We all want a roof over our heads. But what if something happens to the roof over your head, and you need to pay for a roof replacement?
Roof replacements can get pricey. In 2022, U.S. homeowners spent between $5,619 and $11,949 putting new roofs on their homes. And the cost of replacing a roof has only soared as the cost of materials and labor has gone up.
If your home needs a new roof but you don’t have the cash, you can finance a roof replacement. We can show you how roof financing works and the financing options available to you. You can build on what you learn and decide which roof financing option is right for you.
How New Roof Financing Works
Before financing any kind of home repair, like a roof replacement, you’ll need to get a sense of how much it will cost and how much you can afford to pay.
Get an estimate
You’ll need to get an estimate from a roofing contractor. The estimate will break down the repairs they plan to make and estimate the cost of materials and labor.
What you pay for a roof repair or replacement will vary based on your local labor market and the price of materials. For example, if you live in an area that’s just been through a strong storm, there’s likely going to be a higher demand for roofing contractors. Usually, the more demand, the higher the price.
Every roofing contractor works (and prices) differently. Try to get more than one estimate. You might be surprised at the differences in cost.
You should also make sure to research the contractors. Check online reviews and ask for references. Reduce the risk of becoming the main character in a contractor horror story. Make sure you’re working with a licensed, dependable contractor.
Create a budget
Once you’ve attached a dollar figure to the cost of your new roof, you’ll know how much you’ll need to spend.
If you need to finance your new roof, take a look at your budget and calculate how much you can afford in monthly payments.
Let’s say you took out a $10,000 loan to pay for your new roof. Here is what the loan would cost every month with different loan repayment terms (or lengths):
|Repayment Term||4% Interest||9% Interest|
If a $300 monthly payment works for your budget, according to our table, you’ve got a few options available. You can either opt for a 48-month loan term at 4% interest, or you can decide on a 60-month loan term at 4% or 9% interest.
Keep in mind that the longer you’re making payments, the more the loan is going to cost you and the higher interest rate you’ll likely be charged by your lender.
Let’s say you took out the $10,000 loan with a 9% interest rate. With a 24-month loan term, you’d pay $5,404.88 in interest. Extend the loan term to 60 months, and you’d pay $7,499 in interest.
Financing Options for a New Roof
Once you know how much you need to borrow and the size of the monthly payment you can comfortably afford, you’ll be in a better position to explore financing options.
The good news is there are several options available to finance a new roof. They can range from banks and credit unions to online lenders and companies that specialize in roof financing.
Depending on the amount of money you need for your roof replacement, you may be able to skip the loan application and charge the replacement to your credit card or distribute the cost over multiple cards.
If your contractor accepts credit cards, they can swipe your card and get started.
Some credit card companies offer the equivalent of a monthly payment plan. The company breaks up your charge into fixed monthly payments (usually over 6 – 18 months) that are added to your monthly minimum payments.
You can take advantage of a balance transfer offer or apply for a new card with a low or 0% introductory interest rate that usually lasts for 6 – 18 months. If you have any balance left over at the end of the intro period, you’ll pay market interest on the remaining balance.
The interest rates on credit cards range from 15% – 25%. The interest can make a large purchase and a rollover balance very expensive, very quickly.
If your roof payment maxes out your card or gets close to it, it can affect your credit utilization ratio, which can lower your credit score.
If you max out your card, you’re at risk of not having enough credit available for other purchases or future emergencies.
You can apply for a personal loan from a bank, a credit union or an online lender. Personal loans deliver an upfront lump sum of money to borrowers that gets repaid in fixed monthly payments over 1 – 5 years. Personal loans are typically unsecured loans (no collateral needed). So qualifying for a personal loan will depend a lot on your credit score, debt-to-income (DTI) ratio and income.
Most personal loans are unsecured. You don’t have to worry about losing collateral, like your house or your car, if you can’t make your payments.
Many lenders can process a personal loan application and get you your money in 1 – 7 business days.
Because your monthly personal loan payments are fixed and predictable, they are easier to factor into your budget.
The interest rates on personal loans typically start around 8% – 9%. You’ll pay less interest than you would with a credit card, but you’ll probably pay more than you would with a secured loan or other financing option.
To qualify for a personal loan, most lenders require a credit score in the high 600s and up.
You can borrow between $1,000 and $20,000 with personal loans. The amount you qualify for will depend on your credit. If your credit isn’t great, you may not qualify for the total amount you need or you’ll be charged a higher interest rate.
Home equity loan
The money to replace your roof might come from inside your house.
