How To Finance Your Garage Repair Or Remodel

Posted On Monday, 06 September 2021 19:24

When it comes to property repair and renovation, the garage is often the most overlooked part of the house. Unfortunately, not many people recognize its potential as storage or living space. 

A garage conversion or remodeling project can cost anywhere from USD$5,000 to over USD$23,000, according to Home Advisor. The final cost will depend on several other factors such as permit costs, materials needed, and the garage size. Moreover, you should expect to spend more if you’re planning to add other utilities such as heating and cooling systems, insulation, and so on.    

Because of the relatively hefty costs involved, a homeowner may need to go elsewhere to fund the project. Below you'll find some traditional and non-traditional options to consider when remodeling your garage.

1. Borrow Money From Family And Friends

If the costs for your garage improvement project are relatively low and don’t require major works other than replacing the garage doors, you don’t need to go to lending institutions. Consider approaching family members and friends to borrow more funding. Just make sure you clearly explain to them what you’re planning to use the money for and how soon you’re planning to repay them. 

You can also do this in cases where you’re planning a major renovation, especially one that involves renting out the garage to other people. This way, there’s a better guarantee that you’re capable of repayment.    

2. Apply For A Home Equity Line Of Credit (HELOC)

This works similarly to a credit card where the lender allocates a specific amount to you, typically up to 90% of the appraised value of your home less the amount you owe on your existing mortgage. 

To avail of this loan product, you must be an existing mortgage borrower. If you’ve had active payments so far, you’ll have higher chances of getting approved. 

While this may come in handy, take note that you could be paying higher interest rates compared to your original mortgage. On the flip side, you can borrow as little or as much as you need for your project.     

3. Get A Personal Loan 

A personal loan product is often available for a wide range of customer needs. Chances are you can apply for one to complete your garage remodeling project. Of course, you have to submit documentary requirements and meet eligibility criteria in order to avail of this option. Before the loan amount is released, you must agree to pay back the principal amount and interest rates, as well as other charges, over a specific period. 

4. Avail Of A Home Equity Loan 

A garage repair or remodel could involve exorbitant costs, especially if you’re converting it into an accessory dwelling unit (ADU). To the uninitiated, an ADU is a secondary living space on your property. It can either be used to house additional family members or to add revenue if you lease this extra room out. This additional room can be an extension or a new small building detached from your home.       

A home equity loan is meant for large-scale home remodeling projects. It shares several similarities with the home equity line of credit, or HELOC, which was discussed earlier. The main difference is that instead of a credit line, an approved borrower will receive the loan amount through a lump sum.  

5. Consider Other Secured Loans     

If you need to borrow a relatively huge amount of cash, and you don’t have an impressive credit score, a bank or other lending institution may ask you to put up collateral to access additional funding. This is called a secured loan, where a borrower has to present an asset as a form of guarantee. The collateral may be a physical asset such as a house or vehicle. 

If you have valuable assets that you’re ready to use as collateral for your garage renovation, this may be the right route for you. Again, this is an attractive financing solution for borrowers who don’t qualify for other types of loans. 

6. Government-Backed Loans

Government-backed home mortgage companies such as the Federal National Mortgage Association (Fannie Mae) and the Federal Housing Authority (FHA) offer loans intended for building an accessory dwelling unit and other types of home renovation projects. 

The good thing about these types of financing is that they can extend credit to borrowers who intend to buy a home, remodel a property, convert a garage, and build another living space—all in one loan. This is perfect for borrowers planning to purchase a property and want to have the garage renovations done as soon as possible.      

Final Thoughts  

Whether you’re converting it into an additional dwelling space or just making it bigger, a garage renovation project entails significant costs. If you need more funds, you should consider approaching family members, friends, and private or government institutions.    

However, before you decide to borrow money, take the time to carefully study and compare all your options. Choose the one that’s most applicable to your needs and situation.  

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