When Emergencies Happen: Preparing for the Cost of Major Home Repairs
Buying a new home is an exciting experience, and it’s easy to get caught up in how you’ll go
about transforming someone else’s living space into your own. However, sooner or later, home
emergencies do happen. It’s advisable to prepare for the unexpected by saving a certain
percentage of the cost of your house. But sometimes life happens and you get caught unprepared
for the expense of fixing a roof or replacing a broken sump pump.
Everyone needs a rainy day fund, even if it’s not as much as you’d like to have. Set up an
automatic withdrawal from your checking account into an interest-bearing savings account at a
comfortable monthly level. Many experts recommend setting aside 1 to 3 percent of the cost of
your home, though it may be more beneficial to determine the cost of major appliances and other
areas of concern, such as your roof and windows, and save money based on the anticipated cost
of those repairs. You can also take preventative action by protecting important features like your
furnace with clean and effective filters that help keep your indoor air quality healthy. Some
companies even offer subscription services so you’ll always have a filter on hand.
If you have to replace a window, use it as an opportunity to install windows that are more
efficient. The same goes for your roof; if you choose to replace a damaged roof with a more
energy-efficient version, you could expect to pay several times more than a roof with traditional
asphalt shingles. However, with a metal roof, you won’t have to worry about replacing it again,
and a solar-ready roof will save you considerably in energy costs. Before replacing your roof,
make sure to read reviews and get price quotes from reliable contractors.
It’s easy to get so stressed out about a major home repair that you forget to check whether it’s
covered under your homeowners insurance policy. There are things that insurance won’t cover,
such as flooding, mold damage, or power outages. Even if you’re “sure” a home repair isn’t
included, you might be able to get a portion of the cost covered so always be familiar with the
details of your homeowners insurance policy. You might not be able to see roof damage caused
by a storm, but a qualified insurance inspector will know what to look for.
If there’s enough equity in your home, you might be able to take out a loan backed by the value
in your house. A home equity line of credit is a second mortgage, a revolving loan funded by
your home’s equity. It’s a great idea for home repairs or improvements, but not so much if
you’re looking to pay off credit card debt or finance a big vacation.
There are government loans (FHA 203(k) and Limited 203(k)) for refinancing a home that will
let you add money to the loan that can be used for home repairs or improvements. The United
States Department of Agriculture also offers assistance for rural homeowners with very low
income who need financial assistance. Or, you might investigate a Department of Housing and
Urban Development Title I Property Improvement loan. They’re FHA-insured and are good
options for homeowners with little home equity who need to make substantial home repairs.
Using a credit card to pay for high-priced home repairs is not an optimal solution, but it may be
your best option if reserve funds are scant or if a personal loan is out of the question.
Finding a Contractor
When looking for a good contractor, a recommendation from someone you trust can go a long
way. Always be sure to get at least three quotes from candidates and factor in how long it takes
each company to provide an estimate. Make sure whoever you’re considering has insurance and
is in good standing with local trade associations.
A HomeServe USA survey revealed that a quarter of all homeowners lack the savings to pay for
emergency household repairs. This means a lot of people will need to find alternative means of
paying for repairs that are capable of producing a five-figure bill. Always carefully consider all
options based on your assets and the value you’ve built up in them.
Title I Property Improvement loan
HomeServe USA survey