How to Finance Essential Home Renovations & Repairs


Don’t you love being a homeowner? Surprise! You need a new roof.

It’s all fun and games until an unexpected, essential, and costly home repair comes up. With homeownership, it happens. However, preparing yourself for both unanticipated repairs and ways to overcome them will help you avoid financial turmoil in the future.

There are loads of things that could happen when owning a home. Here are just a few impromptu and expensive home repairs you might face as a homeowner:

  • Leak in the roof
  • Tree removal
  • Appliance breaks
  • Furnace breaks 
  • Mold/Asbestos removal 
  • Septic tank repairs
  • Electrical work
  • Foundation repairs
  • Natural disasters
  • Home addition for expanding families

Buying a home is one of the biggest investments of your life, and to get a return on it you must maintain it and even make improvements. Ignoring essential home renovations and repairs will not only affect your quality of life, but will also depreciate the value of your home over time. 

To ensure you continue to build equity while owning a home, you need to be well equipped for the things that your home might need along the way. Here are some options to help you stay ahead financially when it comes to keeping your home in tip-top shape.


While there are lots of different ways to finance unexpected repairs, you should actively consider a budgeting plan to build up your cash savings. One of the most effective ways to save for surprises is through the one percent rule. While this rule is typically for screening potential rental properties, you can follow it to save for home renovations, too.

One way to use this rule is by saving 1% of your home’s value. For example, if your home costs $300,000, you should plan to set aside $3,000 a year to cover possible expenses. You can also develop a plan to save based on square footage, where you would have a dollar per square foot. For instance, if your home is 2,000 square feet, you should have $2,000 saved just in case. 

While you can never fully prepare for the exact cost of an unexpected expense, these budgeting plans are just a place to start to set yourself up with a significant lump sum of money if anything happens while being a homeowner.

Cash-Out Refinance

Even if you have saved up a good chunk of money, odds are you may still have to resort to other financing options for abrupt repairs. One option is a kind of mortgage refinance called a cash-out refinance. The reason people often choose buying a home over renting is you get something out of it: equity. You gain equity through increasing your home’s value or paying down the principal. By doing so, you can take this option and use the equity you built, turn it into cash, and in exchange, get a larger mortgage.

To put it into perspective, say, your home initially costs $300,000, and you’ve successfully paid down your principal to $250,000. You have built $50,000 in equity. Essentially you can use this equity for anything you want. With a cash-out refinance, you might only need $10,000 for a repair. What happens here is the bank will give you the $10,000, but your mortgage principal will now go back up to $260,000.

When having something unexpected to your home come up, using a portion of your equity might be the best option for you during a critical situation.

Personal Loan

Now, if you have recently bought your home and haven’t had that much time to build equity, you’ll have to look into other financing options. Another effective option is using a home improvement personal loan. Using a personal loan will offer you many benefits over using equity. 

For starters, personal loans are unsecured and require no collateral, making interest rates a little higher. However, if you use equity and can’t pay your increased mortgage payments, you are at risk of losing your home. Another benefit of using a personal loan is when you apply, you’ll normally be given a fixed interest rate and can set your monthly payment upfront. This way you can see exactly what you are signing up for and plan it into your budget accordingly beforehand. 

As any loan does, there are pros and cons of using a personal loan for home repairs. However, when something impromptu occurs, a personal loan is likely the least complicated and quickest way to get your home fixed.

Credit Card

Finally, and in terms of speed, financing with a credit card is perfect when there is an emergency. For example, if a tree falls on your house, there’s a leak in the roof, or anything bad happens to your home’s foundation, a credit card will have you covered. When any of these things occur, there isn’t always time to sit down and weigh what the best financing option is. Therefore, putting unexpected expenses on a credit card is the best solution when you need something repaired immediately. 

As a homeowner, it might be a good idea to look into different credit card options that offer perks to you, such as 0% introductory APR, points, cash back, or using a store credit card for a percentage off of home-related supplies. Even if you aren’t one to use a credit card regularly, having one in your wallet might be a good idea when owning a home, just in case.

Home renovations and repairs are essentially a given as a homeowner, and unless you take the time to prepare yourself for the unexpected, you’ll run into bills you can’t pay off because you weren’t ready. Account for home repairs in your annual income, and look into other financing options that could help you along the way to be a successful and prepared homeowner. 

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