Roof Financing Options: How To Pay For Roof Replacement
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Last updated 03/19/2024 by
Ben LuthiSummary:
There are multiple ways to finance the repair or replacement of a roof. This article provides a detailed guide on how to compare the options available and get the best deal possible. Remember these steps when planning your next roof project:
- Collect quotes for your roofing project.
- Ask about repair versus replacement and inquire about hidden damages to the substructure.
- Shop around to secure the best rates and payment options
Does your roof need repairs or an outright roof replacement? If so, finding the right roof repair financing options can feel daunting. The good news is that there are several roof financing options available.
However, the rates and terms of these options vary. The best deal for you will depend on details like your budget, credit, income, and personal preferences. We’ll walk through each one, showing the pros and cons so you can find the right pick for your roof project.
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Do you need a roof repair or roof replacement?
Before you start looking for financing, determine the scope of your roof project. Are you asking about replacement when a repair would do? A few missing shingles are an inexpensive repair compared to a new roof. There are lots of companies that will provide you with free or low-cost quotes for your roof needs. Before you start looking into roof financing, make sure you know what you really need.
Roof repair or replacement quotes serve two purposes. First, they help you identify the repairs needed, and second they provide verification to lenders, should you need to finance a new roof. Speak with the contractor to determine hidden damages from the faulty roof.
You may consider upgrades with your new roof. Instead of basic asphalt shingles, maybe you have considered going with a metal roof or a more modern design. These choices impact the total cost of your new roof. You will need to determine if the long-term cost savings justifies the extra expense now. The same is true if you are considering adding solar panels to your new roof. This article provides detailed information on the cost of a solar panel installation.
Top 5 roof financing options
- Pay Cash – no interest, no fees, and no hassle
- Personal Loan (Home improvement loans)
- Credit Card
- Home Equity Loan
- Home equity investments
- Point-of-Sale Financing (contractor or company financing)
5 ways to finance your roof repair or replacement
Before you look into any of these roof financing options, examine your financial situation and your credit history. Your credit score will help determine the ideal financing options.
Some of these options require a high credit score, and others might charge higher fixed interest without a great credit score. Others offer more flexibility but charge higher interest rates. If you need to get your roof replaced quickly, they’re worth looking into. So, check out a variety of options before you pick one.
1. Cash
The cheapest way to finance your roof is, of course, to pay for it with cold hard cash. With cash, you can take care of your roofing repairs without worrying about any fees, loan companies, or roofing company financing.
A lump-sum payment also saves you from having to make monthly payments. As soon as you replace your roof, you’ll have the financial commitment dealt with as well. Since it isn’t a loan, you aren’t required to have a good credit score. You also won’t need to pay interest like you would on a roof loan.
Pros and cons of paying for a roof replacement with cash
Paying with cash is the easiest and most inexpensive way of financing a roof replacement. However, it only works if you have the cash saved up. It costs $784 on average for a roof repair, according to HomeAdvisor. But a complete or even partial roof replacement can run you in the thousands. Depending on the specific home improvement job you have in mind, your costs could be much cheaper or more expensive.
Before you start work on your roof, check with the roofing company to assess the costs. They should give you an estimate with information on the repair service and any other roofing contractors that they’ll bring in. Then, you can discuss financing options and use cash if you have enough to cover a new roof.
For a roof replacement, it’s important to have plenty of extra cash on hand before you start the project. Roofing companies might not provide accurate estimates, or your roofer might discover additional issues midway through working on your home. If you can’t afford any sudden price increases with cash, you might need to take out a roof loan.
Consider Homeowners’ Insurance
Check your homeowner’s policy. Some roof damage is covered under the homeowner’s policy, leaving you only to pay your deductible. This insurance can secure you against some kinds of home damage and avoid costly financing. Talk to your insurance company for more information, or shop around multiple insurance companies to find the best homeowners insurance rate, giving you more security against unexpected accidents.
