HELOC)

HELOCs may be secured loans. However, you'll qualify for a lower interest rate than you would for an unsecured consumer loan. HELOCs are additionally open-end credit, so you can take what you need as and when you need it. In the event of a long-term or ongoing home renovation project, a HELOC could be an honest alternative. If you don't make your payments on time, your home may be foreclosed if you use your home as collateral. A home equity loan does come with one major requirement: you must have enough equity in your house to borrow against it. Be sure the value of your house exceeds what you still owe on your mortgage before considering a HELOC.

2. Home Improvement Loans

The term 'home improvement loan' refers to loans offered by banks, credit unions, and online lenders. They are unsecured, so there is no need to use your house as collateral to qualify for one. As long as you follow the terms, many lenders deposit money into your account in as little as one day, depending on your credit score. A Home Improvement Loan is best for small or mid-sized projects in your home, like repairing a toilet or replacing a window. Choosing the best home improvement loan lender can be hard. Check out low interest rates, small fees, and easy repayment terms before you apply.

3. Home equity loans

It is sometimes referred to as a mortgage. Home improvement loans are lump-sum loans that you can repay over a number of years with fixed monthly payments. The downside is that you have less payment flexibility than with a HELOC. If you know exactly how much your project will cost, a home equity loan might be the right way to finance your renovation, since you'll receive all funds in one lump sum, but missed payments can cost you. If you fall too far behind on payments on this type of loan, your home could be foreclosed.

4. Mortgage refinances

Refinancing replaces your current mortgage with a new one and gives you a new interest rate. You can use a cash-out refinance to make home improvements since you get to pocket the difference if the new loan is larger than the old one. Compared to a cash-out refinance, a rate-and-term refinance may offer lower interest rates and fees.

5. Credit cards

When you make small improvements to your homes, such as installing a new toilet vanity or a closet system, you can use your MasterCard to finance the work. What are the benefits? For the first few months, some cards are interest-free. Making large home improvement purchases with a MasterCard comes with some risks. If you don't repay the introductory offer before the introductory period ends, you will be charged a high-interest rate - much higher than other home improvement loan options. If you use your regular card instead of an introductory offer card, you'll be able to pay back the entire amount by the next pay period - usually a month - if you'd like to avoid interest. Variable interest rates can also raise the amount of interest you pay as market conditions change.

6. Government loans

Government loans are another option for financing home improvements. A government loan will save you money on both interest and insurance. You can borrow up to $25,000 without securing any equity in your home. An honest option if you've recently purchased your home and want to make some improvements. But the cash must be used for renovations that improve the livability of the house, so a few upgrades might not qualify.

Summary: Best ways to pay for home improvement

The best way to pay for your next home improvement project depends completely on the project you’re planning and your financial situation.

  • If you plan a mid-sized to large project and want to tap into your home equity, a home equity loan or a HELOC may be a good choice.

  • In case you are planning a mid-sized project but don't want to put your home up as collateral, a home improvement loan may be the best option.

  • If you're looking to save on interest for small projects and you can pay down the balance quickly, a 0 percent APR credit card can be a great financing option.

  • If you're interested in saving on interest for a large project, refinancing your mortgage might be a wise move.

  • Home Improvement Loans may also save you money on interest and insurance if you wish to improve the livability of your home.

Whatever choice you make, it's always a good idea to thoroughly research all of your options or hire a reputable financial planner to help you make the right decision. Contact us today and we'll discuss with you how to start your financing options


Lead Claims Consultant, IICRC Certified

April C

Office Manager


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