Costly HVAC Repair

Dear Dr. Per Cap:

Last week, our home’s old air conditioner finally died. It’s going to cost $10,000 to replace, which means no family vacation and a bunch of other sacrifices. The hub suggested we just buy a few cheap AC window units and hold off fixing the main AC until next year. Do you think that makes sense?

Signed,

Needing Cool Air

Dear Needing Cool Air,

I know what you’re up against. I have an older home and every summer I cross my fingers that the AC will hang in there another year. Heating, ventilation, and air conditioning (HVAC) systems are insanely expensive, so much so that an older system can significantly lower a home’s value.

Your hub’s idea is one way to go. For less than $1,000, you could buy three or four window AC units and have them installed and running in an afternoon. However, that’s a cheap, quick fix you’ll want to avoid if possible.  For starters, there’s no comparison between how window units cool and the original AC system your home was built with.

Window units are loud, breezy, not very energy-efficient, and don’t come close to central air in terms of performance. The best you can do is cool specific rooms intermittently, while lacking smooth, quiet, consistent cooling of your whole home.

I get it though. No one wants to spend 10 grand on a home repair. However, that’s part of being a responsible homeowner. Sure, you can hold off a year but if you do, come up with a rock-solid plan for how you will save enough to buy a new air conditioner. The risk is that you make it through summer and come fall, you’ll forget all about the AC and raid the piggy bank.

The bottom line is that sooner or later you’re going to have to fix that AC, so you may as well do it now.  If you need some extra motivation, please remember that unlike many other home repairs, a brand-new AC system is considered a home improvement that adds value to your home.

City and off-rez homeowners might also qualify for state or local tax breaks when replacing an older unit with a newer, more energy-efficient one.

Now, let’s think about that $10,000 repair bill. Most HVAC companies offer financing, which is usually just a home-improvement loan with a two- to seven-year term. Like any loan, they’ll run a credit check and any issues can raise your annual percentage rate (APR).

Rather than borrow from the HVAC folks, I’d check with a tribal or local housing program or a community development financial institution for a home-repair or improvement loan with a more affordable APR.  You might also be eligible for a federal home-repair loan.

Going forward, it also pays to keep a savings fund just for home repairs. Expect to spend about 1% of your home’s value on repairs and maintenance in an average year. Most years you shouldn’t have to spend a whole lot, but every so often you’ll get hit with a big bill, like a new roof or the HVAC.

A little planning and saving make for a prepared homeowner.

Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit www.firstnations.org. To send a question to Dr. Per Cap, email askdrpercap@firstnations.org.