Owning a home is expensive. I know that’s not terribly earth-shattering, but it’s true. There always seems to be something in need of fixing or an upgrade. It’s one of the reasons why I believe many shouldn’t buy a house, rather rent until they’re more financially stable.
Most estimate you need to budget at least 1-4% of the value of a home for repairs – each year. That can be a significant number, especially if you have a major repair to cover. If you’re facing a situation where you need cash for a home repair, consider some of the following issues first.
Start With A Budget
A budget, on the surface, has nothing to do with a home repair. Looking deeper, it has everything to do with repairing your house. I know budgets don’t sound fun and are considered by many to be restrictive. In reality, budgets can be freeing. If you’re facing a large home repair bill, a budget will do you no good in the present. However, a budget will help protect against future repair needs. The point is to start now.
The key here is to put away money every month to cover for home repair needs. Think of it as an emergency fund for your house. Need to replace the front door? Did your refrigerator die on you? Replacing a shower? Those are all things your savings can cover – when done wisely. If the thought of putting aside money each month feels overwhelming, start small and build from there.
Options for Cash
The last thing you want to do for a home repair is to finance it with a credit card. If you have the funds set aside that’s one thing. What I’m talking about is when you have no idea where you are going to get the funds. In that instance, there are better options than your credit card to consider.
Given the right circumstance, a home equity line of credit may be a good option to consider. If it’s going to bring added value to the house and it’s a wise use of equity it could be a good move. The other option to consider is a home improvement personal loan through either your local bank or a peer-to-peer lending site. If you have a relatively good credit score, you can save a significant amount of money in interest payments over the life of the loan.
Know What Brings the Most Value
In most instances, a home repair will add to the value of a house. Not every home repair is equal in value and should be considered if resale is possible in the future. For instance, remodeling your home office pales in comparison to adding a wood deck. You can check out calculators available online to help make the remodel decision.
Don’t overlook the added value proposition when looking at a home repair. If it’s not going to add significant resale value and you’re able to live without the upgrade, you probably should. While it might be nice to have, it may not make the most sense financially.
Home repairs can be costly. Take your time and do the necessary homework to make the best decision possible.