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A garage can add value and utility to your home. Besides giving you a secure place to park your car, a garage provides storage for tools and yard equipment and even space for a hobby, like crafts or woodworking. That said, adding a garage or another structure like a carport or shed can be expensive. The national average cost of building a garage is $29,333. Luckily, for those who don’t have enough money on hand to pay for it, there are plenty of garage financing options. Read on to find out which method might be best for you.
What Is Garage Financing?
Financing a garage means borrowing money to pay for your garage project. Although there technically are no loans that must specifically be used for garages, there are different garage financing options you can consider, including a personal loan, a home improvement loan, or a home equity loan.
Typical Garage Financing Costs
There are a number of costs involved in building a garage or other detached structure, depending on how involved your project is. For instance, the cost of building a one-car garage ranges in price from $10,500 to $27,000. A two-car garage could cost up to $40,000, while a three-car garage may cost $57,000. You might also be renovating an existing garage, in which case these tips for remodeling a garage might be helpful.In addition to the materials and labor, here are costs for some of the other items you’ll need when building a garage:
Permits
If you’re building a new structure, modifying an old one, or changing existing components, you’ll generally need to get a building permit. A permit ensures that the work you have done meets basic safety standards. If you don’t get a permit, that can be a problem when you sell your house. You might also have to pay fees or fines if your municipality discovers that you did the work without a permit. Contact your town or city offices to find out about the permit you’ll need for the project you’re planning. Depending on where you live, a permit for building a garage can cost $1,200 to $1,500.
Doors
Purchasing the doors for a garage door and getting them installed can be one of the major costs in a garage project. The price of a new garage door ranges from $850 to $5,500. On average, a single-car garage door plus installation can cost $500 to $2,500, and a two-car garage door is about $750 to $4,700, including installation. Recommended: Cost to Finish a Garage
Sheds
When all you need is a workstation or a place to store tools and yard equipment, you might opt to build a shed. The price of sheds varies quite a bit, depending on the size and style. In general, you can expect to pay between $20 and $170 per square foot to build a shed, with an average cost of about $3,600.
Carports
If you don’t want to build a full garage, consider a carport. A carport is a covered structure that protects your vehicle from the elements. It can be a freestanding structure or attached to your house. The average cost of building a carport is $6,000, and ranges from $2,000 to $12,000. Recommended: Transform Your Garage Into a Stylish Man Cave
Garage Financing Options
To pay for your garage, there are several financing options you can consider, such as:
HELOC
A home equity line of credit (HELOC) is a type of revolving credit that allows you to borrow against the equity you’ve built in your home. Depending on your credit score and debt-to-income ratio — which is your monthly gross income in comparison to your monthly debts—you may be able to borrow up to 85% of the value of your home. With a HELOC, you borrow money as needed during a certain amount of time, known as the draw period. The interest rate is usually variable, and you only pay interest on the amount of money you use. Just be aware that your home serves as the collateral for a HELOC. If you fail to repay the money you’ve borrowed, your lender could seize your home.
Home Equity Loans
A home equity loan also uses the equity you’ve built in your home as collateral. However, unlike a HELOC, you’ll receive the loan in one lump sum and repay it on a fixed schedule with interest. The interest rate for home equity loans is usually fixed and won’t change.
203(K) Loans
A 203(K) loan is offered by the Federal Housing Administration (FHA) as a way for homebuyers and homeowners to finance or refinance a home and roll the costs of renovating the home into one mortgage. Constructing a detached structure like a garage may be eligible under an FHA 203(K) loan. You can get 203(K) loans through some banks, credit unions, or other lenders.
Credit Card
You could fund your garage project by using your credit card. If you know you’ll be able to pay your statement in full at the end of the billing cycle, that might be an option to think about. If you can’t pay the entire amount, however, you’ll need to pay interest on what you owe. Keep in mind that credit card interest rates tend to be higher on average than other types of financing.
Personal Loan
A personal loan provides you with a lump sum of money you pay back in monthly installments at a fixed interest rate. You can use these loans for almost any purpose, including home improvements like building a garage.There are several advantages to personal loans, such as the fact that you can borrow a fairly high amount (usually up to $100,000). In addition, if you pay back your personal loan regularly and on time, it can help build your credit.The interest rate you’re offered for a personal loan will depend largely on your credit history and credit score. Borrowers with higher credit scores tend to be offered the most favorable rates. Recommended: 5 Typical Personal Loan Requirements
Exploring Personal Loan Options
If you’re financing a garage and considering a personal loan, you’ll want to shop around to make sure you’re getting the best rate and terms. Lantern by SoFi can help. You can easily explore different options, compare rates, and apply for loans all in one place with our easy online tool. Check your rate today with Lantern!
Frequently Asked Questions
What options are available for garage financing?
Can you use a personal loan for garage financing?
How much do you need to build a garage?
Photo credit: iStock/imaginima
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About the Author
Austin Kilham
Austin Kilham is a writer and journalist based in Los Angeles. He focuses on personal finance, retirement, business, and health care with an eye toward helping others understand complex topics.
