Home repairs can be both time-consuming and inconvenient. More often than not, as Whole Property Management Lakewood company notes, they become financial burdens at the most inopportune times. Whether it’s a leaky roof or cracks in the walls, these issues typically require prompt attention and funding, as neglecting them can lead to more serious and costly damage.
Even with a carefully planned budget for unexpected home repairs, costs can still become overwhelming. That’s why it’s important to be aware of the available funding options. Fortunately, homeowners have several resources to help cover these expenses.
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit, or HELOC, is a loan that homeowners can borrow against the equity they saved for their houses. It mostly works as a line of credit, but instead of getting the money from the lender, homeowners get the money from their equity, which they have to pay back in due course.
Most of the time, homeowners can draw money from their equity equal to 10 years, followed by 20 years for repayment. That said, one advantage that HELOCs have is that they are low-cost. Since lenders see this loan as low cost, the house is put up as collateral. If a homeowner fails to repay the line of credit, the house will be seized. It’s the biggest disadvantage of this loan.
Personal Loan
Homeowners can consider personal loans to finance home repairs. If the repair costs are too high for credit cards but not substantial enough to justify a larger loan, a personal loan can be a practical alternative. While they can still be expensive, they are generally more affordable than credit cards. Plus, they offer flexibility since the funds don’t have to be allocated to a specific repair.
Another advantage is the typically high borrowing limit, which can reach up to $40,000. And the best part?
A homeowner can apply for it online and have the money in their bank accounts in days. 680 is a good credit score, too, which means many homeowners can qualify for great repayment terms.
Cash-Out Refinancing
A cash-out refinancing takes a house’s existing mortgage and turns it into an even bigger loan. This means that homeowners end up with an entirely new loan with extra money to put up for renovations and home repairs. Up to 80% of homeowners can get their homes refinanced, and then they can take the difference in cash.
Because of this, cash-out refinancing has become a popular choice for homeowners. Depending on the market conditions and how much a homeowner has paid towards his mortgage, they can end up with a large amount of cash for home repairs. Unlike a HELOC, cash-out refinancing doesn’t borrow against a homeowner’s equity.
FHA Title-1 Loan
HELOCs and cash-out refinancing are great options, but only if the homeowner already has some equity built up over the years. However, what if the homeowner encounters costly home repairs in their first year of owning a home?
In such a situation, an FHA Title-1 loan is a great option for first-year homeowners. This allows them to borrow money for specific types of home improvement and home repairs. A homeowner needs to know some elements surrounding this type of loan before opting for one.
Firstly, its guidelines. The maximum amount that a homeowner can borrow in this loan is $25,000, which is specified for a single family home only. If a homeowner borrows a loan above $7,500, they must put up their house as collateral. Below that amount, it’s not needed. The loan repayment usually runs for 20 years.
Secondly, its qualifications. To qualify, a homeowner should have a debt-to-income ratio of 45% or below. Also, you must apply for a loan to a specified home improvement or repair. And, of course, the said loan should be used for those.
Credit Cards
This one is simple. If a home repair or improvement doesn’t cost much and the homeowner has a high enough limit, they can use their credit card to pay for the expenses. However, if a homeowner doesn’t have a card with a high enough limit, they can simply apply for one that they can use for home repairs or improvement.
A homeowner should remember that credit cards can be more trouble than they are worth. This is because they can be costly and potentially bury you in debt. However, a credit card can be a good option if the home repair is inexpensive. It’s a huge bonus, too, if the homeowner can pay the balance before the grace period ends.
Which Financing Option Should You Choose?
Home repairs are costly and can become even more expensive if neglected. However, most homeowners are unprepared for them and don’t even have savings to deal with these matters. Thankfully, there are several options they can choose from, starting with the ones discussed above. With resourcefulness and wit, home repairs can be gone in a flash.