How to Finance Home Upgrades for Hurricane Protection
Coastal communities endured a record number of storms during one of the longest and most intense hurricane seasons in 2020. With the end of the current season approaching, homeowners in states like Florida are already planning to complete important hurricane resilience projects during the off season. Part of that process is figuring out how to pay for expensive projects like roofing and hurricane windows.
Common Hurricane Resiliency Projects:
Roof Replacement (Average Cost = $9,000)
Protects your home from water damage and structural compromise.
Hurricane Windows (Average Cost = $2,800)
Withstands winds of upwards of 110mph that don’t shatter on impact.
Homeowners looking to complete one or both of these projects before next year's hurricane season starts in June are likely weighing how to pay for such costly expenses. If you have several upgrades in mind and plan to pay in cash, you can decide when to do each one based on how much money you have on hand. An architect and general contractor can help you determine how to break the project into phases and what each phase will cost.
A disadvantage to paying cash is that you’d be taking a liquid asset (money available when you want it) and investing it into a fixed asset (money not readily available). If you’re looking to maintain adequate cash reserves to cover unexpected expenses, consider the scope of your project and the health of your bank/savings account to better decide whether or not to pay cash.
If you’d rather not deplete your liquid assets you might consider financing to pay for these projects, but not all financing is alike. Below is a breakdown of some common financing options used for home improvement projects:
This option requires you to refinance your first mortgage to get extra cash from your home’s equity. A cash-out refinance may be a good option if you can get a lower interest rate than your existing mortgage. Work with a mortgage professional to get an estimate of the financing costs and the interest charges over the life of the loan to determine if a cash-out refinance is right for you.
Secured and Unsecured Loans
A secured loan is recorded as a lien against your property while an unsecured loan (personal loan) is not secured by any property or other assets. Both are contingent on the borrower’s credit worthiness and meeting other underwriting requirements. Unsecured loans generally require a higher credit score (680 and above), than secured loans do, to be approved. In both cases, the borrower must make payments, but a secured loan must be paid in full when the property is sold. The most popular secured loans include home equity loans and home equity lines of credit.
Energy-Efficient Mortgages ("EEMs")
The Energy-Efficient Mortgage ("EEM") is a loan program insured by the Federal Housing Administration that you can use to refinance and make specific energy improvements. EEM adds the cost of those improvements to your mortgage and requires a home performance assessment by a Home Energy Rating System ("HERS") professional. The amount of the loan is limited to 5% of the property’s appraised value, not to exceed $8,000 or $4,000, whichever is greater based on the value of your property.
Property Assessed Clean Energy Program ("PACE")
PACE is a collateral-based financing option that enables homeowners to use a portion of their home equity to cover the cost of home upgrades related to energy-efficiency, renewable energy, water conservation, and safety and resiliency. PACE financing does base eligibility on the homeowner’s credit score, however it does take into consideration factors such as mortgage and property tax payment history, income, etc. Additionally, the property must be located in a participating PACE community.
PACE financing offers:
- competitive fixed interest rates
- loan amounts of up to $250,000
- terms of up to 30-years
- consumer protections and safeguards
Looking to upgrade the hurricane-readiness of your home but are concerned about qualifying for traditional financing? Give our experts a call at 844.736.3934 to see if PACE financing is right for you!
PACE financing is subject to approval. Underwriting requirements and restrictions apply. PACE financing is secured by a lien on the subject property and often required to be repaid upon refinance or sale. Homeowners should perform due diligence before selecting a home improvement contractor. PACE financing is private financing that must be repaid in full. PACE financing is not a government subsidy. Homeowners are encouraged to use PACE financing responsibly.
Renew Financial is a private company and not a government entity. The installation or construction of property improvements financed with a PACE assessment is provided through a home improvement contractor or other third-party provider, and not by Renew Financial or a government entity. Financing provided in California through Department of Financial Innovation and Protection License No. 60DBO-90653.