Should you take on debt for home repairs?

May 29, 2024, 5:00 PM

The housing market in Utah is competitive and shows minimal signs of slowing....

The housing market in Utah never seems to slow down. (Photo credit: Dustin Chambers/Bloomberg/Getty Images/FILE)

(Photo credit: Dustin Chambers/Bloomberg/Getty Images/FILE)

SALT LAKE CITY — Expect the unexpected when it comes to home repairs. According to Bankrate, almost 20% of homeowners say they’ve taken on debt for maintenance and surprise costs. A national economic analyst stresses the significance of saving instead of borrowing when possible.

The survey also found 24% of homeowners say they have set aside money for the inevitable repairs.

About 1 in 5 homeowners say they’ve taken on debt for maintenance and surprise costs: Is it a good idea?

Debbie and guest host Taylor Morgan speak with Mark Hamrick, who is Bankrate’s chief economic analyst, about the pros and cons of taking on debt for home repairs, renovations and maintenance.

In today’s high-interest environment, people tend to focus on the downside, Hamrick said.

A well-qualified new user will see an average credit-card interest rate of about 20.6%, he said. But the upside is the superior return on savings: Money-market accounts and high-yield savings accounts return about 4% to 5%, he added.

Don’t go into home ownership blind. Home repairs and maintenance are inevitable, Hamrick said, adding a line of credit is far better than taking on credit-card debt when it comes to home upkeep and emergencies, such as a leaky roof.

Save for emergencies and repairs at home

“I would much rather have people focus on savings — emergency savings, rainy-day fund, any variation on those themes — rather than taking a liability — replacing an asset with a liability, which is half the equity in your home,” Hamrick advised.

He cited a Federal Reserve survey that found only 43% of Americans can pay an emergency expense of $1,000 or more from savings. The survey also discovered:

Sixty-three percent of adults said they would cover a hypothetical $400 emergency expense
exclusively using cash or its equivalent, unchanged from 2022 but down from a high of 68 percent in

“What I would say is that I have yet to meet anyone who said they saved too much money. If you get to that position, then you can consider splurging or put it to another purpose — taking a vacation or whatever — but I would just say saving more is better than not saving at all,” Hamrick said.

The average interest rate today on a Home Equity Line of Credit (HELOC) is between 7% and 9% on an annual basis, he pointed out. 

“That’s high because we’re in a high interest-rate environment. So, you are taking on more debt, and if you run into trouble down the road, that is going to only create another problem that you need to solve. So this is why saving is just such the better solution,” Hamrick said.


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Should you take on debt for home repairs?