How to Finance a Garage
We all have dilemmas. Into DIY? You’ll need space to keep your tools. Luxury car? Find a way to protect your baby. Working remote? You skip the commute, but now you’re taking up space at the kitchen table. Real estate prices mean you’re staying put? You still need room to stretch out.
These are all separate issues, but they have the same solution: give your house a new garage.
We talked with contractors and personal loan experts to learn more about your choices when it comes to garage addition styles and types and the best loans to build a garage.
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$1,000-50,000
Loan Amount
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8.49-35.99%
APR
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3–7 years
Terms
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560
Minimum Credit Score
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Disclaimer
Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.99%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/.
What a new garage costs
How much you’ll spend on a new garage will depend on the scale of your project.
A simple carport can cost as little as $2,000 according to Jay Sanders of Maryland Contractors in Baltimore, Maryland. Looking for something more protected? Sanders estimates the cost of a detached garage at anywhere from $30,000 to $60,000. “The price for more detailed and larger designs may go up to $100,000,” he says. He emphasizes that a detached garage has benefits like reduced fire risk and lower insurance premiums.
When considering a new garage, most people opt for a fully enclosed garage that connects to the house. “These can also be used for storage or a workshop,” Sanders says. “They are a bit pricey. The cost for the basic structure may vary between $20,000 and $50,000. For additional features and custom-built designs, the cost can be much higher.”
Sanders also emphasizes that related costs must be taken into account when you are pricing out your project and considering the best loan to build a garage. If a foundation needs to be added, for instance, home improvement site Angi says you may be looking at an additional $4,000 to $15,000 in costs. Zoning and permits are another cost. HomeGuide estimates costs between $500 and $2,000 for construction permits.
Important
Should you finance a new garage?
When a home improvement project reaches the five-figure range, many people turn to financing to cover an expense like that upfront. With a loan that is paid off over time, you can enjoy the space now and repay the costs at a comfortable pace.
A recent Forbes survey found that four out of five people who finance a home improvement project say they’d recommend getting a loan.
Corey Sayers of Acorn Finance says monthly affordability is just as important as the total cost of a loan. “When you think about applying for a loan, regardless of whether it’s $5,000 or $50,000, you need to be able to afford the monthly payment.”
Sayers gives the example of a homeowner who wants to keep their payments around $250; if their project has a five-figure price tag, they should look for loans with a longer term and, potentially, a lower APR. Terms on loans of this size can sometimes span a decade or more. “You have to make sure you are committed to paying it, that you are able to pay that over the course of 15, 20 years,” Sayers says.
Types of garage loans
Tip
There are a few funding options available for this sort of home improvement. The best loan to build a garage will depend on the specifics of your garage project and your personal finances. Each has its own pros and cons, and not every borrower is going to qualify for every loan. Research a range of financing choices to find out which can work best for you. Acorn Finance has an easy pre-qualification portal that allows you to compare offers from several lenders at once.
Here are a few types of loans to research to ensure you’ve found the best financing for your new garage:
Home equity loan
The equity in your home can be used as collateral on a loan to build a garage. You receive the loan as a lump sum; these loans typically have a fixed interest rate. The Consumer Financial Protection Bureau warns you to be sure you have the ability to pay back a home equity loan. Since your home is collateral, defaulting means lenders can foreclose on your home.
How long you’ll pay on a home equity loan will depend on the size of the loan and the terms you can secure from your lender.
HELOC
A home equity line of credit (HELOC) is, in many ways, similar to a home equity loan. Both are secured by the equity in your home. The difference is, a HELOC can be tapped as needed during the draw period, giving you flexibility in how much you borrow. Generally, you can borrow up to 85% of the equity in your home. So, if you have $100,000 in equity, you may be able to tap up to $85,000 to use on a project like a new garage.
These loans typically have variable interest rates. Your monthly payment will fluctuate depending on how much you’ve borrowed and the current market rate. If interest rates rise, your monthly payment may go up with them.
Cash-out refinance
If you are considering refinancing your mortgage, you may also be able to get additional funds you can use for a home improvement like a new garage.
Refinancing a mortgage can have both benefits and drawbacks. If you time it right and your credit is good, you may be able to reduce your interest rate or your payments. However, be sure the terms of the new loan leave you in a better place than the one you currently have.
Personal loans
Personal loans or home improvement loans can offer a more flexible option for someone who does not want to tap their home equity. These loans often also have the benefit of faster closing than a second mortgage or a home equity loan.
“On Acorn Finance, we have lenders who do 20-year terms,” Sayers says. “It’s a way to get access to a longer-term loan faster and without risking using your house as an asset.”
How large a personal loan you can qualify for depends on factors that include your credit history, any current debt including your mortgage, and your income. Because they are not secured by assets like a home equity loan is, personal loans often carry higher interest rates. The flexibility in applying and the speed of approval are two factors that many people find a worthwhile trade-off.
Construction loans
When you start talking to contractors, you should also ask if they have financing available. Many contractors work directly with lenders to help their clients finance their new garage.
No matter who you approach for financing, make sure you understand the monthly payments, the interest rate, and the term of the loan. Ask about potential sticking points like prepayment penalties that may not allow you to pay off a loan early without incurring a fee.
By comparing the terms of several loans, you will often find that different terms can add up to thousands of dollars in difference in cost over the life of a loan.
Government loans
Late-night TV and spam text messages regularly tell us that government money is just yours for the taking for your next home improvement project. In truth, while there are loans available, these are often only available in very narrow circumstances.
In a few specific cases, you may qualify for a federal loan for your new garage. The 203(k) rehabilitation mortgage program, for example, is a lending program for improving distressed houses. Part of the funds can be used for home improvements, such as a new garage. However, the terms of the loan mean that the funds can only be used in specific cases, such as reconstructing a structure that’s been demolished. Talk to local lenders to find out if a home improvement project you are considering qualifies.
How Acorn Finance can help
Figuring out how to finance a garage can be overwhelming and confusing. Acorn Finance makes it easy to explore your options. We work with numerous lenders who are willing to compete for your business. Our simple portal allows you to compare offers side by side so you can decide which works best for you.
Getting prequalified for a loan takes just a couple of minutes. And, prequalification comes with no obligation and won’t cause a hard pull on your credit.
Dreaming of more space? We can help you make it a reality. Check out your home improvement loan offers today.
Comparing options on Acorn Finance? See if you prequalify for a personal loan without impacting your credit score. Just answer a few questions to get personalized rate estimates from multiple lenders.