Adding a garage to your property can make your life easier while also adding value to your home. But building a garage can be expensive — and if you can’t afford the cost upfront, some type of financing will likely be required in order to move forward with the project.
The good news is homeowners have several options to choose from so they can get the garage they want now and pay for the project over time — including a personal loan, a home equity loan or line of credit, or a cash-out refinance.
But how do you decide which type of garage financing is best for you? Read on for a breakdown of the different options, some of their pros and cons, and how to choose the right financial product for you when you decide to build your new garage.
How Do People Afford to Build a Garage?
Most people probably can’t afford to add a garage to their home without borrowing at least part of the money for the build. And even those who have enough cash to cover the cost might not want to dip into their savings to foot the entire bill upfront.
There are several ways to finance a garage build, and the option that works best for you may depend on several factors. Before you make your choice, it can be good idea to look at:
• How much equity you have in your home, and if you want to tap that equity for funding.
• Your credit score nd what kind of interest rate you might be offered if you apply for a loan.
• How long you want to make payments, and how those payments might affect your other goals.
• How much you expect the full cost of your project to be, and how much of that you want to finance.
💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.
What Is the Average Amount Needed to Build a Garage?
According to HomeAdvisor, the average cost of building a garage is about $28,326. The typical price range in 2022 was between $16,424 and $40,287.
Of course, your costs may vary significantly based on the size of the garage, the materials you choose, labor costs in your area, and the type of structure you plan to build. Here’s a breakdown of what some garage projects can cost:
Average cost: $2,400 to $8,400 for one car; $4,000 to $14,000 for two cars, fully installed
A carport can be a great option if you’re looking to protect your car from the sun, snow, sleet and hail, pollen, bugs and birds, etc. A carport is typically less expensive than a fully enclosed garage.
Square footage is usually the most important factor when it comes to determining price. A fully installed (parts, labor, etc.) 12-foot-by-20-foot carport, built for just one car, averages between $2,400 to $8,400; while a two-car, 20-foot-by-20-foot carport would be around $4,000 to $14,000.
Here are some other factors that can impact the cost:
• Whether the carport is temporary or permanent
• The roofing and other materials used
• Whether it’s a prefab or custom build
• Whether it’s freestanding or attached to another structure or a concrete foundation.
Attached and Detached Garages
Average cost: $10,500 to $27,000 for one car; $14,500 to $40,300 for two cars, fully installed
If you’re looking to keep tools, bikes, or even a washer and dryer in your new space, along with your car or cars, you’ll probably want a completely enclosed garage with doors you can lock.
Your storage needs will help determine the size of the garage you build — and, yes, that size will figure into the cost. A standard one-car garage is 12 to 16 feet wide and 20 to 24 feet long, while a two-car garage is usually 22 to 26 feet wide and 20 to 24 feet long.
Keep in mind that if the garage is attached to your home, you may pay 10% to 15% less than you would if the garage is detached. The materials you choose for the walls and roofing will also influence the cost. And you can expect the price to increase if you add windows, plumbing, and/or electricity.
Average cost: $2,500, fully installed
If you’re just looking for additional storage and not a place to park your car, a shed might be a more affordable option. The average price range for building a shed ranges from about $200 (for a small prefab shed) to $30,000 (for a custom structure that could serve as an office, man cave, or she-shed).
The size of the shed (both square footage and ceiling height) will make a big difference in the cost, as will the materials you choose, the type of foundation you use, if the project requires a permit or professional installation, and if you want to add plumbing and electricity.
Average cost: $1,200, fully installed
The door you choose for your new garage can be important to your home’s curb appeal, but you may also want to consider energy efficiency and how the door will hold up against rough weather — or energetic kids who use it as a backdrop to their sports practice.
Factors that can affect the cost of a garage door include the style, materials, size, and the type of installation required. The cost can also increase if you opt for an automatic door with sensors, a keypad, and other bells and whistles.
Unless you plan to build your garage yourself, your labor costs could add up to at least half of your project’s price tag — and your location could be an important factor.
