Home Improvement

How to pay for emergency home repairs

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Every homeowner’s worst nightmare is facing an emergency home repair and not having funds available to pay for it. It could be that your air conditioning cuts out in the middle of July or your furnace suddenly decides to stop working on the chilliest day of winter and suddenly you’re stuck with a bill for major repairs. You could even discover your house needs a new roof, or return home one day to find that a burst pipe has caused thousands of dollars in damage.

No matter what the cause, emergency home repairs are stressful and can cause major financial strain. These situations are more common than you might think, though, which is why emergency home repair loans are readily available to help ease the burden. If you’re facing an emergency repair, fear not. There are a ton of home repair loans that you can apply for today to start the repairs and get your home back in good shape.

How much do common home repairs cost?

Discover recommends that you budget 1% of your home’s value for home maintenance each year. That would be approximately $3,000 annually for a $300,000 home. The Motley Fool estimates the national average cost of home repairs at $4,958 per year.

That is just an average, though. The actual costs each year will fluctuate depending on the work needed. They could be lower one year and significantly higher the next. The key takeaway is this: just because you didn’t spend a lot on home repairs one year doesn’t mean you shouldn’t anticipate more the next year.

Ways to finance an emergency home repair

It’s easy to budget for routine home maintenance and planned repairs, but when emergency home repair needs come up, do you have a plan in place to cover the costs? Emergency home repair loans are designed to get you the funds you need in a relatively short amount of time so that you can address the issue without having to worry about coming up with cash. Check out these options that allow financing for home repairs to see which one makes the most sense for your situation.

Personal loan

For emergency home repairs with a small to medium price tag, a personal loan makes a lot of sense to use as a house repair loan. They’re easy to come by and are offered by most banks, credit unions or online lenders. You can typically get approved quickly and have funds available the next day.

If you take out a personal loan to cover an emergency home repair, you’ll want to make sure your credit score is in good shape or you may have to pay a higher interest rate than you would with other types of home repair loans.

Home equity loan

Home equity loans are commonly used as house repair loans since they are secured against the equity you’ve built in your home and are available in larger sums than personal loans. This type of loan is issued in a lump sum that is equal to a portion of your home equity and is best for major repairs that will cost $10,000 to $25,000 and up, as most financial institutions won’t offer a home equity loan for less than this amount.

In order to take out a home equity loan, though, you’ll need to have enough equity in your home to borrow against, which may not be the case if your home was a recent purchase. You should also make sure you can afford loan repayments or you’ll risk losing your house, since this type of loan is secured by using your home as collateral.

Home equity line of credit

Home equity lines of credit, or HELOCs, are also borrowed against the equity you have in your home and your home is used as collateral to secure the loan. The difference is that you’re given a line of credit with a limit that you can borrow from multiple times rather than one lump sum like you get with home equity loans. This flexibility gives you more control over how much you borrow and pay back, which is convenient if you’re dealing with a major emergency project with unpredictable costs. However, the minimum draw is still typically in the $10,000 to $25,000 range, so this is only a good home repair loan option for major projects. It will also only work for people who have built up enough equity in their home to borrow against.

Government loan

Did you know that the U.S. Department of Housing and Urban Development offers emergency home repair loans? These loans are known as Title 1 Property Improvement Loans and are good for repairs up to $25,000. You’re not required to have any equity in your home, although you must have occupied it for at least 90 days, and you have to meet other lending requirements to qualify.

Credit card

When minor emergency home repairs come up it might make sense to use a credit card that you already have to pay for them. Be careful when using a credit card, though, because the interest can be high unless you’re still in an introductory period with a low APR. You’ll want to make sure you can pay off the balance right away or you’ll end up drowning in interest payments. The exception, of course, is if you’ve just applied for a new credit card to take advantage of an introductory interest-free period.

The bottom line

Emergency home repairs are stressful but are not the end of the world. There are plenty of financing options and emergency home repair loans that will work with most budgets. Make sure you compare financing options to get the best interest rates and determine which home repair loan is the best fit for your repair project.