Everything You Should Know about Financing a Garage
Posted by Frank Gogol in Loans | Updated on May 30, 2023
Not having a garage might not seem like that big of an issue. If you have enough space in front of your house, you might simply park the car on the side of the road. If that is not an option, you might simply park it in the nearest parking lot and walk there whenever you need to drive.
But the absence of a garage can have multiple downsides. For instance, it puts your car at higher risk of a break-in, or damage or might even tell you how many birds live in the area based on the bird droppings all over your vehicle.
Therefore, a garage can solve all sorts of unpleasant situations. But what can you do if you don’t have the budget to invest in a garage at the moment, though? You’ll be happy to know that financing a garage through loans and other means is a possibility.
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How to Finance a Garage or Other Addition
Garages are not the cheapest investments. In fact, it may cost over $26,000 to get a new garage.
Things that influence the price include the heating or electricity of the new space, as well as its size. Whether you want it detached or attached will also affect the price.
Garages and other additions can be financed in a few ways. For instance, you can apply for a personal loan or a garage loan. Garage loans can be especially useful since they are meant for this specific purpose. There are also financing options available from some suppliers or builders.
Home equity loans are also accessible to those who want to build a garage but don’t have the money, yet they own enough of their house to use it as security.
Obviously, you can also rely on savings to finance a garage. It may take a while to save money, but at the end of the day, it might be better than getting yourself into long-term debt.
Financing Options for a Garage
Let’s take a look at some of the financing options you have for your garage:
Home Equity Line of Credit
Home equity lines of credit or HELOCs can be great for financing a garage. They will let you borrow money according to the equity you have in your house. This financing option is especially suitable if you are looking forward to a detached garage.
If you want to take advantage of a HELOC to get money for your new garage, you should know that you have 10 years available to borrow from the line. Once you take money out, you’ll pay it back over the next 20 years.
People should only consider a HELOC if they managed to build enough home equity and if they have good credit. This could prevent a potentially high interest rate. Not to mention that they are also great if you are unsure how much cash your project requires.
However, you should not consider a HELOC if your credit is bad or if you are thinking of selling your house shortly. Besides, if you don’t have a reliable income, perhaps you shouldn’t take out a line of credit either.
Home Equity Loan
Home equity loans are quite similar to lines of credit in the fact that they also require you to have home equity. Still, this is a loan, and it will work a bit differently.
With home equity loans, you will be able to borrow up to 80-85% of your home equity. This is also an installment loan, so you will pay it off in installments every month.
While it’s a long-term commitment, the good news is that you will have a fixed monthly payment and interest rate.
You should consider home equity loans if you managed to build enough home equity, if you want fixed payments and if you need your loan as soon as possible. At the same time, you should stay away from them if your credit isn’t good or if you think the project will change its required sum.
Cash-Out Mortgage Refinancing
Another great option for financing a garage is a cash-out mortgage refinance. You take out a much bigger mortgage in order to replace your existing one.
As you can imagine, doing this will change your monthly payments and repayment timeline. As long as you can obtain a much lower rate for the mortgage, it can be beneficial. Otherwise, you should consider a different financing option.
Many people who want to make investments yet cannot pay out of pocket seek personal loans. They can be used for many purposes – therefore, they are some of the people’s favorite types of loans.
When you are getting a personal loan, you can usually gain access to the funds very quickly. Not only that, but they are unsecured, so you will not be forced to use your house or car as collateral.
You can certainly get a personal loan to finance your garage, but you should only do so if you have a good credit score or have a cosigner with a good score. Moreover, it can be suitable if you need quick money.
But there is a downside too: interest rates can be higher, especially when you don’t have excellent credit.
Lastly, credit cards can also be an option when you need access to money for a garage. More specifically, you can use credit card rewards, as they are a great alternative for lowering a project’s overall costs.
To use this method, you need to find out what rewards you can get with your credit card. But keep in mind that you shouldn’t use these to finance your garage if the construction costs will go over your card limit or if you don’t think you’ll be able to pay the credit card statement completely every month.
Best Personal Loan Options for a Garage
Are you thinking of getting a personal loan to finance your new garage? Here are some of the best options available:
SoFi brings you a nice loan with an average APR of 7.99% – 23.43%. You need a minimum score of 680 to qualify, and you can expect to pay around $380 or more per month.
If you want a good option for personal loans but your score is not excellent, you can always go for Upstart. The minimum credit score requirement is 600, and they have an APR range of 4.37% – 35.99%.
LendingPoint is a good personal loan for those with a credit score lower than 600, but higher than 585. If you can pay at least $381 per month, it’s a great alternative.
Upgrade also requires you to have a score of at least 600 to qualify. Depending on the loan, you can expect to pay $380 or more per month. The APR goes between 7.46% and 35.97% on average.
How to Estimate the Cost of Building a Detached Structure or Garage
Do you want to estimate how much a detached structure or garage costs?
Well, you should consider a few factors such as the materials you need to use and the size of the structure. Then, look into how much the material cost and calculate the average price per square foot. Keep in mind that hiring a contractor will cost more than building the garage yourself.
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If you want to finance a garage, don’t hesitate to consider one of these options. All of them have their pros and cons, so choose based on your circumstances, credit score, and size of the structure.