Emergency home repairs come for every homeowner. It may be a failed water heater, a crack in your foundation, or a sinking roof, but whatever it is, you will eventually need to fork out the money for costly fixes. Though unexpected repairs never come at a good time, doing a little preparation can keep your stress levels down when the day does come. If you’re a homeowner, these tips can help you plan for the major repairs you will need to pay for.
Build your savings
The ideal financial situation is to be able to pay for major home repairs on the spot. That way, you’re not piling up debt through high-interest credit card payments. The best way to achieve this is by starting an emergency repair fund, or building your fund up if you already have one.
A good starting point is to set aside at least one percent of your home’s value for repairs every year. For example, if your home is valued at $500,000, you should save at least $5,000 in your repair fund each year. Some experts suggest building an emergency fund until you can cover three to eight months of monthly expenses. However, since you can always count on big-ticket components of your home (e.g., foundation, roof, siding, sewer line) eventually needing to be fixed or replaced, planning to contribute to your fund indefinitely may keep you in the best financial position.
Use your home equity
Sometimes, an emergency repair is needed before someone has their fund built up enough to cover the cost. If this happens to you, consider using your home equity to access the cash you need. For relatively low out-of-pocket costs, look to a cash-out refinance to pay for home improvements or repairs. How much equity you have in your home will determine whether you need a conventional or FHA cash-out, so do your homework to learn more about your options. Cash out refinancing will not only supply the money you need for repairs, it can even result in better terms than your current loan.
Explore personal loans
Another option for paying for emergency repairs is to take out a personal or home improvement loan. There are many loans available that begin with an interest rate below 5 percent. While it’s not ideal, it’s still much cheaper than swiping your credit card. Search online for the various home improvement and personal loans and compare so that you can choose the best one for your situation. For many loans, you can easily apply online.
Be picky with your contractors
Lastly, the contractor you pick for each home improvement or repair can make a significant difference in how much you pay. Choosing a qualified contractor that fits within your budget is the best way to go. It’s important to remember that just because a contractor charges higher fees doesn’t mean they do the best work. On the other side of the coin, if you hire a contractor because they charge the least, you could end up with more to fix than you started with. For example, there’s a reason mold removal costs most homeowners an average of $2,000 - $6,000; if you suddenly find your basement covered in fungus or discover growths in your HVAC system, a true pro will not only do heavy cleaning, but likely drywall replacement and appliance repair, respectively. If a prospective contractor gives you a bid well under that national average, they may not be doing the quality work you need to remediate and keep the problem away.
Make a point to get referrals from friends and neighbors, interview three or more candidates, check each candidate’s licensing and insurance, and research their previous work. Ask each contractor for an estimate, and consider your options before committing to and signing the contract.
Being financially prepared for emergency home repairs can save you a lot of stress and money. Start contributing to a repair fund as soon as possible, and look into cash-out refinancing and personal or home improvement loans as other options. Last but not least, be especially selective when hiring a contractor. The sooner you start planning for the inevitable, the sooner you will gain the peace of mind of knowing you’re covered.
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