Enhancing your home with an attached garage or accessory dwelling unit offers valuable benefits like added storage, curb appeal, and the potential for expanded living space. But those perks come with a price tag.
The average cost for a new garage is $24,000 or more. If you lack the upfront funds, you can consider funding options. From loans to credit cards, there are several smart garage financing paths to make your new garage a reality without draining your savings.
MoneyLion offers a service to help you find personal loan offers based on the info you provide. You can get matched with offers for up to $50,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer. You can also use the loan funds to pay off other existing debts. Find some of the best garage financing solutions below.
How to finance a garage in 9 ways
When tackling a garage addition or renovation, having the right financing lined up is crucial. Here are nine potential options to consider for garage financing:
1. Personal loans
Personal loans offer a straightforward way to finance your garage project – or any other home renovation project for that manner. You borrow a lump sum of money upfront, then repay it over two to seven years at a fixed interest rate and payment.
Credit requirements vary, but you’ll generally need credit in the 600s or higher to qualify. Approval and rates depend on your income, debts, and creditworthiness. Maximum loan amounts are typically $50,000, although you could get a personal loan of up to $100,000.
The main advantages of a personal loan are relatively fast funding and predictable monthly payments over the repayment term. The con is that interest rates can be higher compared to secured options.
2. 203(K) loan
The 203(k) loan program falls under FHA lending and is also called a rehab mortgage. It allows you to finance both a home purchase and renovation or construction costs like a garage into one mortgage.
You’ll need a minimum credit score of 500-580 depending on your down payment amount. The combined mortgage and renovation costs cannot exceed your area’s FHA loan limits.
203(k) loans are ideal if you buy a fixer-upper that needs a garage added. However, closing costs and mortgage insurance make this a costlier option if you own your home.
Recommended: Is Home Improvement Loan Interest Tax Deductible?
3. Freddie Mac CHOICERenovation loan
Similar to the 203(k), the Freddie Mac CHOICERenovation loan wraps both your mortgage and renovation or construction costs into a single loan. Generally, you can finance renovations up to 75% of the projected home value after completing the work. There is no set minimum credit score, but many lenders require a 620 credit score.
A Freddie Mac CHOICERenovation loan offers a handy all-in-one solution if you’re moving into a new home or refinancing. However, as a negative, there are strict guidelines on contractor requirements.
4. Fannie Mae HomeStyle Renovation loan
Fannie Mae’s HomeStyle Renovation loan works nearly identically to the CHOICERenovation program—you get one loan covering your mortgage and any home renovation projects. You can typically borrow enough to cover renovations up to 75% of the expected home value once the work is done. Note that a 620 minimum credit score is required.
The advantage of a Fannie Mae HomeStyle Renovation loan is the simplicity of bundling everything into one loan. However, applying for both the mortgage and renovation funds adds more underwriting complexity and can take longer for loan approval.
5. Cash-out refinance
If you have considerable home equity, a cash-out refinance is one way to extract those funds and use them for a garage addition. With good credit, you may be able to refinance your mortgage to a larger loan amount, receiving the difference as cash, which you can then use toward garage construction costs.
The pro of a cash-out refinance is the possibility of low mortgage interest rates on borrowed funds. But you’ll pay significant closing costs and restart your mortgage term, usually for 15 to 30 years.
6. Home equity loans
Home equity loans also tap into your existing home equity. You borrow a lump sum secured by your home as collateral, usually with a five to 30-year term repayment period.
Lenders typically require 15-20% home equity for approval, along with a credit score of 620, while a credit score of 740+ can give you the best interest rates. You can usually borrow up to 85% of your home’s appraised value minus your mortgage balance.
Home equity loans offer upfront funds at relatively low interest rates. However, your home secures the debt, and there are high closing costs.
7. Home equity line of credit (HELOC)
A HELOC works like a home equity loan, but it’s structured differently. Instead of a lump sum, you receive a revolving line of credit that you can draw on for home renovation expenses. Minimum qualification standards are similar to home equity loans.
In most cases, you’ll likely be able to borrow up to 80% of your invested equity, though some lenders may be willing to go higher. You may also need a credit score of 620 or higher.
As with other loan options, a higher credit score could help you secure lower interest rates, but with a HELOC, interest rates are variable and fluctuate with the prime rate.
HELOCs provide flexible access to cash for ongoing projects, giving you cash when you need it. However, there are a few major disadvantages, including closing costs, adjustable rates, and the requirement that you put your home up as collateral.
8. Credit cards
With good credit, using 0% introductory APR credit cards could help finance your garage addition interest-free for the first 12-18 months.
