Any experienced homeowner will tell you that home repairs are inevitable, but some repairs require immediate attention. Dragging your feet will only magnify the problem and could end up costing you way more to repair than it originally should have. If you don’t already have an emergency fund saved up, it’s important to have some idea of how you would cover these costs before they occur.Fortunately, there are several options to help fund emergency repairs that don’t involve credit cards.
1. Home Equity Line of Credit (HELOC)
A HELOC allows homeowners to open up a line of credit using their home as collateral. You can borrow up to a certain amount, set by the mortgage lender, at any time throughout the life of the mortgage. Once the home equity loan is awarded by the lender, the HELOC enters the draw period (usually spanning 5-10 years), during which you can withdraw money whenever you want, up to your specified limit. When money is drawn, borrowers receive a monthly bill where the minimum payment due is usually interest only. This allows you more freedom to decide how and when you will pay back the loan. After the draw period ends, you cannot borrow any more from the HELOC, and the loan enters the repayment period (typically 10-20 years). The monthly bill is then determined by dividing the total amount withdrawn by the number of months allotted for the repayment phase. Speak with your lender to learn about the ins and outs of HELOCs.
2. Homeowner’s Insurance Claim
Depending on how the damages occurred, check your homeowner’s insurance policy to see if you’re covered. Typically, a new roof will have at least some, if not all, of its replacement costs covered if it was damaged by a storm for example.
3. Cash-out Refinance
If you currently have equity in your home, you may want to consider a cash-out refinance. A cash-out refinance is when a homeowner refinances their existing mortgage for a higher loan amount, and the borrower receives the difference between the two loans in cash. This is in no way free money, and adds to the principal amount that needs to be repaid during the life of the loan. Make sure you work with your lender to find a good refinance rate.
4. Federal Assistance
Certain government loans, like FHA 203(k), allow borrowers to buy or refinance a home along with additional funds added to the total loan amount, specifically to pay for repairs or upgrades. There’s also the Title I Property Improvement Loan program, provided by the U.S. Department of Housing and Urban Development (HUD), which aims to help owners with little equity in their homes. Other federal assistance programs may be available based on your income, so you’ll need to speak with your mortgage lender to determine your best option.
5. Community Development Programs
Check to see if you qualify for any programs in your community, administered by the state and local governments, agencies and financial institutions. For example, Community Development Block Grants are issued through HUD to offer emergency repair loans or grants to local homeowners. For more information, check with your local Office of Housing, Housing Services, Housing Authority or similarly named agency.
6. Disaster Relief
If your repairs are disaster-related, you should look into relief organizations like the American Red Cross or the Federal Emergency Management Agency (FEMA). FEMA can offer funds for emergency repairs that are not covered by your homeowners insurance; however, this money is for major repairs regarding safety and sanitary living conditions, not necessarily to rebuild your home after a disaster has occurred.