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When your home's pipes burst, the roof springs a leak or the boiler breaks down in the dead of winter, your first priority is to fix the damage and make sure your home is livable again. With the kind of urgency this situation typically warrants, how to pay for unforeseen home repairs can easily become an afterthought. Emergency home repairs don't also have to constitute a financial emergency, however. Here are nine ways to pay for unexpected home repairs without devastating your bank account.
Average Cost of Emergency Home Repairs
The cost of emergency home repairs can vary widely depending on the extent of the repair and how much materials and labor cost where you live. Here's how much some common home repairs cost on average, according to HomeAdvisor:
- Furnace replacement: $2,700 to $6,400
- Boiler replacement: $3,700 to $8,200
- Full HVAC replacement: $5,000 to $10,000
- Roof replacement: $5,000 to $12,000
- Water heater replacement: $500 to $1,800
- Burst water pipes: $1,000 to $4,000
9 Ways to Pay for Emergency Home Repairs
By their nature, emergency home repairs need to be completed quickly, both to make your house habitable again and to prevent further damage to your property or belongings. You could save up over time to pay for a kitchen remodel, but letting a leaky roof or broken pipe sit for months while you squirrel away cash will only make matters worse. Here are some options for paying for emergency repairs:
- Emergency fund: Ideally, you have an emergency fund set aside for just such a situation. If you do have to tap your emergency fund for home repairs, create a plan to replenish it as quickly as possible. Look for ways to reduce expenses and adjust your budget so you can build your fund back up to what you had before.
- Homeowners insurance: If you have homeowners insurance, check your policy or contact your insurance company to see whether repair costs are covered. Insurance may even pay for you to live elsewhere while the work is being completed. Keep in mind that filing a homeowners insurance claim will eliminate any discounts on your policy you may have been receiving for being claim-free and could raise your premiums going forward, especially if you've filed other claims recently. If the repairs cost less than (or not much more than) your deductible, it's usually best to pay for them yourself and reserve homeowners insurance claims for major damage in order to avoid the potential premium hike.
- Home warranty: When you buy a home, you may also be sold on a home warranty, which covers appliances and systems that break down. If you're in need of emergency repairs and have a home warranty in place, contact the company to see if your policy covers the issue in question. The warranty company will send a repair person to inspect the problem, for which you pay a small service fee. If the repair or replacement is covered, the warranty pays for it up to the limits of your coverage.
- Government aid: Some federal, state and county government programs provide grants and loans for home repairs. Eligibility varies, but typically depends on the property, your age and your income. Contact your local or county government housing department or your state's Department of Housing and Urban Development (HUD) office to see if you qualify for any type of financial help. If a natural disaster damages your home, the Federal Emergency Management Agency (FEMA) may offer financial assistance for major repairs so you can live in your home again. This assistance may supplement or replace homeowners insurance.
- Personal loan: If you're facing a costly repair and can't afford to cover it out of pocket, a personal loan might be the solution. Personal loans can be used for any purpose and are typically unsecured, which means you don't have to use your home or other property as collateral you risk losing. They usually feature higher interest rates than secured loans, but lower rates than credit cards.
- Credit card: Credit cards can also be a good way to borrow to pay for home repairs. They're accessible immediately, so there's no delay in starting the project, and you might even earn rewards or cash back on the purchase. Credit cards typically carry high standard interest rates, but you can look for a card that offers an introductory 0% annual percentage rate (APR) on purchases for a period of time (potentially a year or more). Use it to cover the repairs and avoid paying interest if you pay off the balance before the introductory period. Avoid maxing out a credit card to pay for home repairs, however. Maintaining a high credit utilization ratio, especially one that's above 30%, can quickly result in damaged credit scores.
- Home equity loan: If you have equity in your home and need to cover a repair of $10,000 or more, you may qualify for a home equity loan. The loan uses your equity as collateral, so interest rates are generally lower than for credit cards. You can typically borrow between 75% and 85% of your equity as a lump sum and repay it in fixed monthly installments over five to 30 years. Regular payments make it easier to factor into your budget and allow you to spread the cost over time. However, borrowing against your equity puts your home at risk if you can't pay back the loan. It also reduces the equity in your home, so you could wind up owing more on your mortgage than your home is worth if its value suddenly drops.
- Home equity line of credit (HELOC): If you're not yet sure of the full extent (and full cost) of the repairs, consider a home equity line of credit (HELOC). A HELOC generally allows borrowing 60% to 85% of your equity in the form of a credit line that you can draw on as needed, typically for a period of up to 10 years. During that time, you make interest-only payments; when the HELOC closes, you usually have 20 years to repay the balance. A HELOC has the same risks as a home equity loan, and because interest rates are typically variable, your payments could increase unexpectedly.
- Family or friends: Family members or close friends may be willing to extend a loan to pay for your home repairs. If you borrow from someone you know, draw up a loan contract and pay the loan back just as you would a loan from any other source—potentially with interest. Otherwise, you could damage your relationship, and repairing it might be far more difficult than fixing a leaky roof.
Be Prepared for Financial Emergencies
Getting a loan for emergency home repairs and paying it back on time and in full can help to boost your credit score. Conversely, missing a payment or failing to repay the loan could damage your credit score. Before using a loan, line of credit or credit card for emergency home repairs, make sure you have a plan to repay the money.
Applying for a loan or line of credit results in a hard inquiry on your credit report, which can temporarily ding your credit score. To minimize impact on your credit, submit all loan applications within a two-week period. You can get your credit report from all three credit bureaus through AnnualCreditReport.com. You can also check your credit report and FICO® Score☉ for free directly through Experian to make sure your credit is in good shape before you apply for a loan or credit card.