Brown three-car garage doors in suburb home.

Garage Financing And Loan Options

Miranda Crace6-Minute Read
UPDATED: October 04, 2024

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A garage can provide extra storage, a staging space for outdoor projects and a secure and reliable parking spot that keeps your vehicle safe from weather damage. Having a garage can also save you the time and effort required to keep up with snow, pollen and whatever else nature might deposit on your car.

While the convenience and versatility of a garage are undeniable, garages can come with a significant price tag. The good news is that plenty of garage financing options are available to break down your costs and make your home improvement goals attainable.

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How To Finance A Garage Build

While you may be able to find dedicated “garage loans,” your financing options for a garage, carport or other detached structure are similar to your loan options for other home improvement projects.

Here’s a list of home improvement loans for financing a garage, whether you’re updating an existing garage or building a new one.

Personal Loans

A personal loan can be an ideal financing option for building or remodeling a garage. Personal loans offer a quick turnaround period and are typically unsecured, which means you aren’t required to offer up collateral to the lender and at risk of losing that collateral if you’re unable to make loan payments as planned. Lenders will instead base your approval primarily on your credit history. Even if your credit score is on the lower side right now, you might still be able to get a personal loan if you can accept a higher interest rate.

Personal loan amounts tend to range from $1,000 – $50,000, depending on the lender and a borrower’s qualifications. You’ll receive your loan in a lump sum if approved.

Home Equity Loans

Home equity loans can be a little more elaborate than personal loans. For instance, you’ll typically need a credit score of 680 or higher and at least 20% equity in your home to qualify. These requirements mean it could take longer to qualify, plus you’ll be using your house as collateral – meaning you could lose your home if you miss or are late on monthly payments. You also might have to pay higher fees and closing costs than you would with some other loan options.

The amount you can borrow will typically be 80% of your home’s value, minus any remaining sum you still owe on your mortgage.

HELOC

A home equity line of credit (HELOC) can be used for various purchases, including garage financing. Like a home equity loan, a HELOC requires having enough equity in your home to finance a significant construction project. Also like with a home equity loan, your house acts as the collateral and could be repossessed by your lender if you’re late on monthly payments.

Cash-Out Refinances

A cash-out refinance can also convert your home’s equity into cash, which can then act as a loan to build a garage. But unlike home equity loans and HELOCs, which are both a type of second mortgage, you’ll be replacing your existing mortgage with a new mortgage. That means there’s potential for you to secure a lower interest rate. Unlike most home improvement financing options, a cash-out refinance involves going through the mortgage application process again and facing all the fees and credit checks that come with that, plus closing costs.

203(k) Loan

A 203(k) is a renovation loan offered by the Federal Housing Administration (FHA) for home improvement projects. It covers a wide variety of renovations, including garage builds.

To qualify, your garage project must meet FHA health and safety regulations and match comparable properties in your area. Keep in mind that garage-like buildings aren’t covered by FHA loans, so your project must look and act like a traditional garage structure to be approved.

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Alternative Garage Financing Options

If a loan doesn’t feel like the right method for financing a garage build or renovation, other types of financing – which we’ll explore next – could work better for your situation.

Paying By Cash

Unless you have the cash readily on hand, saving for a project of this size may take a significant amount of time, and paying upfront might drain your account and make it hard to keep up with other payments. If you have a strong financial plan in place, though, purchasing in cash can be a good option to avoid paying interest.

One major drawback to paying in cash is that you risk depleting your savings, leaving you in a potentially tough spot in the event of a financial emergency.

Paying By Credit

Credit cards are another option if you want to move forward with your garage project now and pay later. Just remember you might pay more interest on your card than you would on a personal loan, and the latter tends to be better for major purchases.

Be confident you can pay off over time what you borrow. Interest charges can add up quickly, and you could find yourself with overwhelming credit card debt.

How Much Your Garage Build May Cost

When considering your financing options, estimating the actual cost of a home addition should be among a homeowner’s top priorities.

Depending on the type of structure you want to build, your costs for a garage build can vary significantly. You’ll need to do a bit of research to figure out the right balance between how much garage you need and how much you can afford.

Carports

A carport is a detached, open-walled structure that provides a sheltered parking space for your vehicle. Since it’s free-standing and doesn’t include walls, a carport is one of the more affordable garage-type options on the market.

Angi and Fixr put the average cost of a carport at $2,000 – $10,000.

Attached And Detached Garages

While a detached garage might cost less than an attached garage, both are significant construction projects, especially if you’d like your new garage to include a living space such as an apartment or in-law suite.

While Angi estimates the average cost of a garage project at roughly $16,500 – $41,000, factors such as the materials you use, the size of the garage and any special features you want included can have a huge impact on how much you’ll pay.

Storage Shed

A shed can’t house a car, but if you’re interested in garage benefits such as storage and extra workspace, a shed can be a great option. Estimated by Angi at $1,800 – $18,000, sheds are some of the cheapest detached structures – and they’re highly customizable. While many people use sheds to simply store tools and set up workbenches, others turn them into home offices and personal retreats.

Garage Doors

Replacing just your garage doors is much more affordable than building a new structure, but depending on the material you choose, the cost can still add up significantly, averaging out at about $750 – $1,700.

Steel doors are the least expensive option, starting at around $600, and they’re often a popular choice. If you’re looking for a more polished look, you can also find vinyl, aluminum, composite, fiberglass and wood doors. Each of these can cost hundreds more than the steel option, so if you’re considering a double wooden door replacement, you could still end up needing a fair amount of financing.

Installation Costs

Hiring a contractor for your garage build? Ask multiple construction professionals for cost estimates. This can help you find the best deal while also giving you a better idea of the price range for your project, making it easier for you to pick your best financing option.

Permit Fees

Finally, it’s important to note that cities and towns often require permits for new construction or major renovations. Check your local government’s rules and regulations to see whether your project needs a permit. Also, remember to factor in this fee when calculating your overall estimate. Permit fees vary wildly depending on where you live.

A small town might ask only a few hundred dollars, while a city might require thousands of dollars to secure a permit. The size of your garage will also increase these fees.

Final Thoughts

A garage is one of the most versatile additions you can make to your house. If you know what kind of garage or detached structure you’re looking for but don’t have the cash on hand, you have a number of garage financing options. These include a personal loan, a home equity loan and cash-out refinancing.

To see the personal loan terms you prequalify for, start an application with Rocket Loans℠ today!

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years.