Best Rooftop Financing Options [2022] – Forbes Advisor

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A personal loan is not your only option for financing a roof replacement. Here are some alternatives to consider.

Home Equity Loan

As a homeowner, you can borrow up to 85% of the equity in your home with a home equity loan. Similar to a personal loan, a home equity loan is an installment loan that provides an initial lump sum that you repay over time.

However, taking out a home equity loan, also known as a second mortgage, can take longer. It can take weeks to get the funds, whereas a personal loan can be funded in days. Plus, your home serves as collateral, which means the lender can repossess it in the event of a default.

Home equity line of credit

A home equity line of credit (HELOC) also uses your home as collateral, but gives you access to a credit limit instead of a lump sum. You can borrow against this line of credit for a specified drawdown period, usually 10 years, and repay it over time. This flexibility may be preferable if you expect project costs to fluctuate or want to fund additional projects.

Most HELOCs come with variable interest rates, but some lenders give you the option of locking in a fixed rate during your draw period.

Refinancing by collection

When rates are low, it may make sense to refinance your mortgage to get better rates. With a cash refinance, you borrow a larger mortgage than you currently have and use the extra cash to fund your roofing project.

This approach might make sense if you can get a better interest rate than you currently have, but it probably wouldn’t work if you already have a low interest rate. It can also be risky if your home’s value drops, leaving you with a loan that exceeds your home’s value (also known as being underwater).

Government insured loan

Homeowners who do not meet credit or equity requirements for other roof financing options can also explore government-insured loans to cover their project.

One option is the standard Federal Housing Administration (FHA) 203(k) loan, which allows you to refinance your existing mortgage while reinstating your roofing costs, as long as they exceed $5,000.

Another is the FHA Title 1 loan, a fixed rate loan you can use for home improvements. FHA Title 1 loans are unsecured up to $7,500 while larger loan amounts are secured against your home.

Contractor financing

Your roofer may also offer financing options, likely in the form of a personal loan or credit card. It may be worth checking rates with your contractor when shopping to find the best deal. Be sure to read all terms and conditions carefully so you know what you are signing up for.

Credit card

If you can pay off the costs of your roofing project quickly, a credit card might be helpful. Credit card APRs tend to be high, but you can consider signing up for a new card with a 0% APR promotional period that extends up to 18 months. If you do not pay your balance during this period, you will owe interest on the remaining balance.

Home insurance or guarantee

If your roof has been damaged by a storm or fire, rather than normal wear and tear, your home insurance may cover the repair costs. Most insurance policies require you to pay a deductible before your coverage begins. If you have a home warranty policy, check to see if it can cover your roofing issues.

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