A new roof or a replacement is a great step in maintaining your home’s aesthetic style and durability, as well as increasing its overall value. A crucial aspect of this phase is how to finance the new roofing system. Roofs are expensive, and the process of figuring out how to pay for it can be overwhelming.
Thankfully there are many options to help out homeowners with the overall cost. From loans, rebates, and credit options, there are many ways to obtain roof financing.
Consult your homeowners' insurance policy
If you need a new roof because of damage, your homeowners’ insurance policy may cover the cost if it was caused by something out of your control, like a severe storm or fire. But, if the replacement is needed because of a lack of maintenance or natural wear and tear, your policy most likely won’t apply.
Review your policy and call the insurance company to find out what it covers and any exemptions, coverage limitations, and exclusions in the contract.
However, even if homeowners insurance covers the damage, you still may have to offer up some cash. You may need to pay a deductible before the coverage applies, and without any cash saved, financing will still be an option.
Roof loan qualifications
Roof loans give homeowners the money they need when they need it, which can be a great advantage. However, it’s easy for folks to get excited and overspend.
Draft a budget and figure out exactly how much financial aid you’ll need for the new roof.
After you have a solid number to work with, the loan option depends on two things:
Home Equity: If you’ve recently purchased a home and don’t have much equity invested yet, you’ll have to opt for an unsecured option, such as a personal loan. Unsecured means the loan option does not need your home equity as collateral.
Timeframe: It can take up to 4 - 6 weeks to apply for and be approved for a line of credit with a bank. This may not be a problem for homeowners looking to take proactive action and improve the style of their home, but for urgent projects caused by damage, it can be too long to wait.
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Home equity loans
If the new roof is not an urgent matter, a home equity loan can be a great option.
This financing option has lower rates than personal loans but can take up to 4 - 6 weeks to be approved. In addition, you may have to pay high closing costs and might face penalties if the loan is paid back early.
Government loans and rebates
Federal Housing Administration Title I loans are used for home improvements to make the home more useful and livable, and roofs fall into this category. If homeowners have good credit but limited home equity, they’ll qualify for this option.
Qualified lenders and banks make these loans from their own funds, and the FHA gives insurance to the lenders against a possible loss.
If the new roof is energy efficient, such as a metal roof, check out the Database of State Incentives for Renewable Energy. It outlines state, local, utility, and federal incentives for energy-efficient improvements to homes. The Department of Energy can assist with tax credits and rebates to further assist with roof financing.
Credit cards and HELOC
Credit cards can be a solid option under the right circumstances.
They let homeowners borrow money up to a certain limit, and if paid back quickly, you can avoid large amounts of debt that could grow out of control.
0% APR credit cards: If you’ve built up a great credit score, you could qualify for a 0% card. What this means is that the card has zero interest for a starting period, typically from 6 to 18 months. This allows homeowners to finance the new roof without paying any added interest if the balance is paid before the introductory period is over.
Credit cards for bad credit: If your credit isn’t up to snuff, a new roof may need to be placed on the backburner until you have the financial means to improve your credit. But, if the roof needs to be replaced due to severe damage, a credit card may be the only option. Be diligent about using it and pay off the card as soon as financially possible to avoid higher interest payments.
A Home Equity Line of Credit (HELOC) is a form of credit that uses the home as collateral. This type of financing option is used for only large expenses, such as medical bills and necessary home improvements. Homeowners can utilize this financing option and pay it off over time.
Credit cards, loans, and rebates are strong options for roof financing, but the best option of all is a large savings account.
Of course, not everyone has a large nest egg to draw from, but if you know you’ll need a new roof in a few years, start saving around $80 a month.