When you don’t have homeowners insurance, this is what you don’t want to see: water dripping through the ceiling, or the toilet splitting in half like a grenade was dropped into it. All of these things can happen without notice, and with no homeowners insurance, tending to repairs can be costly. But there are several ways to tackle home repairs without going broke, or moving back in with your parents.
Just like smart to not ignore chronic chest pains or other pain-alarms, you also don’t want to ignore that drip from the ceiling, which could turn into mold later or warp the entire structure. Your home is an investment, so you want to protect it by nipping repairs in the bud. Typically, home repairs can run up to $62,000 depending on what needs to be fixed– but if you don’t have homeowners insurance, what do you do?
Emergency Funds and the Piggy Bank
Back to the leaky roof–this is the “rainy day” you’ve been saving up for, so if you’ve set aside an emergency fund or established personal savings, consider dipping into them if possible. Unlike loans or credit cards, using your own cash means there’s no accumulating fees or interest tacked on. But once repairs are made and money spent, try to replenish your funds as soon as you can to take on any future repairs.
Home Equity and Lines of Credit (HELOC) Loans: Which is Better?
The equity, or value you’ve established in your home, can be used for both home equity and Home Equity Line of Credit (HELOC) loans. Basically, your home serves as collateral and what you typically get is lower interest rates since it’s secured. Here’s a closer look:
- Home Equity Loans: The main difference here is you’re paid in a lump sum with predictable, fixed monthly payments. A big plus.
- HELOCs: Think credit card–HELOCs work just like one; take what you need up to a specific limit and pay only on the interest. Also a plus.
With HELOCs, expect lower interest rates for sure, but if you default or fall behind making payments, your house could potentially be foreclosed on.
You Work for Them, Let Them Work for You
If eligible, you can seek help for home repairs through federal, state, and local programs depending on your annual income, or if your house is older. The Federal House Administration (FHA) offers loans at lower interest rates for repairs, and the Section 504 Home Repair Program is there for the elderly and those with lower incomes.
Here’s a Tip: Government offices and local nonprofits may have special programs available where you live, and some utility companies offer financing for certain upgrades, like installing high efficiency HVAC systems at low (or even 0%) interest rates.
To Cash-Out, or Not to Cash-Out
Another way to go is the cash-out refinance route. This replaces your current mortgage by tapping into your home’s equity (usually maxing out at 80%) for a newer loan for a more substantial amount–this equity-released cash can be used (by many) for home improvements. For some homeowners, it can even lower their interest rate.
Is there a downside? Just like a HELOC, you risk foreclosure for failing to repay the loan, and you will have to pay closing costs, or have it included in the new mortgage. Use your best judgment on this one and try to take out only what’s needed and will benefit you financially in the long run.
Personal Loans and Credit Cards
Personal loans and credit cards may be more feasible options, especially if your credit isn’t the best.
Personal Loans
Credit is king, but if you’d rather get a personal loan, some lenders will still consider you despite your FICO score. Since the loan is unsecured, your home won’t have to serve as collateral. Bear in mind, interest rates can also run higher with personal loans, and it again has to do with a lower credit standing.
Credit Cards
If you want to go with a credit card, try a no interest promotional card. Take the time to find a card with 0% APR, make the purchases you need, and pay off the debt quickly within the introductory period. What do you get? Basically, an interest-free loan. But if you can’t pay the balance off in time, you may be looking at significant charges later.
Working with Contractors
Don’t overlook local contractors for home repairs, many offer exclusive in-house payment plans to extend repair costs over a span of time that fits your budget. Make a list, check it twice, and see what kind of quotes you’ll get. You’ll be able to scratch off the more unscrupulous “sign up today or be without plumbing for a week” types easily. Prices fluctuate, but you’ll quickly learn who is legit, and who isn’t.
Crowdfunding and Local Charities
Feature films, comic books, and even those desperately needing medical procedures have all turned to crowdfunding to get funding when more traditional means turn them down. Kickstarter, GoFundMe, whichever the platform, it may be possible to obtain money for home repairs, just be upfront, honest, and communicate with backers. Look into local charities as well and community organizations that help homeowners in a jam.
3 Tips for Minimizing Repair Costs
So far we’ve explored various ways of financing home repairs without having homeowners insurance, but whatever option you choose, strive to keep costs down. Consider the following:
- DIY It: If you can do it yourself, do it yourself and cut out unnecessary labor costs unless it absolutely requires a professional.
- Prioritize: Put the really aesthetic, or “nit-picky” repairs on the backburner and focus on what’s dire instead. A toilet in pieces, geysering water is more important than a fresh coat of paint.
- Contractor Negotiation: Again, when dealing with local contractors, shop around for the best quote possible with a payment plan that makes sense.
You Don’t Have Homeowners Insurance… So What?
No doubt, having the cozy blanket of homeowners insurance is a definite plus, but if you don’t have it, look into the various options we’ve covered: personal savings, cash-out refinancing, or crowdfunding–there’s always a way. What’s important is to prioritize, be realistic in what you can take on, and don’t be ashamed to ask for help if you need it.