HomeAdvisor found, for example, that if you live in Austin, Boston, or Los Angeles, you could end up paying twice as much for your garage as you would if you lived in Chicago, Oklahoma City, or Kansas City, Mo.
Average cost: $150 to $500
Here’s a cost homeowners tend to overlook: Almost any building project requires a permit.
Permitting needs and costs can vary depending on the type of project and where you live. If you’re working with a contractor or installation company, they should be able to tell you what’s required and the cost. You also can contact your local government agency for information.
The average cost for a garage permit is $150 to $500, but if you’re adding electricity, plumbing, or air conditioning, the price could be as much as $800 to $1,500.
Recommended: The Cost of Buying a Fixer-Upper
Garage Builders Financing Options
Because the cost of building a garage can get pretty expensive, homeowners often decide to use some type of financing to pay for the project.
There are several options available if you prefer to break down the cost of your project (large or small) into affordable monthly payments. Here are some common choices:
With a personal loan, you’ll get a lump sum of money that can be repaid in monthly installments, usually at a fixed interest rate that’s based on your credit score, income, and how much debt you’re currently carrying. This type of financing can be used for just about anything, but home improvement projects are among the most popular uses of a personal loan.
Borrowers typically aren’t required to provide collateral to get a personal loan (unlike a home equity loan or HELOC). This can make the approval process go faster, which means you can get your money sooner. Another plus: You won’t be putting your home or any other asset at risk if you can’t make your loan payments. But there’s also a downside in that your interest rate may be higher than it would be with a secured loan. And you may have less time to pay back the money you borrowed.
Recommended: 11 Types of Personal Loans and Their Differences
Home Equity Loan
Borrowers who have built up some equity in their home (at least 10% to 20%) may want to look into financing a garage build with a home equity loan. With this type of loan, you’ll get your money upfront and pay it back, with interest, in fixed monthly payments.
The upside to a home equity loan is that a lender may offer a lower interest rate because the financing is secured with your home as collateral. The downside, of course, is that if you default on the loan, the lender could choose to foreclose. And if you sell your home, you’ll be expected to pay off your loan balance. You also can expect a more complicated application process and to pay closing costs and other fees with this type of loan.
A HELOC is like a home equity loan in that it allows you to borrow against the equity you have in your home. But with a HELOC, you don’t have to borrow all the money at once — you can use your line of credit to borrow just what you need as the project moves along. And you’ll pay interest (usually a variable rate) only on the amount you currently owe, much like a credit card.
The major drawback is that your home will serve as collateral for the line of credit, so if you default, the lender could foreclose on your home. And if interest rates increase, your loan payment could end up being higher than the amount you originally budgeted.
The Federal Housing Administration offers 203(K) loans as a way for current homeowners and homebuyers to refinance their home and roll the costs of a renovation into the mortgage. Because they’re backed by the FHA, these loans can come with lower interest rates and qualifying may be easier. But your home and your garage project will have to meet FHA requirements.
Construction loans traditionally have been used to finance the building of a new home, but they also may be used to make substantial renovations to a current home.
These loans typically have a variable interest rate, and because they’re unsecured, the rate may be higher than other types of garage financing options. Construction loans also have shorter terms than most loan options: They generally must be rolled into a mortgage or paid off within a year.
With a cash-out refinance, borrowers take out a new and larger mortgage on their home, then pay off the old mortgage and keep the difference to pay for their renovation project.
If you can find a competitive, fixed interest rate and other loan terms that work for you, this might be an alternative worth considering. But again, the loan is secured with your home as collateral, the application and approval process can be more complicated and slower than with other options, and there may be closing costs and fees.
What Type of Loan Is Best for Building a Garage?
If you’re hoping to build a garage, it makes sense to thoroughly research all the financing possibilities. But you’ll likely find that a personal loan is among the top contenders.
Benefits of a Personal Loan
There are several benefits to using a personal loan to finance a new garage.
• You can borrow a fairly high amount (up to $100,000, for example, with a SoFi personal loan).
