A new roof is one of the most significant and necessary financial investments a homeowner can make for their property. After all, you’re probably looking at installing a new roof for one of the following reasons:
- Your current roof is at the end of its usable lifespan.
- You’ve recently experienced a major storm or other event that caused significant damage to your roof.
- You want to install more eco-friendly roofing materials than your current roof.
- You’re looking to put your home on the market in the next 5-10 years.
While some of these reasons can be planned for, others come up without warning. If roof replacement costs weren’t initially in your budget, you might find yourself in need of an immediate replacement with no way to finance a new roof.
Luckily for you, help is out there. Look through these seven roof financing options to see which one is best for you.
1. Roof Loan
Loans can be a great way to get fast cash for your roof replacement as long as you can pay back the loan on time and with interest. Be prepared for lenders to check your credit score, debt-to-income ratio, and personal assets when applying for an unsecured personal loan. Both adjustable-rate and fixed-rate loan options are available.
A loan for a roof replacement will generally come in one of three forms:
- Personal loans: With this kind of loan, you receive your requested amount in a lump sum and then repay the balance and interest with monthly payments. The term is usually less than 10 years, and interest rates tend to be pretty high. No collateral is required for this type of loan, so you’ll need a good credit score and proof of a steady stream of income to qualify.
- Home equity loans (also known as a second mortgage): This type of loan is very similar to a personal loan except that your current equity in your home is put up as collateral for the loan. These loan terms can be up to a few decades, and the interest rates tend to be lower than those of personal loans. It will likely take a few weeks for you to receive approval on your application.
- Government-insured loans: If you have a poor credit score and/or low equity in your home, the Federal Housing Administration offers loans to help you afford your home improvement project. Their 203(k) standard loan and Title 1 loan are their most common options for emergency roof repair.
2. Home Equity Line of Credit
In terms of collateral, a home equity line of credit (HELOC) is basically the same as a home equity loan. Your lender will assess the amount of equity you have in your home, use that to establish your loan amount, and use your home as collateral against the loan.
In practice, though, a HELOC is more similar to a credit card than to a home equity loan. You’ll be provided with a credit limit, and you can take out money continuously and in any amount less than the limit during your draw period (usually 5-10 years). Then, any outstanding balance must be repaid during the repayment period (generally 20 years).
This form of credit often has variable interest rates, meaning that you may end up paying more in interest than you initially anticipated. However, it’s the most flexible option available to you if you anticipate ongoing expenses related to your roofing project. Plus, some homeowners are able to deduct their interest payments on their federal tax returns; talk with your financial advisor to see if these tax benefits might apply to your situation.
3. Homeowners Insurance
Your insurance policy should be one of the first things you look up, possibly before looking into lines of credit and other personal loans. If you’re replacing your roof because it sustained damage in severe weather or another insurance-covered event, it will likely be most cost-effective for you to pay your deductible and then have your insurance company pay the rest of the expenses.
If the damage came as a result of faulty products or improper installation, your product and/or labor warranties may also cover the cost of the damage. Check your paperwork to determine if you qualify for any coverage.
4. Contractor Financing
Roofing companies often have pre-existing relationships with specific lenders, meaning that they can get you special rates on loans when you apply through your contractor.
This often comes in the form of a low-interest rate during a promotional period, with higher interest rates later in the life of the loan. These loans are also usually quick approval loans that don’t require equity. Clean Cut Roofing offers these kinds of loans through Hearth Financing.
5. Cash-Out Refinancing
If your current home mortgage has a relatively high-interest rate or variable-rate interest, then cash-out refinancing could be a smart move for you. For this to work, you go through another mortgage approval process to secure a mortgage for a higher dollar amount than your current mortgage. You use the funds to pay off your current mortgage and use the leftover money to pay for your roof repairs.
This isn’t the best way for everyone to finance a roof, though. If you already have a low-interest rate on your mortgage, you’ll likely end up paying more for this next mortgage. Plus, you’ll also need to pay closing fees to close the first mortgage and open the next one.
6. Credit Cards
Credit cards should only be used if you’ve exhausted every other financing option. Carefully consider how much money you borrow, the interest rates for the cards you open, and whether you can actually afford your monthly payment.
Roof Financing Made Easy
When you need to get your roof fixed, you have several avenues available to you to pay for the work. From personal loans to roofing company financing, do your research to ensure that you’re choosing the best path for your home and finances.
When you work with Clean Cut Roofing, we take care of all the details for you. If you need help covering your roofing costs, we have just the financing options you need to make the upfront payment, receive competitive interest rates, and end up with affordable monthly loan payments.
Interested in learning more? Contact us today to discuss your options!