Garage Financing: How To Find the Right Option

The average cost for a new garage is $24,000 or more. If you don't have 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.

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. Though those perks come with a price tag. 

Key Takeaways

• Garage costs set your financing target. Building a garage averages about $24,000 nationally, with attached builds running roughly $23,000 to $45,000 and detached builds from about $7,000 to well over $100,000 depending on size and finishes.

• Personal loans are the fastest garage financing path. You can get matched with offers of up to $50,000 through MoneyLion's marketplace, with fixed payments and quick funding — though rates may run higher than secured options.

• Renovation mortgages bundle the project into your home loan. FHA 203(k), Fannie Mae HomeStyle and Freddie Mac CHOICERenovation roll renovation costs into a single mortgage; HomeStyle caps renovations at 75% of the as-completed value and generally requires a 620 credit score.

• Home equity options offer lower rates but use your home as collateral. A home equity loan or HELOC can let you borrow against built-up equity, often up to about 85% of your home's value minus your mortgage balance, usually with a 620+ score.

• A 0% intro APR credit card can work for smaller projects. For builds under about $15,000, an intro-APR card may help short term — just have a payoff plan before the promo period ends and the ongoing APR, which can reach 25% or higher, kicks in.

• Paying cash avoids interest, but protect your emergency fund. Cash is the cheapest route if you have the savings, but don't drain money set aside for emergencies to cover a garage.

Summary generated by AI, verified by MoneyLion editors

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 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. 

How To Finance a Garage in 10 Ways

When tackling a garage addition or renovation, having the right financing lined up is crucial. Here are 10 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 to 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. Construction Loans

A construction loan is used to cover the cost to build or rehab your home. It's usually a short-term loan, though tends to have higher interest than your standard mortgage loans. It makes sense if you're adding on a new space, such as a new garage or adding a new or different structure to the home.

You'll need a blueprint for the project, excellent credit, a licensed and qualified contractor and, depending on the lender, a sizable down payment. You'd usually begin the payment schedule between six to 24 months after you've taken out the loan. You can pay it off as a lump sum or you can choose to convert it to a conventional mortgage, though this option may or may not be available, depending on the terms. If that's the case, you may need to reapply for a new loan.

7. 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.

8. 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.

9. 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.

10. 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.

What To Know Before You Apply

When you're looking for funds for your garage build, think about the scope of your project and how much budget you can devote to it. Here are some things to keep in mind:

• Your credit score: This affects your interest rate and the options you'd be qualified for. The higher your score, the better the rates you'll see, along with better terms and the ability to take out a larger loan, among other options.

• Equity: If you're thinking about a home equity loan, HELOC or cash-out refinance, lenders will like to see that you've built up some equity in the home, which can help your borrowing power.

• Project cost: Talk with contractors to get a sense of how much the project will cost.

• Loan terms: The longer your loan term, the more you'll pay in interest in the long run. On the flip side, a shorter-term loan will have a higher monthly cost, but you'll save more on interest.

• How quickly you need financing: Some of the options, like a personal loan, will get you funds faster. A construction loan, though, could have a longer timeline because you'd need to provide more documentation.

• Fees and closing costs: Watch for origination fees, appraisal fees, closing costs and other incidentals. There is still a cost to borrow beyond just the interest rate.

• Emergency fund: Try not to tap into your emergency fund unless absolutely necessary, to cover anything unexpected.

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. 

FAQs 

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.

Key Terms

• Personal loan: An unsecured lump-sum loan repaid in fixed monthly payments over a set term, often used to fund projects like a garage without putting up collateral.

• FHA 203(k) loan: A government-backed rehab mortgage that combines a home purchase or refinance with renovation costs into one loan, subject to FHA loan limits.

• HomeStyle Renovation loan: Fannie Mae's program that finances purchase plus renovation in a single mortgage, with renovations capped at 75% of the as-completed appraised value and a minimum 620 credit score.

• CHOICERenovation mortgage: Freddie Mac's conventional renovation product that lets borrowers pay for renovations with the loan proceeds in a single-close transaction, with no separate construction loan to pay off.

• Cash-out refinance: Replacing your mortgage with a larger loan and taking the difference as cash, which you can put toward construction costs — adding closing costs and a new mortgage term.

• Home equity loan: A lump-sum loan secured by your home, typically allowing you to borrow up to about 85% of your home's value minus the mortgage balance.

• HELOC (home equity line of credit): A revolving credit line secured by your home that you draw on as needed, usually with a variable interest rate tied to the prime rate.

• Loan-to-value (LTV) ratio: The share of your home's value that your loan represents — a key figure lenders use to set approval and renovation limits.

Sources

• U.S. Department of Housing and Urban Development. 203(k) Rehabilitation Mortgage Insurance

• FDIC. Affordable Mortgage Lending Guide: Fannie Mae HomeStyle Renovation Mortgage

• Freddie Mac. CHOICERenovation Mortgages

• Consumer Financial Protection Bureau. Consumer Tools and Resources

• Consumer Financial Protection Bureau. What Is a Construction Loan?

• National Association of REALTORS. Construction Loans: A Real Estate Agent's Guide

• Federal Trade Commission. Consumer Advice

Summary generated by AI, verified by MoneyLion editors