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Roof Financing: Why Do I Care and What Do I Need to Know?

Different types of roofs have varying lifespans, ranging from 15 years to more than 50 years. Replacing the roof becomes necessary at some point, and it can be a costly endeavor. However, the roof plays a critical role, and you cannot afford to delay the roof replacement project or use sub-standard materials and skills. This is where roof financing comes into the picture. Here is a brief overview of important things you need to know about roof financing. 

What is Roof Financing & Who Needs It? 

The average cost to replace a roof ranges from about $8,000 to $11,000, according to estimates by Forbes. Most people find this expensive to pay out of pocket, so they opt for roof financing options. 

Roof financing entails seeking financial help to meet the cost of roof replacement. Roof financing options come in various forms, including personal finances and different types of loans (usually a combination of both). 

An old and dilapidated roof is a liability that can cause considerable damage. The sense of urgency, combined with the high costs, usually leaves most homeowners and property managers with no other option except to seek roof financing options to offset the cost of roof replacement. 

The Roof Financing Process & Options 

Roof financing processes vary depending on your option. However, they all follow a standard pattern: making an out-of-pocket down payment and borrowing money to cover the rest of the cost. The borrowing process usually entails making a formal loan application and undergoing financial evaluation based on factors such as your credit score. 

Your roof financing option has many implications for the financing process and roof replacement success. Here is an overview of six popular roof financing options

Personal Loan 

A personal loan is an ordinary loan that you can request and use for virtually anything, including home upgrades such as roof replacement. However, personal loans usually come with higher interest rates than most other roof financing options because they are not secured. On the plus side, your house cannot be used as collateral, so you cannot lose it if you default on the loan.  

Home Equity Loan 

A home equity loan is a second mortgage. It uses the free portion of your home equity (the value of the home that you own outright) as collateral. You own at least 15% of your home’s value, and this share increases as you continue paying off your first mortgage. Home equity loans have flexible terms ranging from five years to 30 years. 

Cash-Out Refinancing 

Cash-out refinancing also entails taking out a new mortgage. However, unlike a home equity loan, the refinancing loan is based on your home’s full current value. You can get enough money to clear your existing mortgage and use the balance however you wish, including financing your roof replacement project. However, cash-out refinancing is only recommendable if you find a mortgage with a significantly lower interest rate or replace a variable-rate mortgage with a fixed-rate one. 

Home Equity Line of Credit (HELOC) 

A Home Equity Line of Credit (HELOC) also functions like a second mortgage. Like a home equity loan, you borrow money against the free portion of your home equity. However, unlike a home equity loan, the loan comes as a revolving line of credit (like a credit card) instead of a lump-sum loan. You can use a debit card or write checks to cover roof replacement costs, just like paying with your credit card. 

HELOC loans usually have lower interest rates than personal loans. Interestingly, some lenders offer discounted rates for the first 12 months, which is more than enough time to replace your roof. However, you must use your house as collateral. 

Contractor Financing 

Contractor financing involves getting the roofing contractor to replace your roof on loan. You pay a small down payment, and the contractor covers most of the material and labor costs. These loans are easier and quicker to access than most of the other roof financing options. Contractors have deals with lenders to offer roofing loans at discounted prices and flexible rates, making this one of the best options. 

Credit Card 

Using a credit card to finance your roofing project can be convenient but also costly. It is convenient because the money is easily accessible, and some credit cards offer more than the total cost of roof replacement. However, it is also costly because most credit cards have an average APR (Annual Percentage Rate) of about 19%. Using a credit card should be your last option, and it would be prudent to get a credit card with an introductory APR of 0%. 

Consult the Experts 

Working with a professional roofing contractor can help make your roof replacement easier, quicker, and cheaper. O’LYN Roofing is one of the leading contractors in Norwood, MA. We offer professional roofing services for your roof replacement or repair project. We also offer flexible and affordable roof financing options. Get in touch today to learn more about how we can help.