How you’ll want to cover the expenses of an unexpected home repair will depend on the extent of the damage, how much you’re able to contribute from savings and how your home was damaged.
A home equity loan or home equity line of credit (HELOC) allows you to use the equity in your home for repairs and general improvements. While home equity loans and HELOCs differ slightly, they’re both secured by your property — which means you may risk losing it if you default.
However, they can be a low-interest way to pay for an emergency home repair while you wait for an insurance claim or government assistance to come through.
Depending on the type of fix you need and how it happened, there’s a chance your homeowners insurance policy will cover your repairs. For example, a roof damaged in a storm might be partly or completely covered by your policy.
If your policy isn’t clear, contact your insurance provider. It can help you assess the damage and may even be able to recommend a qualified contractor in your area to make any necessary repairs.
The US Department of Housing and Urban Development (HUD) has three programs to help low-income homeowners pay for repairs:
Title I Property Improvement Loan. Title I loans are insured by the Federal Housing Administration, and you may be able to qualify for up to $25,000. However, repairs must “substantially protect or improve the basic livability or utility of the property.” If they don’t, you likely won’t qualify for a Title I loan.
USDA home repair loan. If you live in a rural area, you might qualify for a loan through the US Department of Agriculture’s Section 504 Home Repair program. They’re designed to help low-income homeowners modernize their homes and make repairs that remove or prevent safety hazards. To apply, find a USDA home loan specialist in your state.
FHA 203(k) and Limited 203(k) loan programs. These loan programs allow you to finance up to $35,000 for repairs, improvements and upgrades to your home. This money is added to your mortgage, and you can use the HUD calculator to determine your maximum mortgage amount.
Low-income homeowners may qualify for community development grants through their state, municipal government or local financial institutions.
One of the largest programs, the Community Development Block Grant (CDBG), is run by the US Department of Housing and Urban Development (HUD) and designed to ensure residents have access to affordable housing.
You may qualify for a community development program if your income is less than 80% of your community’s median income. Homeowners with disabilities might be eligible for additional assistance programs.
Lenders typically offer loan amounts between $2,000 to $100,000. Loan terms are generally between one to five years, and the APR ranges from 4% to 36%. These may be a good option for borrowers with steady income, good to excellent credit and a low debt load compared to the amount of money they make each month. Otherwise, you could find trouble with approval for large amounts or competitive rates.
It’s also one of the fastest financing options out there. Apply through an online lender or personal loan marketplace, and you might be able to receive your funds as soon as the next business day.
With cash-out refinancing, you take out a new mortgage that’s larger than the one you’re currently paying off. This new mortgage replaces your old one — ideally with more favorable rates and terms than you’re existing one.
You use your extra funds for home repairs, which means you’ll be paying off both your home and the repairs as part of your new mortgage.
This option can be expensive and risky, however. It’s not always easy finding competitive rates with a cash-out refinance, and you’re often on the hook for closing costs equal to 3% to 6% of the mortgage. And if you aren’t able to repay, you could end up losing your home.
For small emergency repairs — like a broken water heater or AC unit — your friends or family may be willing to help. You could even put together a formal contract with a service like LoanWell. Just make sure you repay what you borrow as soon as possible. Otherwise, you risk straining your relationship and losing future help down the road.
Grants for home repairs after a natural disaster
The Red Cross and the Federal Emergency Management Agency (FEMA) are the first two places you should turn to if your home is damaged during a natural disaster like a flood or hurricane.
The Red Cross can assist with cleanup in your home after a disaster and often funds home repair grants. FEMA also offers grants for major repairs that include fixing your home’s foundation, roof, septic systems, utilities and other essentials.
Since grants typically last until funds run out, it will be easier to qualify if you apply as soon as possible after the natural disaster hits.
3 tips to prepare for an emergency home repair
If you don’t want to be caught off guard by a repair, these tips can help you prepare before disaster strikes:
Keep a list of contractors. Storing numbers in your phone is smart, but you should also write down a list of contractors in your area and stick it in your wallet in the event that you lose cell service. Look for those on call 24/7 in case of emergency.
Call your insurance provider. Contact your insurer to confirm what’s covered by your policy and what you’re responsible for. After an emergency, most insurers send an assessor to look over the damages and let you know how much you’re covered for. But it helps to know before so you can think about financing if you need it.
Know your disaster relief options. Ask your local housing administration about potential grants and other forms of disaster assistance so that you can apply as soon as possible, if necessary, to increase your chance for approval.
How much do common home repairs cost?
Home repair costs can vary according to the value of your home, where you live and the extent of the damage. Here’s a ballpark of what you can expect for common home repair and improvement costs, according to a July 2018 HomeAdvisor survey:
Lowest and highest cost
Water main repair
Repair or replace electric panel
Level or mudjack concrete slabs
Stairs or railings
3 home repair solutions to avoid
If you don’t have a savings buffer to put toward unexpected home repairs, you might be tempted to juggle your existing personal expenses to scrape together what you need. Applying for a personal loan could be a better option than these three ways people use to pay for home repairs — and keep you from landing in an even worse financial situation.
Putting off payments on bills. Late loan repayments can seriously damage your credit score, making it difficult to qualify for financing in the future. But skipping your usual bills to foot an emergency expense could launch you into a spiral of debt, not to mention leave you without a place to live if those bills are your mortgage or home equity loan.
Paying with plastic. Paying for a new faucet or a caulk gun with your credit card might not set you back too much. But they typically come with much higher APRs than personal loans, and costs can add up quickly if you swipe for a big-ticket item.
Using short-term lenders. A payday loan or installment loan might be a last resort when you can’t qualify for a personal loan or government assistance. But with APRs that can soar to 100% and even 400%, it’s the most expensive type of financing you can get.
If you don’t have the money for repairs when the unexpected happens, you’re not alone. You’re also not out of luck. Start your search with our comprehensive guide to personal loans so you can jump right into comparing lenders when you have to cover an emergency home repair.
Frequently asked questions
Yes. You might have trouble qualifying for a personal loan, but you could be eligible for grants or government-backed loans. They tend to be the least expensive option, and your credit score might not prevent you from qualifying.
You may be able to find help from nonprofits like Habitat for Humanity or local organizations like a community center or church. But funds may be limited, and it might take a while to get the repairs completed.
And look into your grant or government-backed options. For example, rural homeowners ages 62 or older might qualify for a USDA grant of up to $7,500. Reach out to your local department of housing or public housing authority for details.
As long as you’re eligible for both, you may qualify for both. This can help reduce costs — if you receive $27,500 from the USDA, you may only need to repay $20,000. Just keep in mind that you must repay your grant if you sell your property within three years of receiving grant money.
Anna Serio is a trusted lending expert and certified Commercial Loan Officer who's published more than 1,000 articles on Finder to help Americans strengthen their financial literacy. A former editor of a newspaper in Beirut, Anna writes about personal, student, business and car loans. Today, digital publications like Business Insider, CNBC and the Simple Dollar feature her professional commentary, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
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