5 Ways to Finance Home Repairs

There are a lot of great things about being a homeowner, but having to finance home repairs isn’t one of them. Repair costs often pop up unexpectedly and at inopportune times, such as a broken furnace in the dead of winter or an extensive roof repair right after you’ve come back from vacation. And they’re rarely cheap. In 2018, 88% of American homeowners had to take care of at least one major repair, with an average annual spend of almost $5,000.

A home is a big investment, and like many other big investments, you need to take steps to maintain and improve it if you want to make a return. And depending on the age and condition of your home, as well as the elements that it faces where you live, a large part of maintaining your investment is addressing home repairs. So how do you finance home repairs without completely depleting your savings? Alternately, how do you finance home repairs if you don’t have a lot of savings? Fortunately there are options to help with both cases.

Budgeting for Home Repairs

Even before you start looking into ways to finance home repairs you should be actively accounting for the possibility of repairs in your budget. There are a few ways that you may choose to do this, but many homeowners abide by either the 1% rule or the square footage rule. Here’s how they work.

The 1% rule dictates that you should set aside 1% of the purchase price of your home each year for potential repair costs. So if you bought your home for $250,000, that’s $2,500 allotted in your budget year after year for maintenance and repairs. The logic behind the 1% rule isn’t so much that your repairs are going to cost you that much every year, but that it’s a good way to set a guideline and encourage yourself to save.

Variations on this rule include saving 2-3% instead of 1%, or putting aside 10% of what you spend on your property taxes, mortgage payment, and insurance payment each month for repairs. With the latter rule, if you’re spending $2,000 a month on those combined expenses you’ll want to put an additional $200 a month into savings for repairs.

The square footage rule is a recommendation that you budget $1 per square foot of your home for repairs. A 2,200 square foot home means $2,200 in savings for repairs a year, for example, and a 3,000 square foot home means $3,000 a year. Again, this doesn’t mean that there’s a direct correlation between the square footage of your home and what you’ll spend in repair costs each year—it’s just a good way to ensure you’re saving a decent chunk of change toward these types of expenses.

How to Finance Home Repairs

Even with a well-executed savings plan it’s not uncommon to need extra funds when it comes to financing home repairs. If you save $2,000 a year for example, you’ll see it go quickly if you need a roof repair (averages $351 to $1,352, depending on whether the repair is minor or major) followed by a new water heater (averages $767 to $1,447 with the new unit and labor). And there’s always the possibility of needing a notoriously expensive repair, like a foundation repair (average cost of $4,511 but can range as high as $15,000) or needing to restore and repair after incurring water damage (average cost of $2,701).

As you might expect, many homeowners will at some point find themselves in need of having to finance home repairs. And fortunately, there are a few good options for how to do it. Here are five of them.

Home Equity Line of Credit

Cash-Out Refinancing

FHA Title-1 Loan

Credit Cards

Personal Loan

Final Takeaway

Home repairs pretty much always need to get done, even if you don’t have funds on hand. Look through the available options above and find a lending option that makes the most sense for your long term financial goals and your existing financial situation, and be sure to account for repair costs in your annual budget as well.