How to Pay for Emergency Home Repairs

Average Cost of Emergency Home Repairs

The cost of emergency home repairs can vary widely depending on the repair that's needed and the cost of materials and labor in your area. Here's the average cost of some common home repairs, according to data from HomeGuide and HomeAdvisor:

• Furnace replacement: $2,000 to $10,000 or more
• Boiler replacement: $2,200 to $10,000
• Full HVAC replacement: $5,000 to $12,500
• Roof replacement: $5,000 to $10,000
• Water heater replacement: $750 to $5,200
• Burst water pipes: $200 to $3,000

Tip: Set up a sinking fund to put aside money for regular home maintenance, which helps prevent the need for costly home repairs.

10 Ways to Pay for Emergency Home Repairs

Here are some options for covering the cost of emergency home repairs.

1. Emergency Fund

Do you have an emergency fund set aside? Now is the time to tap it. Once your home repairs are handled, make a plan to replenish your emergency fund as quickly as possible. Look for ways to reduce expenses and adjust your budget so you can build your fund back up to what you had before.

Learn more: What to Do When Your Emergency Fund Runs Out

2. Homeowners Insurance

Homeowners insurance may cover your emergency home repairs and even help pay for you to live elsewhere while the work is underway. Check your policy details or contact your insurance company to find out if the damage is covered.

Keep in mind that filing a homeowners insurance claim will eliminate any policy discounts you may have enjoyed for being claim-free and could raise your premiums going forward, especially if you've filed other claims in the past seven years. It's best to reserve home insurance claims for major damage, so if repairs cost less than (or not much more than) your deductible, consider covering them yourself.

Learn more: What Happens When You File a Homeowners Insurance Claim?

3. Home Warranty

Some homeowners purchase a home warranty, which pays to repair or replace appliances and systems that break down. If you have a home warranty in place, contact the company to see if your policy covers the issue in question. The warranty company will send a repair person to inspect the problem, and you'll pay a service fee. If the repair or replacement is covered, the warranty pays for it up to the limits of your policy.

Learn more: Are Home Warranties Worth It?

4. Government Aid

Some federal, state and county government programs provide grants and loans for home repairs. Eligibility varies, but typically depends on the property, your age and your income. Contact your local or county government housing department or your state's Department of Housing and Urban Development (HUD) office to see if there are any programs you qualify for. If a natural disaster damages your home, the Federal Emergency Management Agency (FEMA) may offer financial assistance to make urgent repairs not covered by home insurance.

Learn more: Government Grants for Home Improvement

5. Personal Loan

Since you'll receive money in a lump sum, a personal loan can be a good option if you know how much your repairs will cost. Personal loans are available for as much as $100,000 and are repaid over time in fixed monthly payments, which can help with budgeting. You can use personal loans for any purpose; most are unsecured, so you don't have to use your home or other property as collateral. Personal loans usually have higher interest rates than secured loans, but lower rates than credit cards. Be prepared to meet credit score and income requirements to qualify and possibly pay an origination fee.

Learn more: Personal Loan Requirements to Know Before You Apply

6. Credit Card

Credit cards can be an instant solution, minimizing delays to your repairs; you might even earn rewards or cash back on spending. They also offer the flexibility to borrow more as needed, which is helpful if you're uncertain how much home repairs will cost. However, credit cards generally have high interest rates, topping 29% in some cases. Consider applying for a card that offers an introductory 0% annual percentage rate (APR) on purchases. Use the card to cover the repairs, then pay off the balance before the introductory period ends (which can be up to 21 months) to avoid interest charges.

Tip: Avoid maxing out a credit card to pay for home repairs. A high credit utilization ratio, especially one above 30%, can hurt your credit score.

Learn more: Personal Loan vs. Credit Card: What's the Difference?

7. Home Equity Loan

If you have equity in your home and need to cover a repair of $10,000 or more, you may qualify for a home equity loan. The loan uses your equity as collateral, so interest rates are generally lower than for credit cards. You can typically borrow between 75% and 85% of your equity as a lump sum and repay it in fixed monthly installments over five to 30 years, spreading the cost over time.

However, borrowing against your equity puts your home at risk if you can't pay back the loan. It also reduces the equity in your home, so you could wind up owing more on your mortgage than your home is worth if its value suddenly drops. If your home insurance will cover a large repair, this could be a better option.

Learn more: Requirements for a Home Equity Loan or HELOC

8. Home Equity Line of Credit (HELOC)

Not yet sure of the full extent (and cost) of your home repairs? Consider a home equity line of credit (HELOC). A HELOC generally allows borrowing up to 85% of your equity in the form of a credit line that you can draw on as needed, typically for up to 10 years. During that time, you make interest-only payments; when the HELOC closes, you usually have 20 years to repay the balance. A HELOC has the same risks as a home equity loan, and because interest rates are typically variable, your payments could increase unexpectedly.

Learn more: Home Equity Rates: HELOC vs. Home Equity Loan

9. Family or Friends

Family members or close friends may be willing to extend a loan to help with your home repairs. When borrowing from someone you know, it's important to draw up a loan contract and pay the loan back just as you would a bank loan—potentially with interest. Otherwise, you could damage your relationship, and repairing it might be a lot harder than patching a leaky roof.

Tip: If you don't repay the loan, and the outstanding balance is more than $19,000, the IRS may consider it a gift and impose a gift tax on the person who lent you the money.

10. Contractor Financing

Contractors sometimes offer financing for home repairs, typically through lenders they work with. It's important to be cautious with contractor financing, though: Scammers sometimes con homeowners into signing loan agreements that put their homes at risk.

Shop around and compare other lenders' offers to contractor financing. Check online reviews, past customers and the state's consumer affairs department for any complaints regarding the contractor, their financing program or their partner lender. Make sure you understand the terms before signing a financing agreement, and never sign a contract with blank spaces in it.

The Bottom Line

If you decide to finance your home repairs, keep in mind that applying for a loan or HELOC results in a hard inquiry on your credit report, which can temporarily ding your credit score. Minimize impact on your credit by submitting all your applications within a two-week period.

Qualifying for loans or credit cards with low interest rates typically requires a good credit score. To see where you stand before applying for credit, you can check your FICO^® Score^Θ and Experian credit report for free. You can also get matched with personal loan and credit card offers that fit your credit profile.