Major Home Repairs Can Blow Up Your Bank Account — Here’s How to Avoid a Catastrophe

A homeowner is never truly finished with home repairs. As soon as you get one thing fixed or under control, another problem often springs up. Some home projects are under your control — these are the fun ones that you plan for. Many home projects are thrust upon the homeowner, however. Major home repairs like fixing a foundation, redoing a roof, or replacing an entire HVAC system can be bank-breakers. Here’s how to ensure your next major project doesn’t hurt you too badly — physically, emotionally, and financially.

Avoid Major Repairs in the First Place

It may seem obvious, but your best defense against a home repair catastrophe is to avoid them altogether. Regular home maintenance is key. Make sure you do things like keep your foundation dry (divert rainwater away from your home), clean and repair your gutters and roof flashing (to avoid a major problem down the road), and change your air filters on a regular basis (every three months). One good way to do this is to sign up for a quality filter subscription service, which will provide you with a filter for when it’s time to change it out.

Never Let Your Rainy Day Repair Fund Go Dry

If you value being financially sound (for the present and the future), then you’ll already be familiar with the concept of savings accounts. While dipping into your standard savings to pay for major home repairs can work, it’s much better to have a dedicated savings account that is just for home repairs — and absolutely nothing else. 

How much should you keep in this fund at all times? It’s up to you, and you can base it the age and general condition of your home, but putting back 10 percent of your monthly mortgage until you have accumulated 5 to 15 percent of your total mortgage on repair savings is smart.

Don’t Reach for the Plastic

Even with a solid rainy day fund, there is a chance the total cost of your major home repair will exceed the cash you have on hand. It’s tempting to pull out your favorite credit card to help cover the costs, but you should at least consider other financing options first.

You should consider using your home’s equity to your advantage, either through a home equity line of credit (HELOC) or refinancing with a cash disbursement. You should also look into taking out a personal loan. Do your due diligence to find a good lender, but in many circumstances, these loans will offer a far lower interest rate than you have on your traditional plastic card. 

Don’t Blow Money on the Wrong Contractor

Some projects are going to cost what they are going to cost, and it doesn’t really matter who does them for you. The price of some projects can vary wildly, however, depending on who takes on the job. Assuming you’re not going to DIY all your major home repairs, it’s time you read up on how to make sure the contractor you hire isn’t what breaks your bank.

Some easy ways to hire a good, fair contractor:

  • Get estimates from at least three different contractors. Let them bid for your job.
  • Don’t forget to ask around your community and read online reviews.
  • Demand up-front pricing (tacked-on costs at the end of a project can skew your budget).
  • Make sure they come to you to get approval on any changes — and put it in writing.

It’s also vital that you know how to avoid scams — and they are out there. Some signs you are dealing with a bad contractor include possible intentional damage (I found this other problem while I was looking around), trying to scare you (that thing is gonna explode!), and refusing to write up a written contract (verbal only).

There are many joys of home ownership. Major repair jobs aren’t among them. In most circumstances, avoiding a major financial catastrophe isn’t always easy, but it’s simple: save money, be smart about where you get extra cash for the job, do your homework, and prioritize preventative measures over everything else.

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