For this post, we’ve teamed up with our partners at Fairstone
From roof leaks to foundation cracks, broken air conditioners, aging decks and more, the winter can take a toll on your home. If you’re facing surprise home repairs this spring, you may be wondering how to manage the cost. And, considering you’re probably spending a lot more time at home this spring and summer, you won’t want to let these repairs go unfixed for very long.
We’ve asked our partners at Fairstone to lay out your financial options to cover large unexpected expenses, so you can determine the best approach for paying your home repair bills this spring.
Step 1: Know The Cost Of Making The Repair vs. Leaving It
While it may be tempting to leave a small repair for another year, it’s important to consider that small repairs can grow into major issues in a seemingly short while. Rather than leaving the issue with “future you”, do a quick estimate to see how much the repair might cost you to fix now. Turn to Google or YouTube videos about home repairs. If you can do it yourself, budget out the cost for materials from your local hardware store. If you need to call in an expert, there are often contractors willing to come to do a free estimate if it means you might do business with them later. Once you have a sense of the scope of your spring repair and how much it may cost, you’re ready for the next step.
Step 2: Assess Where The Cost Sits Within Your Budget
Smaller repairs like caulking or painting windows, adding a bit of insulation or patching holes in screens might not run up a big bill, so take a look at your budget to see if you can absorb it. Before putting the bill on credit, ask yourself if you can redirect money from another area of your budget (for example, entertainment) to cover the cost of the repair. If you can, great – pay with a debit card, cash or a credit card that you’ll pay off right away. This way the cost never really adds to your debt load and can be managed very quickly.
Step 3: Consider Credit Options
If you know you won’t be able to pay for the repair with money from your current budget, it’s time to assess your borrowing options. You’ll want to think about how much money you need to borrow, how much credit you have available, and which option will allow you to pay off the debt soonest and at the lowest cost. You may be choosing between the following:
- Credit card – a credit card is handy, but the interest rate is often fairly high compared to other borrowing options. If you’re looking at a repair job that is within your current credit limit and you’ll probably be able to pay off quickly, this may be the option for you. If you’re not likely to pay off the cost of the repair immediately, you may want to consider other types of credit instead so you can avoid cycles of revolving interest charges.
- Personal line of credit or home equity line of credit (PLOC or HELOC) – larger repairs or renovations will probably mean more money, which you may be able to access through a line of credit. Typically, the interest rate on a line of credit is lower than a credit card, which is to your benefit if the cost of your maintenance is more than you’re able to pay off immediately. Make sure you have a payment plan in place if you’re going to use your line of credit, however. Because there isn’t a specific repayment schedule and only minimum payments are required, it’s very easy to fall back on minimum payments and get caught in a cycle of revolving interest on your line of credit.
- Refinance your mortgage – mortgage holders have the benefit of being able to refinance their mortgage (or acquire a second mortgage) as long as their current loan is in good standing. If you have a large home repair that will be an expensive fix, this may be a lower-interest avenue to pursue than other loan options. As with your current mortgage, you’ll have a set repayment schedule and repayment term, which can help you keep your loan on track.
- Secured personal loan – ideal for homeowners, a secured personal loan generally gives you access to more money at the lowest interest rates a lender offers. Because this is a ‘term loan’ product, you’ll have a set repayment schedule and repayment term, meaning you’ll know when you’re going to be debt-free. This type of borrowing option is best for people who need to borrow more money than what they have available on a credit card or line of credit, and/or who prefer the structure of a term loan.
- Unsecured personal loan – if you’re not interested in a secured personal loan, an unsecured loan may be right for you. Unsecured loans aren’t backed by an asset, so you won’t have to put a lien on your home. Typically, it’s faster to borrow money with an unsecured loan, so you’ll be able to access the money you need, when you need it, with a predictable repayment schedule and defined repayment term.
Step 4: After Your Repair, Focus On Repaying Debt (While Enjoying Your Updated Home)
After your repairs are complete, you’ll need to factor your new debt into your budget so it doesn’t get forgotten. Focusing on repaying your debt now will help you become debt-free sooner, ensure you feel in control of your finances and be able to focus on enjoying your home this season. If you haven’t built a budget yet, there’s no better time than now. Start with your income and then breakdown how much money you need to pay on debt, groceries, home essentials and other spending categories. If you need some help getting started, check out Fairstone’s 5 steps to building a budget that works.
While home repairs may not be the most exciting activity to contemplate this spring, they’re often necessary to maintain the value of your home. As a homeowner, you’re making a responsible choice to not only enjoy your home but also to ensure that it stays in good shape, preventing major issues in the future. Your ability to “weather this storm”, borrow the money you need to get your repairs done and feel confident in your borrowing decision is key to your future stability.
If you’re dealing with surprise repairs and are wondering how much money you can borrow with a secured or unsecured personal loan, you can get a free loan estimate without impacting your credit score here.