Roof replacements are necessary home improvements, but you don’t want to be caught with no money for any other unexpected expenses. If you have enough cash on hand for roof financing and other financial goals, cash may be your best bet, and you won’t have any loans or prepayment penalties hanging over your head.
2. Personal loan
While some lenders have restrictions, you can typically use a personal loan for just about any expense, including roof financing. Some lenders even specialize in personal loans for bad credit, albeit at high-interest rates.
The average interest rate on a two-year personal loan is 10.12%, according to Federal Reserve data for the third quarter of 2018. If you have excellent credit, you could get even lower than that. This makes a personal loan one of the best new roof financing options because it’s hassle-free and relatively unrestricted.
If you have bad credit, though, some personal loans charge rates upwards of 30%. Because roof loans tend to be very large if you can’t pay for a new roof upfront, these interest rates are too high to carry. They might also charge an origination fee for taking on the loan. Shop around to get better loan terms, or use different financing options instead.
The importance of comparing multiple lenders
Different personal loans come with different rates, fees, and requirements, so make sure to check out the best personal loans. If you’re already paying back student loans or have other liabilities outstanding, you might have a tough time securing financing for a personal loan.
Pros and cons of personal loans
Personal loans have set repayment plans that usually require you to make monthly payments. (Different personal loans may vary.) Also, you can typically get the funds in a week or less. This makes a personal loan a perfect choice for homeowners looking to finish their job and return the money fast.
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3. Credit card
A credit card is a good option to pay for a new roof if you need to get the job done quickly and simply. Credit cards give you easy access to lines of credit, and they’re much more convenient than a traditional loan.
Pros and cons of paying with credit cards
Putting the total cost of a roof repair or replacement on a credit card may sound like a bad idea. But if you can qualify for a credit card that offers a 0% APR promotion for an introductory period, you could pay off the costs of fixing your roof interest-free. You may also be able to secure a good card through a credit union site.
Email representatives from different companies to find out the best financing options for your credit score. There are a couple of things to note, however. First, you typically need excellent credit to get approved for a 0% APR credit card. If you can’t find a 0% APR promotion, you’ll want to pay off the entire amount as quickly as possible to avoid paying too much interest.
Planning for Payments
Depending on your credit score, credit card companies can charge very high rates. If you can’t get a good deal, the interest payments can add up quickly. Do your research to make sure that you can cover the monthly payments.
Check your credit card to find out the interest rate before you start your roofing project. Then, get a project estimate from your contractor and evaluate how much the roof financing will cost. This will help you get a better estimate and see how quickly you can pay off the cost with your credit score.
Second, there’s no guarantee that your credit limit on the new card will be enough to cover the cost of the roof. Even if you get a card with a 0% APR for your roofing project, the credit limit needs to be high. Otherwise, you won’t be able to cover the total cost of the roof repair on the card alone.
When to Use a Credit Card
Credit cards work best for buyers with good credit and established credit history. For these lenders, they offer a convenient service and straightforward financing. If you don’t have either of these, you might end up with overblown payments for your new roof.
4. Home equity financing
A home equity loan is another alternative for homeowners who have significant equity in their homes. With home equity loans, you can leverage your home’s value to get good lines of credit without the high interest of other loans. Because it’s a secured loan — your home acts as collateral — you can typically qualify for lower interest rates, even if you have bad credit.
Another option that taps into your home equity is a Home Equity Line of Credit (HELOC). The line of credit acts as a revolving credit account. The home equity loan and home equity line of credit have other differences which you can compare here.
Home equity options are popular with established homeowners who don’t want the high rates of personal loans or credit cards.
You may be able to deduct the interest from your taxable income if you can prove that fixing the roof substantially improves the home. Check for current credits for increasing energy efficiency. These home improvement credits and tax deductions can save you a lot of money, making home equity loans more appealing than other roof financing options.
Pros and cons of home equity financing
But if you default on the loan, you could end up losing your home. This is a significant risk, particularly for homeowners without a steady income stream. Even if you have a lot of home equity, a personal loan sometimes offers less risk than home equity loans.
