9 Ways How to Afford a New Roof You Might Not Have Thought About
Roof replacement is a significant investment, but there are ways to make it more affordable without compromising quality.
The good news is that there are plenty of roof financing options available to make sure you’re not breaking the bank.
With the option to pay in installments, financing a new roof is how many homeowners get the roof they need when they can’t put off a roof replacement any longer.
A home’s roof is vital for protecting its occupants from outside elements, but sometimes paying for a new roof may be out of reach. So what do you do then?
The first step is to schedule a free inspection. That way, you will know if your roof should be replaced or repaired.
The second step is to get the pricing and then strategize different payment options to see which one may be best for you.
This article explains several new roof financing options so you can determine what may work the best for you to get your roof repaired as quickly as possible.
1) Homeowner insurance
Before securing roof financing, determine if you qualify for homeowner’s insurance coverage for a new roof.
You may qualify for roof replacement financing through your insurance company if they directly linked the reason to damage caused by an unforeseen event like extreme weather.
One of the most challenging avenues for paying for a new roof is through an insurance claim, primarily because homeowner’s insurance will not cover damage caused by wear and tear.
In these cases, insurers will usually cite the roof’s age when they deny a claim.
We can help you through the claim process. For example, maybe there are fallen tree branches that caused damage or cracks to the roof, which you weren’t aware of.
You should schedule an appointment for us to inspect your roof immediately to evaluate if you should file an insurance claim.
If your homeowner’s insurance does not cover a roofing repair, don’t despair because other roof financing options exist, such as a home equity loan or home equity line of credit (see below).
Using homeowner’s insurance to pay for a new roof is perfect for those that:
- Suspect possible roof damage
- Haven’t filed a claim recently
- Need to have the work done quickly
2) HELOC or home equity loan
According to the Consumer Financial Protection Bureau, “a home equity loan (HEL) allows you to borrow money using the equity in your home as collateral.”
Equity is the amount your property is currently worth, minus the amount of any existing mortgage on your property. You receive the money from a home equity loan as a lump sum. A home equity loan usually has a fixed interest rate–one that will not change. If you cannot pay back the HEL, the lender could foreclose on your home.
If you consider taking out a HEL to pay off your debts, explore alternatives with a credit counselor that do not potentially put your home at the risk of a forced sale. Home equity loans may have upfront fees and costs, so be sure to compare more than just your monthly payment when shopping around.
If you have home equity and are looking for a predictable payment schedule, doing a Home Equity Loan may be the perfect option.
Many homeowners prefer this type of loan because interest rates are much lower than personal loans.
One of the major benefits of this type of loan is that, unlike a credit card, you will not have to pay interest for as long as you don’t use it.
These loans often secure lower rates than other types of consumer loans since your home’s equity backs them. This benefit can be a great option if cash is tight and you need extra money in a hurry.
Another reason to consider a home equity line of credit is if your roof has extensive damage.
A Home Equity Line of Credit (HELOC) is a loan that allows you to withdraw more money over time and pay back the total amount in multiple payments.
If you plan on having multiple home improvement projects, a HELOC might be a better option.
When considering roof repair, you should only use a HELOC if the repair costs thousands of dollars. Taking out a home loan for less than that is not the best option.
Home equity financing is a great way to borrow from your home’s available equity.
The loan-to-value ratio, which represents the outstanding balance on your mortgage versus what it would cost you to sell given current market conditions and values, will determine how much money you can receive.
A loan-to-value ratio of 85% or lower is typical to qualify for home equity financing.
There are benefits to using home equity financing when replacing the roof.
First, interest rates are low due to using the home as security for the loan.
The most significant disadvantage is that you can lose your home for non-payment. This problem is the reason lenders require a good credit rating to avoid such disasters.
You have to build an equity fund in your house to use these options. Your circumstances may determine whether a HELOC or a property loan would be better.
It’s essential to think of your interest rate before you get into a loan.
Loan terms can range anywhere from 10 years up to 20, 25, or 30 years.
The shorter the term, the less you pay in interests fees.
Here’s how a home equity loan works:
- Determine how much you can afford
- Determine the life of your loan in years
- Decide on a fixed or variable interest rate
- Choose between a line of credit, home equity installment loan, or a fixed loan
- Think about your payment schedule and the additional closing costs involved in getting a home equity loan or HELOC.
- Decide how often you will pay the loan back.
- Make sure that your property taxes are up to date
- Evaluate what insurance needs to be updated
The longer the term of your loan, the more you will have to pay in interest. So if you are thinking about taking out a home equity loan, think about how much you can afford to pay.