However, you’ll need to ensure you have a clear plan to pay off the balance before the 0% period ends and the ongoing APR kicks in, which can be up to 25% or higher. You could refinance with a personal loan, HELOC, or other option on this list after a year, but if you can afford to pay off the loan within the introductory period, you’ll be able to save more.
Remember that carrying more than 30% of your available credit could harm your credit score. Credit cards should only be used for projects under $15,000 or so unless you have a very high credit score and ultra-high credit limit.
The advantage of this option is that credit cards can bridge the gap if you need affordable short-term financing. However, a major con is the risk of high interest rates. Any outstanding balance after the intro period will accrue high interest, making this a risky long-term option.
MoneyLion can help you explore a wide variety of credit card options tailored to different needs and preferences.
9. Pay in cash
Planning ahead can be the best way to finance a garage. For those who can afford the total costs out of pocket, paying cash upfront is the simplest financing path for a garage addition or renovation. With no interest or monthly payments, it’s the most affordable route if you have the savings.
The only downside is that you need access to a large lump sum to pay contractors as their bills come due. But this is usually the best solution if you’ve built up savings. One caveat: you shouldn’t spend your emergency fund on a garage addition, as that is, by definition, saved for emergencies.
Want more help securing the cash? Building your savings gradually in a high-yield savings account over time could help you eventually reach your cash goal. You can also check out frugal hacks to save more or consider other solutions to get money without a loan.
MoneyLion offers a convenient marketplace to compare high-yield savings accounts from our trusted partners that could help grow your money.
How much does a garage cost?
With so many financing methods, the next logical question is, “How much will I need to finance a garage?” How much you should budget for a garage addition or renovation depends on the project you have planned.
Project costs can vary significantly based on the garage’s size, style, materials used, and whether you build detached vs attached. For example, building an apartment above the garage will cost significantly more than a simple carport. Here are some ballpark estimates:
Carports
The simplest (and cheapest) covered garage solution is a single-car carport, which starts from $3,000 for premade kits and can increase to $8,000 or more for a custom two-car carport. Common materials used to construct carports include metal, wood, and polycarbonate. Prefab carports offer cost efficiency, while custom carports provide unlimited design options.
Attached and detached garages
Building an attached garage directly onto your home typically costs $23,000 to $45,000, depending on its size, finishes, and whether you need to make a foundation. On average, a detached standalone garage runs $6,000 to $60,000, depending on the number of cars, the architectural style and materials used, and additional amenities like a workshop or living space.
Accessory dwelling units (ADUs)
If you want to go big with a detached garage that includes living space on top or to the side, an accessory dwelling unit (ADU) can be as little as $20,000 or as much as $400,000-plus. The size, design, materials, and construction style affect total costs. In terms of price per square foot, you can expect to pay anywhere from $138 to $492 or more.
Storage shed
For small portable garage alternatives, storage sheds pre-made or built on-site generally cost $1,000 to $10,000. These are some of the most affordable garage or storage solutions to add to your property, and you can usually find them for $1 to $1.50 per square foot.
Garage doors
The garage door will make up a portion of your total budget, ranging from $850 to $5,500-plus for a custom garage door. The average cost nationally is $1,200, but that varies by door style. Standard panel doors are the most inexpensive, while glass roll-up or carriage doors are the most expensive.
Building a garage within your budget
Renovating or adding a garage provides numerous perks, from protected parking to bonus living or storage space. While building a garage requires making a sizable investment upfront, strategic financing can help spread out the costs over time and bring your vision within reach.
Carefully compare loan options, cash-out refinancing, home equity borrowing, and other options to decide on the funding solution that works for you. A garage should add value to your property over time, but ensuring costs are in check can help you save more.
FAQ
What kind of loan do I need for a garage?
The most common options are personal loans, home equity loans or HELOCs, construction loans like 203(k) loans, and mortgages that allow financing renovations.
Is it hard to get a loan to build a garage?
With good credit and equity in your home, accessing loans for a garage addition is very doable. Focus on secured options like home equity for better rates.
Can I add a garage to my mortgage?
Yes, certain mortgage products, such as the 203(k), Freddie Mac’s CHOICERenovation, and Fannie Mae’s HomeStyle Renovation, allow you to fold renovation costs into your mortgage.
Is an extra bedroom worth more than a garage?
An additional bedroom usually adds more resale value to a home than a garage. Bedrooms are weighted more heavily in pricing models as they increase a home’s functional square footage, while garages as “unheated” square footage aren’t typically counted in the home’s size.
What is the ROI of adding a garage to a house?
On average, adding an attached garage recoups around 64% to 81% of its costs through increased home resale value. If it costs $30,000 to build, you could expect around $19,200 to $24,300 in added home value.