If you can tap into your home’s equity, which is the difference between the appraised value of your home and the amount you owe on your mortgage, you might find the money you need sitting in the walls of your home (not literally, but you get the picture).
You can use a home equity loan to borrow against your available equity and receive a lump-sum payment you would repay in monthly installments over 3 – 10 years.
Because your home acts as collateral, home equity loans usually have low interest rates.
As long as the money is used to buy, build or repair your home, you can usually deduct the interest on your home equity loan from your taxes.
Because your loan is secured by your home, you risk foreclosure if you can’t keep up with your monthly payments.
Most lenders allow you to borrow up to 75% – 80% of the value of your home, minus what you owe on your mortgage.
Most home equity loans charge closing costs, such as an origination fee, appraisal fee and more. Depending on your lender and the size of your loan, your closing costs could add a few hundred or thousands of dollars to your loan’s overall cost.
Roof company financing
Some roofing companies offer financing options. Usually, a contractor works through a third-party company to offer financing options to their clients.
Like traditional lenders, roofing companies that offer financing will run a credit check to determine how much they’ll let you borrow and for what terms. Before you commit, make sure you understand the terms and conditions.
Working with a roof financing company means you don’t have to worry about applying for a bank loan. Everything is handled by the roof financing company.
Roof financing companies may be more willing to approve you for a loan even if your credit score is low. They may charge more interest on the loan or require a shorter repayment term than other lending options.
Unlike a car dealership, which may partner with multiple lenders to provide auto loans to buyers, most roofing contractors work with one financing company. You’ll either need to accept their terms or find your own financing.
Government-funded home improvement loan
If you can’t qualify for a personal loan or a home equity loan, you may be able to get a loan with a little help from the government.
The Federal Housing Administration (FHA) offers Title 1 loans to homeowners who need help financing necessary home improvements.
The loan rates are fixed and comparable to home equity loan rates.
You can borrow up to $25,000. If you need to replace a roof on a multifamily property, you can borrow up to $12,000 per unit for a max of $60,000.
The terms on the loan range from 6 months to 25 years.
Loans up to $7,500 are unsecured. You won’t risk losing your home if can’t make your monthly payments.
FHA loans don’t have a minimum credit score requirement, but most lenders prefer a credit score of 620 or higher. And a borrower can have a DTI of up to 45%.
If you have homeowners insurance coverage, you could file an insurance claim to cover all or part of the cost of the roof. But this tactic only works under limited circumstances.
If your roof is damaged due to an accident or act of nature, you may be covered. If the replacement or repair is due to normal wear and tear, your insurer will likely not cover your claim because, in that case, it’s considered a part of standard home maintenance.
Before filing an insurance claim, it’s a good idea to:
- Review your policy: Every insurance policy is different and has different criteria for what they cover and don’t cover. Also, in some areas, you may need specialized insurance. For example, you may need hurricane insurance if you live in the Southeast or tornado insurance if you live in the Midwest.
- Know your deductible: Homeowners insurance policies usually have deductibles ranging from $500 – $2,000. The deductible is money you pay out of pocket before your insurer picks up the rest of the tab.
- Check the age of your roof: Insurers typically won’t cover your roof if it’s over 20 years old because it’s deemed to be at the end of its useful life. Even if your insurer provides coverage, it may only be for the cash value of the roof (what it’s currently worth), not the full cost of replacement.
Raise the Roof for Financing Options
If your home needs a new roof, you don’t have to dig into your wallet for the money. There are financing options for you to explore.
To get the best financing for your financial situation, you’ll need to get a handle on your money, from knowing your credit score to knowing how much home equity you’ve got stashed in your home. From there, you can select the right financing option and keep a leak-free roof over your head.
HomeAdvisor.com “How Much Does It Cost to Replace a Roof?” Retrieved June 2022 from https://www.homeadvisor.com/cost/roofing/install-a-roof/
National Credit Union Association. “Credit Union and Bank Rates 2022 Q1.” Retrieved June 2022 from https://www.ncua.gov/analysis/cuso-economic-data/credit-union-bank-rates/credit-union-and-bank-rates-2022-q1
U.S. Department of Housing and Urban Development. “Property Improvement Loan Insurance (Title 1).” Retrieved June 2022 from https://www.hud.gov/program_offices/housing/sfh/title/title-i
U.S. Department of Housing and Urban Development. “About Title I Property Improvement Loans.” Retrieved June 2022 from https://www.hud.gov/program_offices/housing/sfh/title/ti_abou
Experian™. “How Do I Qualify for an FHA Home Improvement Loan?” Retrieved June 2022 from https://www.experian.com/blogs/ask-experian/how-to-qualify-for-fha-home-improvement-loan/