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What You Need to Know
- Homeowners insurance may cover foundation repair costs if the damage was caused by a covered event.
- Financing options for foundation repair include personal loans, home equity loans, and cash-out refinancing.
- Homeowners can also consider using a credit card or cash to pay for foundation repairs, and some contractors may also offer financing options.
- The U.S. Department of Agriculture and the Department of Housing and Urban Development offer loan programs for those who may not qualify for a loan from a private lender.
A cracked or leaking foundation can leave a home at risk for structural issues. Homeowners who notice large cracks, settling, or water leaks in their foundations will want to act fast by hiring a house foundation repair company to fix the damage before it gets worse. Depending on the severity of the foundation issues, the cost of foundation repair could be several thousand dollars. This unexpected expense can be difficult for some homeowners to manage. Luckily, homeowners can learn how to pay for foundation repair services through several options.
Before You Begin…
Not all foundation cracks need cracked foundation repair services. Some foundation issues are only cosmetic. Homeowners can get a professional foundation inspection to learn more about their foundation issues, including an estimate on the cost for foundation repairs. Generally, the cost of a foundation inspection is worth the peace of mind to identify whether structural foundation repair is necessary on a home.
1. Check to see if your homeowners insurance will cover some or all of the foundation repair.
Homeowners insurance can help cover the cost of expensive repairs if the home is damaged by a covered event. Coverage from one of the best homeowners insurance companies (such as Allstate or Lemonade) may cover the cost of repairing the damaged foundation, depending on the cause. Generally, homeowners insurance will cover foundation damage if it’s caused by a covered peril.
Some acts of nature, such as fire, storm damage, fallen trees, or lightning damage, are commonly covered under most standard insurance policies, while others, such as floods, are not. Non-natural events that cause foundation damage and are outside of the homeowner’s control are also sometimes covered. For instance, homeowners insurance can cover foundation damage caused by an act of vandalism. If the home’s foundation issues are covered by insurance, the homeowner can file a claim with their insurance company. However, homeowners will want to note that they will need to pay a deductible (a portion of the claim) before their homeowners insurance policy will cover the damage. Therefore, if the cost to repair the damage is less than the deductible, homeowners will want to consider whether it’s worth filing an insurance claim, as any claim that is filed can impact the policyholder’s premium, even if the company doesn’t pay out on it. Plus, people who file too many claims (even if it’s not that many, and even if the insurance doesn’t ultimately pay out) risk having their policy canceled.
Homeowners insurance doesn’t cover all cases of foundation damage, however. Foundation damage caused by neglect or wear and tear isn’t likely to be covered. That means homeowners insurance likely won’t cover foundation damage caused by tree roots growing into the foundation or poor yard drainage. Homeowners can prevent this type of damage by addressing the underlying issue before it causes any harm to the foundation. Additionally, most homeowners insurance policies exclude certain natural disasters from coverage. Flooding and earthquakes are typically not covered under a standard homeowners insurance policy.
2. Take out a personal loan to help pay for the repair.
Homeowners who have foundation issues not covered by insurance might consider taking out one of the best personal loans to cover the cost to repair foundation damage. Typically, homeowners can use personal loan funds without any restrictions, which means the money can be used to pay for house foundation repairs. Many different types of lenders offer personal loans, from national or local banks to credit unions and private lenders. Some online lenders even offer next-day funding to qualified borrowers. Additionally, a borrower may be able to choose between a secured and an unsecured personal loan. Secured loans require the borrower to put up some sort of collateral that the lender can retain if the borrower defaults on their loan payment, while unsecured loans don’t require collateral. It’s often easier to qualify for a secured loan, especially for those with fair credit scores. Additionally, secured loans also typically have lower interest rates than unsecured loans.
The main downside of using a personal loan for repairing a foundation is that these loans tend to have higher interest rates and shorter terms than other types of financing. This combination of high interest rates and shorter timelines can make personal loans less affordable, especially for homeowners who need a larger loan amount. It’s generally a good idea for homeowners to compare their personal loan options before committing to a loan. Terms for personal loans can vary widely. By comparing loan options from multiple lenders, homeowners increase their chances of finding lower interest rates or a more affordable monthly payment amount.
3. Apply for a home equity loan or line of credit to cover the foundation repair cost.
Homeowners with a sizable amount of equity in their home may be able to tap into those funds to pay for their foundation repair costs. The best home equity loans (such as loans from U.S. Bank or Flagstar Bank) and home equity lines of credit (HELOCs) use the equity in a home as collateral for financing.
The key difference between a home equity loan and a HELOC is how the borrower receives the funds and how they repay them. With a home equity loan, the borrower receives a lump sum of cash based on their qualifications and application. Home equity loans generally have a fixed interest rate and term length with predictable monthly payments. HELOCs work more like credit cards. The borrower qualifies for an amount of credit they can borrow from based on the amount of equity they have in their home. The borrower can then draw money from the line of credit as needed during an initial period, called a draw period; during this time, the borrower only pays interest on the money they borrow. Once the draw period has ended, the repayment period begins, and the borrower must pay back all the money they borrowed during the draw period. Like a credit card balance, homeowners can pay down their HELOC balance to free up more funds to borrow.
Either a home equity loan or a line of credit can be a good option for fixing house foundation issues for homeowners with equity in their homes. However, homeowners often need a sizable amount of equity to qualify for these types of financing. Most home equity lenders require a homeowner to have at least 20 percent equity in the current value of their home.
4. Use a cash-out refinance to tap into your home equity.
Home equity loans and HELOCs aren’t the only ways for homeowners to take advantage of the equity in their homes. Another option for a homeowner to consider is to refinance their current mortgage for more than they currently owe, receiving the difference in cash. This type of refinance is called a cash-out refinance.
