Home repairs are one of the biggest costs associated with homeownership—and they can often be unexpected. In fact, American homeowners spend an average of $4,958 on home repairs each year, and 88 percent report completing a major repair or improvement within the past year. So what’s the best way to address these costs? Having a plan in place can help you avoid unnecessary headaches and tackle any repairs that may come up.
1. Create a home repair budget.
Budgeting is always a good idea, and this holds true with home repairs, too. If you’re new to homeownership, you can create a budget based on the age of your home and the repairs you think you’re likely to need over the coming year. If you’re a seasoned homeowner, you might develop your budget based on repairs you’ve done in previous years and the ones that are still on your to-do list.
How much should you save for home repairs?
A good rule of thumb is to set aside 1 percent of your home’s value each year for maintenance projects. So if your home is valued at $300,000, you’ll need to set aside $3,000 per year to cover expenses. This is a great way to ensure that you have the funds to deal with any urgent repairs and the ability to finance any remaining ones.
2. Consider your home repair financing options.
From replacing a water heater to installing a brand new roof, the cost of home repairs can vary significantly. For example, a new water heater typically costs between $650 and $1,600 while a new roof can range from $5,000 to $15,000 depending on materials and the size of your house.
For smaller costs in the $500-$1,000 range, credit cards can be a viable option — provided they don’t have a high interest rate. This type of financing works best for small emergency repairs and should be considered carefully in the context of your existing budget and expenses. For more expensive repairs, a personal loan can be a much better option, sometimes offering lower interest rates. And since a personal loan probably has set payments and is repaid on a fixed schedule, it can be easier to fit it into your budget. Plus, you’ll have a clear sense of when it will be paid off.
3. Select the financing option that’s right for you.
Once you’ve explored your options, it’s time to look for a solution that matches your needs. If you’re considering a small repair such as fixing your air conditioner, a combination of careful budgeting and the right credit card could be a smart choice.
For larger repairs, including roof replacement, new floors or electrical work, a personal loan might be the better option. A type of installment loan, personal loans let you borrow money from a lender and pay it back over a fixed period of time with regular set monthly payments. Unlike revolving credit, the interest rate is usually fixed for the repayment term of your loan which is also pre-determined. So you know how long it will take to pay it back and you have a set monthly payment for which you can budget.
It’s worth noting that not all personal loans are created equal. Many can have fees and penalties that might add up to a lot of extra costs for you. Discover personal loans have no origination or closing fees and no prepayment penalties. They also offer a choice of repayment terms for additional flexibility. And with fixed rates between 6.99% and 24.99% APR, you could lock in a rate that is lower than other financing options. Additionally, Discover offers same-day decisions in most cases on loans up to $35,000 which could help speed up your home repairs.
Home repairs can often feel stressful, but finding a way to pay for them shouldn’t be. By estimating your costs, budgeting carefully, and knowing your financing options, you can tackle any home repair issues that may come your way.