• With an unsecured personal loan, you won’t have to put up your home or any other asset as collateral.
• If you have a good credit history, you should qualify for a competitive interest rate.
• Personal loans typically come with a fixed interest rate, which can make budgeting easier.
• If you make timely payments and pay off the loan on time, it can help your credit.
• The application process can be faster than other options, so you’ll get your money sooner.
Qualifying for a Personal Loan
Personal loan requirements can vary from one financial institution to the next, but here are three things lenders typically look at when reviewing an application:
• Credit score and credit history: The higher your credit score, and the cleaner your credit report, the better your chances of qualifying for a loan with a competitive interest rate.
• Employment history and income: Borrowers should be prepared to provide recent tax returns, bank statements, and other documents to verify their employment and their wages or salary.
• Debt-to-income ratio: Lenders can have different requirements, but generally, the lower your debt-to-income ratio (how much you spend on monthly debt payments relative to your income), the better chance you’ll qualify for the loan terms you want.
Things to Consider When Applying for a Personal Loan
Before you apply for a personal loan, it can be a good idea to think about:
• How much you need: With a personal loan you’ll receive a lump sum of cash, so it can be helpful to have an estimate for your project’s overall cost — and how much what you’ll need to borrow — before you begin researching lenders.
• How much you can afford to pay back each month: You may want to run the numbers to see how your loan payments will fit into your monthly budget.
• How much time you’ll need to repay the loan: If you have big dreams — and a big price tag to match — you may want to look at a long-term loan (five to seven years) so the payments don’t overwhelm you. Keep in mind, though, that the longer the loan term, the more you can expect to pay in interest.
• Where you can get a personal loan that’s a fit for your needs: When you’re ready to look for a loan, your focus will likely be on finding the most competitive interest rate. But when you’re deciding where to get a personal loan, don’t forget to consider other costs — including origination fees, late payment charges, and prepayment penalties.
Alternative Garage Builders Financing Options
There are a couple of alternatives to financing your garage build with a loan or a secured line of credit. And like the other options listed here, they, too, have pros and cons.
If you have plenty of money to finish your project without financing, and you want to avoid interest charges, paying cash is definitely an option to consider. But if it would require pulling money from your emergency fund, or affect your budget or other important financial goals, you might want to look at other options. Of course, you could save up until you feel comfortable about paying for the project with cash. But depending on the total cost of the project, that might mean a long delay.
A credit card is a convenient way to pay for costs as you go, and this type of financing could be easier to obtain than a secured loan or secured line of credit. But unless you’re eligible for a card with a low or 0% introductory rate — and can pay off your balance before the introductory period expires — the interest rate could be much higher than with other borrowing options. If you’re building a storage shed or DIY carport, a credit card might be an appropriate financing tool. But for a pricier project, you may find there’s a more affordable option.
Building a garage — whether it’s a prefab shed, standalone carport, or attached garage — can be an expensive project. Depending on the scale of the project and where you live, you could easily spend close to $30,000.
Most people opt to finance their garage build project, either with a personal loan or a line of credit. This allows them to break up the cost over several months and keep their cash in savings for a rainy day.
If you know what kind of garage or similar structure you hope to build, and you need or want to find financing to help pay for it, a personal loan can be a solid option.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.
How do people afford to build a garage?
If paying cash to build a garage isn’t feasible, there are several financing options available, including a personal loan, home equity loan, or home equity line of credit (HELOC).
Can you finance a garage?
You can finance a garage if you can’t pay cash — or don’t want to. There are several financing options available, whether you’re planning to DIY a small carport or you’re working with a contractor to install a super-sized garage with all the amenities.
What type of loan is best for building a garage?
If you have solid credit, a personal loan may be the best type of financing for building a garage. You can borrow the money you want upfront, get the funding quickly, and make fixed-rate monthly payments while enjoying the benefits of adding a garage where you can keep your car, boat, tools, toys, and more.
Photo credit: iStock/PC Photography
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