Refinancing through one of the best mortgage refinancing companies (such as PNC Bank or Caliber Home Loans) can replace the homeowner’s current mortgage with a new one. Often, the new mortgage will have a lower interest rate or a different term than the original mortgage, allowing homeowners to pay less per month on their mortgage. With traditional refinancing, the new mortgage is for the same amount as the existing mortgage balance. In a cash-out refinance, however, the homeowner takes out a new mortgage with a higher loan amount based on the current value of the home. Depending on the lender and the amount of equity homeowners have, they could borrow up to 90 percent of their home’s value. After cash-out refinancing, the homeowner can use the cash from their home’s equity for home improvement or repair projects, like covering a basement foundation repair.
Cash-out refinancing could be a good option for homeowners with a lot of equity in their home and who may qualify for better loan terms than their current mortgage. For example, a homeowner who has increased their credit score since they purchased their home 10 years ago may qualify for a better interest rate through refinancing. Unfortunately, this can also work in reverse. If interest rates have gone up since the owner bought the home, refinancing may mean a higher interest rate and higher monthly mortgage payments. Additionally, the new loan term could mean the homeowner is back in debt for another 15 to 30 years, depending on the length of the loan.
5. Consider using a credit card with a 0 percent introductory rate to finance the foundation repair.
Credit cards are one of the easiest ways for homeowners to pay for concrete foundation repair services. Credit card payments are fast and secure, which means homeowners don’t have to wait for financing to come through to pay their contractors. In addition, many credit card companies have special introductory offers for new cardholders. The most common introductory offers are a 0 percent interest rate for a limited amount of time. If the homeowner pays off the balance before the introductory rate expires, they can finance their foundation repairs interest-free.
Homeowners will want to check with the foundation repair company or contractor to make sure they accept credit cards. Some contractors won’t take credit cards because of the added fees, while others may pass credit card processing fees on to the customer. Although credit card fees are usually only a small percentage of the total bill, the cost can add up for expensive repairs like foundation work. Homeowners can ask this question when they’re vetting the best foundation repair companies (like Basement Systems or Ram Jack) to see which one is the best fit for their project.
Homeowners who take advantage of an introductory credit card rate will likely want to pay off the balance in full before the introductory rate expires. Credit card interest rates are almost always higher than rates for most other types of financing. Additionally, the higher the credit card balance, the more expensive the interest for the cardholder.
6. Ask whether the foundation repair company offers financing.
Working with a contractor that offers a payment plan might be one of the simplest ways for a homeowner to pay for foundation crack repair costs. Many contractors and foundation repair companies let their customers break up the cost of repairs into installments. A payment plan is often beneficial to both the homeowner and the foundation repair company. The homeowner gets to pay off their expensive foundation repairs over time, while the foundation repair company doesn’t have to wait for financing to go through or charge credit card fees. Most foundation repair companies that offer payment plans split the cost of the repairs throughout their work. Repayment terms can vary depending on the company. For example, one foundation contractor may require 25 percent payments split between a down payment and milestones during the project. Other companies may simply offer a monthly repayment plan similar to a loan.
Not all foundation repair companies offer in-house financing, however. Some companies may work with outside lenders or finance companies to provide foundation repair loans to customers. In this case, homeowners typically have to qualify for a loan through the third-party loan provider. Homeowners may want to compare the financing offered by the foundation repair company with other options to find the best loan for their needs.
7. Look into government loans and grants designed to help homeowners pay for necessary home repairs.
Some homeowners may qualify for grants or government loan programs to help them improve their homes, including those for foundation repairs. Both the U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of Agriculture (USDA) have loan programs designed to improve a homeowner’s property. The HUD program, known as the Title 1 Property Improvement Loan, provides government backing for lenders to offer repair loans. HUD doesn’t directly offer these loans; instead, borrowers work with a HUD-approved lender to secure financing. If the borrower fails to repay their loan, the lender can recoup their losses through HUD.
The USDA home repair program, known as Section 504 Home Repair, provides loans and grants to very low-income homeowners for home repairs, including foundation repair. Eligibility requirements for the USDA program are strict, including:
- Being a homeowner and occupying the property;
- Being unable to get affordable credit elsewhere;
- Have a household income at or below the very low limit in their county; and
- Living in an eligible area.
Additionally, seniors aged 62 and older who meet the loan requirements may qualify for up to $10,000 in home repair grant funds. The USDA requires that homeowners use grant funds to remove health and safety hazards. Grants need not be repaid unless the property is sold within 3 years after the homeowner receives funds.
8. Use your savings to pay for some, or all, of the foundation repair.
Funds in a savings account may be the easiest way for a homeowner to pay for foundation repairs. Homeowners with enough savings in an emergency fund or other account can simply write a check to their foundation repair company or use an electronic funds transfer. Using savings for home repairs, especially critical repairs like foundation repairs, may not be the most exciting way for a homeowner to spend their money. However, paying for foundation repairs with savings means the homeowner doesn’t have to deal with third-party financing companies, loan fees, interest charges, or going into debt for their home repairs.
Even if a homeowner doesn’t have enough money to cover their full repair costs with savings, they can use part of their savings to lower the overall cost of financing repairs. Other ways for a homeowner to pay in cash include selling investments or assets, such as stocks or mutual funds, to cover repair costs. Selling assets can have tax implications, so homeowners are encouraged to talk with their tax professional or financial adviser about their unique tax situation.
The foundation is one of the most important structural components of a home, and the cost of building a foundation can be one of the most expensive parts of construction. Damaged foundations can lead to structural issues in a home, so most homeowners want to fix foundation issues as soon as possible. Homeowners can use these steps to figure out how to pay for foundation repair when facing a cracking, crumbling, or leaking foundation.
