This May Be Your Best Way to Pay for Home Repairs in 2022

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Home repairs can strain your budget, but here’s a good way to cover them.

Key points

  • Home equity is up on a national level, making it easier for property owners to borrow against their homes.
  • If you get hit with a large repair, you may want to consider a home equity loan or HELOC.

The tricky thing about owning a home is you need to budget for much more than just your mortgage payments. You also need to factor in added costs like insurance, property taxes, maintenance, and repairs. Most of these are items you can plan for. But home repairs tend to fall into a separate category.

Sometimes, home repairs can creep up without warning. And often, they can be extremely costly — so much so that you may be forced to pay them off over time, even if you have some money in an emergency fund for unplanned bills.

But this year in particular, you may have an easy, affordable way to finance home repairs. And it’s all thanks to record-high home values.

Tap your home equity when you need it

Because home values have soared on a national scale, property owners are sitting on more home equity than ever. In fact, during 2021’s third quarter, home equity reached a collective $9.4 trillion. Broken down, that amounts to an average of $178,000 per borrower.

If you’re facing a home repair and don’t have the money to cover it in cash, borrowing against your home is a reasonable course of action. That’s because interest rates on home equity loans and lines of credit (HELOCs) tend to be more competitive than the interest rates you’ll pay for a personal loan or credit card balance.

So which borrowing method is best for you if you’ll be tapping your home equity? If you know how much a given repair will cost, you may want to stick to a home equity loan. Home equity loans come with fixed interest rates, and a predetermined amount of money is lent to you for a period of time. That makes it easier to factor the loan payments into your budget, since you’ll know exactly how much you owe.

HELOCs, on the other hand, give you more flexibility because you don’t borrow a lump sum. Instead, you get access to a line of credit you can draw from over the course of multiple years (often, five to 10).

Say you’re facing a $5,000 home repair right now, but you’re worried about future repairs because your house is aging. If you take out a $10,000 HELOC, you can borrow $5,000 now and then leave the remaining $5,000 alone. If another issue with your home arises in three years, you can access that remaining money later on.

The drawback of HELOCs, though, is they tend to come with variable interest rates. This means your HELOC payments could be harder to factor into your budget — and could rise over time.

Use your home as a lifeline

Having to pay for home repairs is a major drawback to homeownership. But right now, the idea of facing repairs may be less stressful given where home equity levels are at.

Of course, it’s still a good idea to keep plenty of money on hand in the bank for home repairs and other unforeseen expenses. But in the absence of that, borrowing against your home to pay for repairs is a good option to fall back on today, and will probably remain so throughout 2022.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase. 

The Ascent’s in-house mortgages expert recommends this company to find a low rate – and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn’t influence our opinions of products, we do receive compensation from partners whose offers appear here. We’re on your side, always. See The Ascent’s full advertiser disclosure here.

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