The idea of setting aside money for an emergency is especially pertinent when you need to fix a roof that is leaking. If your family’s financial reserves are not enough to pay for the entire expense, you may have to look into loan options to fund a new roof. The cost of replacing a roof across the country is between $5,569 and $11,415, with an average cost of $8,349, as reported by HomeAdvisor, a website that deals with home repair.

Fortunately, there are a number of roof financing options to choose from when you have tarpaulins and buckets in place to prevent water damage. Research the different possibilities and make the best decision for your needs.

What Is Roof Financing?

You have the option to break up the cost of your roof replacement and pay it off gradually with different types of funding. This eliminates the need to pay everything in one lump sum. A possible alternative is to take out a loan specifically for the purpose of putting a roof on your property. This is known as a roof loan, and it is a form of personal loan.

An individual loan is a kind of loan that is paid back in multiple installments over a period of 1 to 7 years. You generally receive a consistent interest rate and make equivalent payments every month until the loan is completely repaid.

You can get a personal loan from a financial institution like a bank, credit union or an online lender. You will need to have an excellent credit rating (at least 670) and an acceptable debt-to-income (DTI) ratio in order to be eligible for a personal loan, which are usually not backed by any collateral.

It is possible to secure a personal loan even if your credit score is average, although you are likely to be charged a higher interest rate. You can normally locate individual advances that start from $1,000 and go up to $100,000 with financing costs extending from about 4% to 36%.

How Much Does It Cost to Replace a Roof?

The price to put in a new roof is not the same for everyone; it depends on the dimensions of your residence, the kind of roofing material used, and the wage rate in the region. The average roof replacement cost is $8,314.

Some roof materials are a lot pricier than others. The price of asphalt shingles is usually in the range of $5,753 and $12,231, while the typical expense of a slate roof is between $5,553 and $23,872. A 3,000-square-foot home could require up to $90,000 to install a copper roof.

The cost of labor is usually somewhere between one and a half dollars and three dollars for each square foot. It is prudent to request various estimates from different contractors before settling on one in order to compare labor costs.

Other elements that may impact pricing include the total destruction of your roof, climate and the elimination of old materials.

Can You Finance a Roof With Bad Credit?

You generally have to have a decent credit rating or above in order to acquire a personal loan, which is not secured by any sort of collateral. If your credit is poor, you’ll need to find a lender willing to offer you a personal loan for people with bad credit, or you can apply with someone else who has a good credit history as a co-signer.

Another option is to take out a secured loan that requires collateral, which is something that the lender can take back if you do not pay. Loans that are backed by collateral generally have looser credit standards and can provide more money to borrow than those that are not.

8 Options for Roof Financing

1. Home equity loan.

A type of loan called a home equity loan, or second mortgage, uses the portion of a home that a person owns outright as security for a loan which is paid back in regular monthly installments. The length of time for repayment of a home equity loan typically ranges from five to thirty years.

You can determine how much equity you have in your home by subtracting the amount of your mortgage you still owe from the current market value of your home. If you have taken out a loan of $200,000 on a house worth $300,000, your equity would be $100,000.

Generally, banks will not give you a loan amounting to more than 85% of your house’s worth, taking into account the amount of your current mortgage. For a $300,000 house, you would take 85% of that amount, which would be $255,000. Subtracting the $200,000, you would be left with $55,000.

Before you agree to a home equity loan, the interest rate is usually fixed, meaning you will be aware of the amount you will be paying every month until the loan is paid off. Benefiting from a home equity loan for roof financing may entitle you to deduct the interest payments you make from your federal income taxes, if you decide to itemize your deductions. Think about consulting with a financial specialist to determine if this is a viable option for your particular circumstances.

Nevertheless, it’s important to be aware that there are some negatives to financing a roof through a home equity loan. The authorization procedure for these types of mortgages is often lengthy and similar to the one for a first mortgage, and it typically takes between two to four weeks to be finalized. One other downside is that home equity loans can be a risk to your property: If you are not able to make your loan payments, it may lead to the loss of your house.

2. Home equity line of credit.

A home equity line of credit (HELOC) is a type of loan that utilizes the equity of your home as security. It is not a one-time payment like other home equity loans but instead creates a revolving credit account that can be used similar to a credit card. A HELOC works like a home equity loan, allowing you to borrow up to 85% of the worth of your home, taking into consideration the amount you still owe on your mortgage.

For a designated period, usually 10 years, a Home Equity Line of Credit (HELOC) gives you the option to make payments against the allocated amount with checks or a debit card. You can pay off the balance in as much or as little time as you want, provided you meet the monthly minimum payment. Once the draw period concludes, the entire outstanding balance must be paid off either in a single lump sum payment or in a set of fixed monthly installments.

Home Equity Lines of Credit usually have fluctuating interest rates, and may have low introductory rates for the initial year, followed by significant yearly jumps after that. It can be difficult to accurately estimate the amount of money it will take to manage a Home Equity Line of Credit (HELOC) due to the ever-changing balance of payments.

If you utilize a Home Equity Line of Credit (HELOC) to finance a roof (or any other home renovation project), it may be possible to deduct the interest you have paid on your federal income taxes. Consult with a financial expert to determine if you qualify for a HEL.

3. Personal loan.

If you take out a personal loan for a roof repair, the interest rate will most likely be higher than what you would get from a home equity loan, as these kinds of loans do not require any form of security. APRs that take into account interest rates and origination fees (usually between 0 and 6 percent of the loan amount) can vary from 9.3 percent for those with a credit score of 760 or higher to 22.16 percent for those with a score between 640 and 679.

