Some home repairs can be put off until you have the money to fix it, but there are some repairs that need to be done immediately before it gets worse. Unfortunately, home repairs can cost a significant amount of money, especially when you are running on a tight budget as it is. So, what do you do when you need a major repair that you can’t afford?
Before you panic, here are some solutions that you can look into:
1. Use your home equity
Say that your roof is on the verge of collapsing or you need an experienced electrician to fix a major wiring issue in your home. These are problems that you cannot ignore for the sake of your safety–but what if you don’t have the cash to pay for the needed repairs?
One of the most doable solutions is to tap into your home equity. If you have at least 20% of equity on your home, you can finance your repairs through a home equity loan or a home equity line of credit loan (HELOC). With a home equity loan, you can borrow a certain amount of money and pay interest on that amount. With a HELOC, on the other hand, you gain access to a revolving source of funds as needed.
2. Opt for home improvement financing
If you need to make repairs to your house, you can go to your local home improvement store and ask about their financing options. Often, home improvement stores will offer you to open a credit line to purchase what you need with financing, sometimes even with 0% interest for a certain amount of time. Most stores will also offer special discounts or free shipping if you spend more than a certain amount.
Opening a credit line with a home improvement store is a relatively easy way of financing your home repairs if you can pay for the labor out-of-pocket or are doing the labor yourself.
3. Apply for cash-out refinancing
When you refinance your mortgage, you are essentially paying off your old loan and replacing it with a new one. People refinance their home to get a lower interest rate, shorten the life of their loan, convert to a different type of mortgage (ARM or fixed-rate), or to tap into home equity.
The last one is what you’re going for when you have a major home repair that you can’t afford. Refinancing your mortgage with a cash-out option will allow you to get a bigger loan on your house, and then the extra money can be used to cover your repairs. For example, if you owe $100,000 on your current mortgage, you can take out a $120,000 loan to replace your previous balance. You can use the remaining $20,000 for home repairs and other large expenses.
4. Get a grant or government loan
Check with your locality if there are grants or government loans available to cover home repairs. However, this option is usually the last resort for homeowners since it can be incredibly difficult to qualify for a government loan or grant. Nevertheless, it’s worth looking into, especially if you are unable to get affordable credit anywhere else.
There are also government assistance programs that offer funds to homeowners whose houses have been damaged by natural disasters. If this is the case for you, look for government assistance on both the federal and local levels to see if you can qualify.
5. Borrow from friends and family
Borrowing money from friends and family should be your last resort, even it’s the easiest option for you. It can easily complicate your relationship with your loved ones when you are unable to pay them back on time, or worse, unable to pay them back at all. But when don’t have any other option, you can try financing your home repairs from the people close to you.
However, ensure that you set clear expectations about when you’re going to pay them back to avoid conflict in the future. Don’t say that you’re going to pay them next month if you know you’re not going to be able to. Similarly, if you will be unable to pay them back at the agreed date, let them know in advance so that they know you still intend to pay.
Getting stuck with costly home repairs is a nightmare for any homeowner, but most especially for those who already have financial troubles as it is. If you suddenly run into a major home issue that you can’t afford to pay with cash, here are the next best options that you can try. Think of your next step as soon as possible, and whatever you do, do not ignore the problem because you can’t afford to fix it yet.
