A house is usually the most expensive purchase someone will make in their lifetime, so it also tends to be the purchase people are most careful about maintaining. One of the most stressful parts of being a homeowner is having to pay for expensive repairs. It would be nice if things never broke down or fell apart, but that’s just not reality.
Trying to cover repair costs while also keeping the roof over your head can be difficult. There are many different financing options available to you, but it can be hard to know which one is best for your needs. Continue reading to learn what financial tools you can use to cover expensive repairs and renovations.
Create a budget for home repairs.
If you’re a new homeowner, then you probably are still learning the ropes about all that goes into caring for your home. When people are going through the home buying process, they’re concerned with things like finding the right home, applying with lenders, and a laundry list of other concerns. Almost no one thinks about future maintenance costs while house shopping.
However, once you buy a home, you should immediately start a savings account specifically for home repairs and other emergency expenses, especially if you buy an older home. It may seem a little paranoid to start saving for maintenance problems in advance, but the longer you’re a homeowner, the more you’ll come to realize that everything breaks at some point. It’s just a matter of when. The best thing you can do to prepare for expensive repairs before you need them is to anticipate that things will break, so create a savings plan and budget for when they do.
Get a home warranty.
Most home appliances, like AC units, water heaters, and washing machines, come with warranties to help you cover expensive repairs. However, if you own older appliances, then the warranty on them has probably expired, at which point it may make more sense to go with a new unit altogether. If you do opt to repair your AC unit instead of getting a new system, the bill for the technician may no longer be covered by the AC unit’s warranty.
Have you ever thought about what you would do if your AC unit or furnace quit on you and you couldn’t afford the cost of the repair? When you have older units in your home, then a home warranty is a great way to safeguard against breakdowns and expensive repairs. With the cost of air conditioning repair on an old unit, a home warranty could save you thousands in repair costs.
Borrow from your inheritance.
If you’re an heir to an estate, then one financial option that being an heir puts at your disposal is an estate loan, also called an inheritance loan or a probate loan.
With a probate or inheritance loan, you’re borrowing against an inheritance you haven’t yet received, so whatever real estate you stand to inherit is used for collateral. If you fail to repay your loan, then the lender will be rewarded the real estate property through the probate process. So, before getting a probate loan, it’s important to talk it over with your family members to ensure that an inheritance loan is right for you.
Get a home equity loan.
Another great way to pay for expensive repairs is to get an equity loan on your home. Equity is the amount of interest you have in your home. Another way to put equity is to say that equity is the percentage of the house you own.
When you get a mortgage, the bank owns the total value of the home until you begin making payments. You bought equity in your home when you made your down payment. The longer you’ve paid on your mortgage, then the more equity you have in your home that you can borrow against.
With a home equity loan, you’re putting up your equity in your home as collateral. If you sell the home before you pay off your loan, then the equity you borrowed against and the interest will go to the lender who holds the equity you used as collateral.