Personal loans are not secured by any collateral. This is why creditors usually impose higher interest rates on these loans. The advantage of a personal loan is that it does not require you to use your house as collateral, so if you are unable to make payments for your roof, it will not put your house in danger.

4. Cash-out refinance.

When interest rates are low, it can be a wise decision to refinance your home loan in order to secure more favorable rates. You take out a loan that is larger than the one you currently have, and use the extra money to pay for your roof repair.

It could be beneficial to take this route if you can find a more appealing interest rate than what you currently have, however, if the interest rate you possess is already low, it likely won’t be effective. It can be dangerous if the worth of your house decreases, resulting in a loan that is more than the cost of your residence (which is commonly referred to as being underwater).

5. Government-insured loan.

Those who aren’t eligible for other roof financing options due to credit or equity conditions may look into government-backed loans to fund their project.

An alternative is the FHA 203(k) standard loan, which gives you the possibility to reorganize your current mortgage and roll in the expenses of your roofing if they are more than $5,000.

The FHA Title 1 loan is another financing option, offering a fixed interest rate that can be used to make improvements to a home. FHA Title 1 loans are capped at $7,500 and do not require the use of collateral, but if the loan amount is higher, you must use your house as security.

6. Contractor financing.

Your roofing specialist might also provide financing options, most likely taking the form of a private loan or credit card. See what your contractor charges for rates as you look for the most advantageous bargain. Be sure to thoroughly review any contractual provisions so you understand what you are consenting to.

7. Credit card.

If you’re able to settle the costs of your roofing project in a timely manner, a credit card could be of benefit. You might want to look into getting a credit card with a 0% Annual Percentage Rate that can last up to 18 months as a promotional offer even though the APRs usually tend to be high. If you do not settle the debt in full during this period, you will be charged interest on the remaining sum.

8. Homeowners insurance or warranty.

If the harm done to your roof came as a result of a storm, a fire, or something other than regular deterioration, your home insurance might pay for the fixing expenses. Your coverage will not begin until you have paid the deductible required by your insurance policy. Investigate whether your home warranty plan would cover any issues related to your roof.

Tips for Comparing Roof Loans

  • Compare interest rates. Interest is the cost of borrowing money, so the lower your rate, the more affordable your loan will be. Comparing multiple loan offers can help you find one with the best rate.
  • Watch out for fees. A low interest rate doesn’t necessarily make one loan more affordable than another if it comes with high fees. Keep an eye out for an origination fee, disbursement fee or any other expense that could add to your cost of borrowing.
  • Review repayment terms. Check out the amount of time a lender gives you to pay back your loan. If you’re borrowing a large loan, you might prefer the option of a longer repayment term.
  • Estimate your monthly payments. Use a personal loan calculator to estimate your monthly payments on each loan offer. Look for one that fits your budget and won’t be a burden each month.
  • Find out how much you can borrow. Every lender sets its own minimum and maximum loan amounts, so search for one that offers the amount you need to cover your roofing project costs.
  • Look for the option to prequalify. Some lenders let you check your rates online with no impact on your credit score. Having this option to prequalify can make it easier to shop for loan offers, so it may be worth prioritizing lenders that offer this service.
  • Ask how long the loan takes to fund. Depending on your roofing needs, you might need your roof loan fast. As you compare lenders, find out how long it takes for each one to process your application and fund your loan.
  • Check out the customer service channels. Find out how you can communicate with a lender, whether over the phone, email, live chat or all three. The amount of support a lender provides may sway your decision toward one lender over another.
  • Read customer reviews. Finally, take some time to read customer reviews before selecting your roof loan. Consumer review sites like Trustpilot can show you whether other borrowers had a good experience with the lender.

What to Consider Before Choosing Roof Replacement Financing

Get multiple quotes.

It pays to shop around. See if your neighbors, relatives, or acquaintances can suggest any trustworthy roofing companies, and then get multiple of them to inspect your roof and give you quotes. Each contractor must submit their proposal along with a certificate of insurance and evidence of workers’ compensation insurance.

Before deciding on a contractor, look through online reviews to ensure that there are no unresolved complaints about the roofer’s job.

Look at what’s included in each proposal.

Once you have obtained quotes from contractors you feel comfortable with, take the time to thoroughly analyze and compare the proposals.

Each proposal should have a one-time payment that covers all the anticipated expenses. Generally, professionals will also provide a rate per square foot to account for any unforeseen damage. If a contractor discovers that a sheet of plywood has rotted while they are preparing to put new shingles on, the unit price can provide an estimate of what the extra cost of replacing it would be.

The following costs are typically itemized in a proposal:

  • All labor and materials.
  • Any building permits required by your county, city or town.
  • Cleanup and disposal of all debris and waste.

Use your home warranty if you have one.

A home warranty is similar to an insurance policy; you purchase it in the hope that you will never have to use it. The yearly cost of your policy may be different based on the type of plan you have and the location you live in, but it should offer protection in the event of a major malfunction in one of your house’s systems. Home Advisor estimates that the expenditure for a year could be anywhere between $219 and $1,704.

If your roof damage is included in your insurance policy, you will only have to pay a fee to submit a claim, which is usually between $50 and $100. Again, every policy is different.

Find out if insurance will cover any repairs.

Once you understand the extent of the repairs needed, contact your insurance provider to find out if they will cover any part of the cost. This will depend on your policy. Many insurance plans will pay for leakage due to bad weather such as strong winds or hail, but not for repairs caused by age or wear and tear. However, it is important to note that each policy is unique and certain exceptions may be in effect.

Jonathan
Author: Jonathan