Finance 101

How to Finance a New Roof

September 12, 2023

A roof may not be the most aesthetically pleasing part of your home, but it might be the most critical. The average home’s roof needs to be replaced every 15-30 years. Unfortunately, a new roof is a big expense. A typical asphalt shingle roof could cost about $9,280 in 2023.

So how do you pay for a new roof?

In a perfect world, you could save money for a new roof over several years as your roof nears the end of its life. Or you could use your emergency fund. But saving ahead isn’t always possible. If you already have roof problems that aren’t the direct result of a storm, you might need to finance the fix.

But can you finance a roof repair? Can you finance a new roof? Thankfully, the answer is often yes.

In this article, we’ll look at how to get financing for a new roof, available roof financing options, and important factors to consider before choosing one.

Roof Financing Options

Before you can make any choices about financing roof repairs or a new roof, get familiar with the financing options. Options for “how to finance a roof?” may include:

Insurance Money

If you have roof damage that is the direct result of a storm or other event, check whether your home insurance policy will cover the costs. Home insurance companies often cover roof damage that is the result of a covered event – this will depend on your policy. Even if your insurance covers repair or replacement, you’ll still need to pay your deductible.

If your roof issues aren’t the result of normal wear and tear, contact your home insurance before making arrangements with a roofing company. They should be able to explain your coverage and file a claim if necessary.

Contractor Financing

Roofing contractors may offer financing or work with a lending partner to provide it. This can be a convenient option. Just make sure you compare the terms, APR, interest rate, fees, and monthly payments with several other lenders to be sure you’re getting the best deal available to you.

Federal Housing Administration (FHA) Loans

There are several types of loans available from Federal Housing Administration (FHA) approved lenders. These loans are specifically for making home improvements and renovations. The rates may be friendly and are worth looking into.

Home Equity Loan

Home equity loans, sometimes referred to as second mortgages, are based on the equity you have in your home. You can determine your home equity by subtracting the amount you owe on your mortgage from your home’s current value.

Home equity loans usually have repayment terms ranging from 5 to 30 years. They often have lower interest rates because they are secured loans that use your home as collateral. Once the loan paperwork is complete, the lender will disburse the loan amount to you in a lump sum. Home equity loans are repaid in monthly installments.

Home Equity Line of Credit (HELOC)

With a home equity line of credit (HELOC), a lender allows you to borrow against a given approval amount. You can borrow repeatedly and pay back money over the term of the loan. Like a home equity loan, a HELOC uses your home as collateral, so it may carry a lower interest rate than unsecured alternatives.

Cash-out Refinance

A cash-out refinance may be an option, particularly if your home’s value has increased since you took out your mortgage. With this option, a borrower takes out a new mortgage on a home’s now-increased value. The borrower uses the funds to pay off the original mortgage and can use the remaining cash for anything – in this case, a new roof.

Generally, a cash-out refinance is only a good idea if you can get a lower mortgage interest rate or want to replace a variable-rate mortgage with a fixed-rate option. It’s important to remember that you may ultimately end up paying more for your house with a cash-out refinance. As with a home equity loan or HELOC, a cash-out refinance can often take 30 to 45 days to complete.

Credit Card

In general, the only time it’s a good option to finance a roof with a credit card is if you qualify for a 0% introductory rate promotion and you can pay off the total amount within the interest-free period. Typically, 0% introductory rates last for a 12- to 18-month period, then revert to the standard interest rate.

Personal/Installment Loan

Personal loans are an option for home improvements. There are no restrictions on how the money is used, and you get the money from the lender in a lump sum (all at once). Personal loans are available from online lenders, credit unions, banks, and more.

A personal loan could be a good option for an urgent repair since you get the money quickly. Personal loans are also accessible to those with challenging credit.

These loans don’t require collateral, so you’ll likely pay a higher interest rate than with a home equity loan. But unlike a home equity loan, you won’t lose your home if you ever find yourself unable to keep up with payments.

Apply For an Installment Loan

Things to consider when financing a roof

Before financing a roof, you want to consider a lot of factors.

Determine the urgency. Is the problem urgent or not? If you can wait a little longer, it may impact the financing you choose, while an urgent problem or leak will mean you need the money ASAP.

Look at your savings. Do you have money in your emergency fund to cover the repair? If not, do you have savings you can put toward the repair?

Determine your budget. How much can you afford to pay monthly for the roof repairs or replacement?

Get quotes and compare. Ask friends, neighbors, and family members if they’ve used a roofing company they would recommend. Search online for licensed roofers in your area with excellent reviews. Then get quotes from multiple roofing companies so you can compare them.

Do your research. Find out your credit score, and search to see what interest rates and terms you might qualify for. Be sure to look at reviews online for any lender you consider; Trustpilot and the Better Business Bureau are good resources.

Compare your financing options carefully. If you decide to finance the roof repair/replacement, look at how much equity you have in your home. Compare the total cost of the roof with different kinds of financing; a loan calculator can help you compare loans more easily. Be sure to factor in origination fees, late fees, and any other expenses involved in the loans you’re considering so you know you’re looking at the true monthly payment before you choose a financing option.

Our best advice?  Take your time. Don’t panic or rush to sign a loan. Carefully evaluate your financial options before choosing the best one for your unique situation. 

FAQs: Financing a New Roof

Can you finance a new roof?

Yes, there are multiple ways to finance a new roof. See the article above for details.

Can I get a loan for roof repairs with bad credit?

Yes. You may qualify for more than one loan type. Do your research, as described above, to understand what’s available to you.  Also, look at our related article, Can I Get an Installment Loan for a Bad Credit Score for more information.

How do I determine the best loan type for my roofing project?

See “Things to Consider When Financing a Roof” in the article above for tips on how to determine the best loan type for your unique roofing project.

How do you use equity for a new roof?

Home equity is essentially the part of your home you actually own. You can use your equity as collateral with a home equity loan, home equity line of credit (HELOC), or a cash-out refinance to fund a new roof. Learn more in the article above.

What credit score is needed for a roof?

This depends on the type of financing and the lender. That’s why it’s so important to research the loans available to you and compare your unique options.

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