Houses are a source of pride and part of the American dream. You don’t have to be a homeowner for very long; however, to realize your dream requires routine upkeep — and it can get pretty expensive. Do you have the funds set aside to cover a major repair if something unexpected happens? And if not, what will you do? Here’s how to tackle those big bills without your dream turning into a nightmare, even if you’re caught off guard.
Use Your Insurance
Homeowners insurance is an important resource in many instances. Money Under 30 explains that coverage typically includes problems such as fire or smoke damage, weather-related damage, and damage from vandals or thieves. However, you’re normally on your own for a wide variety of circumstances, such as sewage backup, damage relating to power outages, damage from neglect, and wear and tear. That means when things get old and break, you need to pay out of pocket, even for big-ticket items like roof repairs and HVAC systems.
Hire Great Help
Whether you have insurance coverage kicking in or not, make sure you hire quality help for whatever repairs are necessary. There is a wide variety of scams in the construction industry, and the last thing you want is to throw away money on a fly-by-night contractor who takes the check and runs, or pay for work that is subpar, potentially causing more damage in the long run.
As an example, every time there is a hail storm, it seems the news is filled with stories of roofing contractor con artists, but knowledge is power. Assess candidates carefully before you hire someone, examining credentials, getting direct contact information, and finding out whether they will provide a written estimate. Make sure you hire contractors with a solid track record and professional background for the best results.
Rainy Day Prep
If your insurance company isn’t involved, the best option when you have a major home repair is to pay for repairs with cash. According to some statistics, the average homeowner pays up to 4% of their home’s value over a year’s worth of repairs. If you are ill-prepared, the costs can pull the rug out from under you. Thankfully, there are other ways to pay for the repairs, even if you don’t have immediate access to cash.
Some of the alternative methods for covering home repair expenses are more palatable than others. For instance, you might be able to get a loan, and there are a few to choose from. As Bankrate explains, you could fund your repairs with a personal loan, home equity loan, or line of credit. A home equity loan or line of credit uses your home for collateral. Of the three, a personal loan puts your home at the least risk, generally offers a reasonable interest rate, and minimizes the impact on your credit score.
Another option is a cash-out refinancing loan. This type of loan hands over the cash that makes up the difference between your existing mortgage and the cash-out refinance. If you apply for a PennyMac refinance, you have an array of options to choose from based on your home equity, such as a conventional cash-out and FHA cash-out. Basically, tapping into your home equity by taking out a cash-out refinancing loan is a good choice to get fast cash for the repairs.
In terms of interest rates, all of those loan types are usually preferable to using a credit card, although a credit card will not directly put your home at risk. Sometimes people resort to asking relatives for assistance, which might or might not be a desirable option, depending on relationships and circumstances. Another idea is to use crowdfunding when you’re in a pinch.
Lastly, Family Handyman notes that there are many home repairs you can do yourself. Some issues are unsafe to take on, some require training or special tools, but there are times you can break a big job into smaller parts to save money. If you can wield a paintbrush and turn a screwdriver, chances are you can pare down your bills a bit, and then hire a pro for the rest.
When it’s time to repair your property, the last thing you want is to find yourself high and dry. Prepare as best you can and hire quality help, and if push comes to shove, find the best option for your circumstances. Homeownership is a privilege, and with good choices, you can keep on living the dream, and steer clear of financial nightmares.