A home equity loan is good for homeowners who may not have the best credit but aren’t worried about potentially losing their home through a default. This might be the case if you have poor credit but a good income stream to pay off the loan in the future. If you’re still building your credit, a home equity loan can also give you access to lower rates and more extensive lines of credit.
Because of the high risk and low security, it’s important not to commit your home equity before finding the best financing option.
Check with loan providers to find the best loans. This might also depend on the equity in your home. Make sure to get a good appraisal so you get the most value out of your house. Then, remember to find out if the roof loan can count for home improvement. If you’re eligible to deduct the interest you pay, you could save thousands on roof loans.
5. Home equity investment
Home equity investments (aka shared equity agreements) are an alternative to home equity loans and HELOCs that allow you to unlock your home equity without charging interest or monthly payments. They are also easier to qualify for than home equity loans and HELOCs. See how much you could get today for a share of your home’s future appreciation. We recommend you apply with the following investors and see which one offers the best terms. It is free to apply and won’t hurt your credit.
How does a home equity investment work for home improvements?
Home equity investments give homeowners the option of cashing out on their equity without getting further into debt. Here is how it works.
An investor gives you a lump sum in exchange for a share in the future value of your home. When you sell your home (or when the contract term ends), the investor gets a share of the sale. When home prices increase, the investor also wins. However, if your home drops in value, the investor will also share in the loss.
6. Point-of-sale financing
Some contractors offer what’s called point-of-sale financing; they may call it company financing. This allows you to apply and qualify for a loan directly through the contractor’s website. You’ll often get good terms on the loan itself. However, some roofing contractors can charge more for their point-of-sale financing services. If you want the absolute best deal, remember to shop around.
How does point-of-sale work?
With this type of roof replacement financing, you’ll work through a company like SuperMoney to get pre-approved quotes from several lending partners. This process allows you to compare rates and fees and choose the lender with the best deal for you. Once you get approved, you could get the money as soon as the same day.
“[You’ll have] the ability to break payments up over time, rather than paying all at once,” says Katherine Pomerantz, an accountant at the BookKeeping Artist.
“There’s also an increased incentive on the part of the contractor to complete the work quickly.” After all, they know you have the money in hand and don’t have to wait for financing for each installment. This makes point-of-sale financing perfect if you need a new roof quickly.
Because they know they’ll be paid on time, roofing companies also appreciate this financing option. As you shop around for contractors, ask if they offer point-of-sale loans. Get the contact terms for each company so you can work out details of the loan and financing. You can get the roof loan secured over email before the contractor arrives at the job site with a little luck.
Pros and cons of point-of-sale financing
Point-of-sale financing is best for people who want more flexibility and don’t want to apply with multiple lenders to make sure they get the best rate. You can get your roof replaced quickly and work with a lender to pay off the cost afterward.
Which option is best for you?
There’s no silver bullet to finance your roof repair or replacement. So, it’s important to consider all of your options for roof financing. Again, take a look at your financial profile before making a decision.
If you can quickly improve your credit or boost your cash holdings, consider putting off the roof job for a month or two. But if not, go with the option that best suits your needs and saves you the most interest. These five roof financing strategies are not all that exist, but they are a great place to start.
- Pay Cash – no interest, no fees, and no hassle
- Personal Loan (Home improvement loans)
- Credit Card
- Home Equity Loan
- Home equity investment
- Point-of-Sale Financing (contractor or company financing)
Cash works best if you have the money on hand to pay for your new roof. If you need more financing, check out personal loans, credit cards, and home equity loans. For replacing your roof as fast as possible, point-of-sale financing might also be helpful. No matter which option you pick, shop around, and you’ll save money on the deal.
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Ben Luthi is a personal finance writer and a credit cards expert who loves helping consumers and business owners make better financial decisions. His work has been featured in Time, MarketWatch, Yahoo! Finance, U.S. News & World Report, CNBC, Success Magazine, USA Today, The Huffington Post and many more.
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