You come home after a long day at work, and the house is freezing cold. You can hear the furnace blower running, but you’re just getting cold air. Something’s wrong with your furnace – and you need to fix it, ASAP.
If you’re a homeowner, this is going to happen to you eventually. So, how can you deal with the financial implications of an unexpected furnace repair? Here are a few tips!
- Build A “Home Emergency Fund”
When you own a home, you should expect the unexpected. There’s a financial planning adage that states that, when you rent, the money you pay each month is the most you’ll ever pay. But when you own a home, the money you pay for a mortgage is the least you’ll ever pay.
And that makes sense. When you rent, your landlord is responsible for upkeep and repairing major systems like furnaces. You’ll never have to pay more than your monthly rent bill. But when you own a home, you’ll regularly have to pay for maintenance and repairs – on top of your mortgage.
Most financial experts recommend saving 1% of your home’s value for repairs in a special “home emergency fund” every year, as this is about the amount you’ll pay for repairs. So, if you have a $150,000 home, try to build up a stash of $1,500, which can be used for these kinds of emergency repairs.
- Keep Energy Costs Down (And Save That Money For Furnace Repairs)
Try to keep things a bit cooler in the winter and warmer in the summer. You may also want to investigate ways to insulate your home more effectively. If you can take some money off of your monthly energy bills, you can dump it directly into your home emergency fund!
- Ask If The Company Offers Any Financing Options
Don’t have cash on-hand for Winnipeg furnace repairs? It happens. In fact, it happens so often that some furnace and HVAC companies offer in-house financing for large repairs, or for furnace replacements. See if there’s any way to spread the cost over 6-12 months, to make sure you can get the furnace service you need now – but give yourself extra time to pay it off.
- Consider Paying With A Credit Card
Credit cards are a reasonable way to pay for a minor furnace repair, which usually costs about $300, or even a complete furnace replacement, which can cost up to $3,000. However, you should not use your credit card unless you’ll be able to pay it off, in full, within a month or two.
Credit cards have very high interest rates compared to other loans. The longer you wait to pay off your furnace repair, the more money it will cost you in the long run. That’s why it may be a better idea to…
- Tap Into Your Home’s Equity Or Get A Personal Loan
A Home Equity Line of Credit (HELOC) uses your home’s equity as collateral, to secure a loan with a great interest rate. This is often the best option for financing a furnace repair or replacement, if you don’t have an emergency fund. Depending on your credit, the APR (interest rate) could be as low as 4%!
Personal loans are also a reasonable option. But because you do not put up any collateral for a personal loan, they have higher interest rates than HELOCs, usually between 7-12% if you have good credit. However, this interest rate is much lower than most credit cards – so a personal loan is usually a better alternative, if you can’t pay off the cost of your furnace repair within a month or two.
Use These Tips – And Prepare For The Unexpected!
Ideally, you can save enough money to cover the cost of a furnace repair or replacement outright.
But, if not, a credit card, HELOC or personal loan – or in-house financing with an HVAC company – gives you the financial flexibility you need. You’ll pay a bit more in interest, but you’ll be able to keep your home in tip-top shape, and ensure that your furnace remains functional and safe for years to come!