How to Pay for a Big Home Repair: Your Options Compared
A new roof or furnace rarely arrives on schedule. Here's how the main ways to pay compare, what each one risks, and the questions to ask before you sign anything.
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In this guide
The roof doesn’t care that you were planning to replace it in two years. Neither does the furnace that quits in January. Big repairs tend to arrive on their own schedule, and the way you pay for one can add hundreds or thousands of dollars to the bill. The good news is that there are more options than “put it on a card,” and a little comparison goes a long way.
The short answer
If you have the savings, use them; it’s the only option with no interest and no risk to your house. If you don’t, a home equity loan or line of credit usually costs less than unsecured borrowing, but it puts your home on the line. A personal loan avoids that risk at a higher cost. Contractor financing and 0% offers can be good deals only if you understand exactly when interest starts. Be very careful with PACE loans repaid through property taxes. Get the repair quote first, then shop the money separately.
Picture a furnace that dies the week before a holiday. The contractor offers financing at the kitchen table, and it’s easy to sign on the spot because the house is cold. If you can get by for a few days, it’s worth comparing that offer with a home-equity line or a personal loan first. The comparison below takes an evening.
Start with the right number
Before you compare loans, get the repair right: two or three written quotes, compared line by line (see our guides to roof costs and furnace replacement). Borrow the amount the job needs, not the amount you’re offered. A lender approving you for more isn’t a reason to spend it.
The options, side by side
The numbers
| Option | How it works | Main advantage | Main risk |
|---|---|---|---|
| Savings | Pay cash from an emergency or repair fund | No interest, no debt | Drains your cushion; rebuild it |
| Home equity line of credit (HELOC) | Borrow as needed up to a limit, secured by your home; usually an adjustable rate | Often costs less than unsecured debt; draw only what you use | Your home is collateral; payments can rise with rates |
| Home equity loan | Lump sum secured by your home; fixed or adjustable rate | Predictable payment if fixed | Your home is collateral; closing costs |
| Cash-out refinance | Replace your mortgage with a bigger one and take the difference | One payment | Resets your mortgage; costly if your current rate is low |
| Personal loan | Unsecured installment loan | Your home isn’t at risk; fast | Usually costs more than home-secured debt |
| Contractor or 0% promotional financing | Financing arranged at the point of sale | Convenient; sometimes 0% | Deferred interest can be charged back if not paid off in time |
| PACE loan | Repaid through your property tax bill | No down payment, easy approval | Can make selling or refinancing hard; tax-sale risk |
Descriptions draw on the Consumer Financial Protection Bureau and Federal Trade Commission. Terms vary by lender; this is general information, not a recommendation.
Home equity: the HELOC and the home equity loan
The Consumer Financial Protection Bureau describes a home equity loan as a fixed amount you receive as a lump sum, with a fixed or adjustable rate. A HELOC works more like a credit card secured by your home: you can draw money several times up to a maximum, usually at an adjustable rate, and your payment changes with the balance.
For a single, known cost like a roof, a fixed-rate home equity loan gives you a predictable payment. For a project where the final cost may move, like a repair that could uncover rot, a HELOC lets you draw only what you end up needing.
The trade-off for a lower cost is real risk. The Federal Trade Commission is direct: if you don’t repay as agreed, the lender can take your home. It also points out that you’ll pay fees, possibly including application, appraisal and annual fees, and that interest-only home equity loans can end with a large balloon payment. The CFPB publishes a free HELOC guide that’s worth reading before you apply.
This weekend
You have a right to change your mind. For most home equity loans and lines on your main home, the FTC says you can cancel within three business days of signing, in writing, for any reason.
About taxes. The IRS says interest on a home equity loan or line is deductible only if the money is used to buy, build or substantially improve the home that secures it, within the overall limits on mortgage debt, and only if you itemize. A new roof may qualify; paying off a credit card won’t.
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Personal loans and credit cards
A personal loan is unsecured, so your house isn’t at risk if things go wrong. That safety usually comes at a higher interest rate than home-secured borrowing, and terms are shorter, so payments are higher. It can make sense for a smaller repair, or if you don’t have much equity.
Credit cards are the most expensive way to carry a large balance for long. Use one only for what you can pay off quickly.
Contractor financing and 0% offers
Many contractors offer financing on the spot, sometimes at 0% for a set period. Read the terms closely. Many of these are deferred-interest offers, and the CFPB explains the catch: if you don’t pay the full balance by the end of the promotion, interest can be charged back to the original purchase date. Being more than 60 days late on a payment can end the promotion early.
If you take one, divide the balance by the number of months in the promotion and pay at least that much every month, not just the minimum.
PACE loans: read twice
A salesperson or contractor may offer a PACE loan for energy or repair work, repaid through your property tax bill. The CFPB lists the risks plainly: your tax bill can rise sharply; if you fall behind, the PACE debt is paid ahead of your mortgage in a tax sale; buyers may have to take over the payments; and most lenders won’t refinance or issue a new mortgage while one is outstanding.
Call a pro
Don’t sign any financing at the kitchen table on the day of the sales visit. Take the paperwork, compare it with at least one other way to pay, and ask someone you trust to read it. Any reputable contractor will hold the quote for a few days.
Questions to ask before you sign
- What’s the total I’ll repay, including all fees, not just the monthly payment?
- Is the rate fixed or adjustable? If adjustable, how high can it go?
- Is my home the collateral?
- Is there a promotional period, and what happens when it ends?
- Are there prepayment penalties?
- What fees are due at closing or each year?
Your next step
Get the repair quote in writing first. Then get at least two financing options in writing, and compare the total cost, not the monthly payment. If you’d rather not be in this spot next time, our guide to what owning a home really costs each year shows how to build a repair fund before the next big job.
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Questions readers ask
What's the difference between a HELOC and a home equity loan?
The Consumer Financial Protection Bureau describes a home equity loan as a fixed amount you receive as a lump sum, with a fixed or adjustable rate. A HELOC works more like a credit card secured by your home: you draw what you need up to a limit, usually at an adjustable rate.
Is it risky to use home equity for a repair?
Both loans are secured by your house. The Federal Trade Commission warns that if you don't repay as agreed, the lender can foreclose. Borrow only what the repair needs, on a payment you can keep up through a job loss or rate increase.
Is home equity loan interest tax deductible?
The IRS says interest on a home equity loan or line is deductible only if the money is used to buy, build or substantially improve the home that secures it, within the overall mortgage debt limits, and only if you itemize. Ask a tax professional how it applies to you.
Are 0% financing offers from contractors a good deal?
They can be if you pay the full balance before the promotion ends. Many are deferred-interest offers: if any balance is left, the CFPB says interest can be charged back to the original purchase date.