Of course, you should always check with a mortgage broker for accurate information specific to your needs.
3) Apply for a Grant
There are many home improvement grants available, especially for seniors.
Even if you don’t have a fixed income, there are programs out there to help you afford roof repair or replacement.
Call local community action agencies to inquire about possible help.
If you plan on applying for assistance, make sure that your roof is still in good condition. The roof repairs will be covered by whatever grant funding is being offered at the time of application.
4) Home Improvement Loan
A property improvement loan is another excellent way to finance a roof replacement or roof repair.
It is similar to a home equity loan in that the property owner used it as security for the money being borrowed.
The primary difference is that it does not accrue interest until after the home improvement project is complete and paid for in full.
This means that your bill will comprise both principal and interest once all work has been completed. Like any other type of loan, homeowners have to decide how they want their payments structured.
We advise our customers to set up an appointment with us to inspect their roofs properly, which will help them make the correct decision about their next renovation.
5) Cash-out refinancing
A cash-out refinance is a finance option where a new one replaces the old mortgage with a more considerable amount than what you previously owed.
With a cash-out refinance, you can convert equity into cash to pay for a new roof—a win-win situation, as the new roof improves the value of your home while providing you with needed cash.
The option you choose will depend on how much equity you can build and your free cash flow.
Another benefit of cash-out refinancing is that it doesn’t add an additional payment like a second mortgage or home equity loan.
We can provide you with a free estimate to help you determine how much you should spend on a new roof.
6) FHA Title 1 loan
An FHA Title 1 loan is a type of government-sponsored roof financing program.
Unlike HELOCs, there is no equity requirement in your house for FHA Title 1 loans. Title One loans also offer fixed rates with no minimum credit score or income requirements.
According to the HUD (U.S. Department of Housing and Urban Development) website, “Improvements must substantially protect or improve the basic livability or utility of the property.”
In other words, no luxury installations, like hot tubs or yard water features.
Some FHA Title 1 loan advantages are:
- You don’t have to live in a particular area to qualify.
- No collateral is needed for loans under $7,500 or cosigner.
- Your mortgage or deed of trust is not altered.
- The simple qualifications include owning the property, having good credit, and a note agreeing to repay the loan.
- The loan covers inspection and other fees.
- FHA must approve Lenders, which protects you from working with a dishonest mortgage company.
7) Department of Agriculture loans
Certain loans from the Department of Agriculture can help homeowners pay for their roofs. In addition, loans are available to qualified candidates to make energy-efficient repairs and replacements.
Exact eligibility requirements vary depending on the program, but generally, they include:
- Land ownership in an agricultural area.
- Sufficient equity.
- Prove your income is from farming activities or has a steady source of income.
- Prove your credit is good.
- Property must be a primary residence, not a rental property.
8) Personal loan
A personal loan is a type of financing offered by banks and credit unions to consumers.
Not all lenders offer this type of loan, but you can check your local bank or one of the national sites like LendingTree for more details on rates and terms.
The benefit of a personal loan is that it is an unsecured loan, meaning no collateral is used to secure the debt—no house or car title is needed.
In other words, if you have good credit, you should be able to get a low rate on a personal loan. But keep in mind, this type of loan typically has a higher interest rate than a similar home equity option.
However, personal loans often charge higher-than-average interest rates because collateral does not back these loans.
It is advisable to speak with a tax professional regarding tax deductions for a personal loan paid interest.
Typical personal loans fees:
- Annual percentage rate (APR): average APR is 10 to 15 percent.
- Term: typically between three and five years.
- Late fees
Here are a few things that you should do if you’re shopping around for a personal loan:
1) Compare rates and terms from different lenders.
2) Use the lowest rate available to pay off existing debt, like high-interest credit cards or payday loans. This way, you’ll save money in the long run.
3) Don’t borrow over 40% of your annual income.
For example, if your take-home pay is $50,000 per year, don’t borrow more than $20,000.
4) Protect your credit by making a timely payment each month and paying off the loan in full before its due date.
Remember to check for application fees, origination fees, closing costs, finance charges, and pre-payment penalties when comparing lenders or looking into personal loans online.
9) Veteran’s Administration (VA) loans
The VA loan program offers home financing for qualified veterans.
According to U.S. Department of Veteran Affairs website:
A VA-backed home loan is guaranteed a portion of the loan you get from a private lender. If your VA-backed home loan goes into foreclosure, the guaranty allows the lender to recover some or all of their losses. Since there’s less risk for the lender, they’re more likely to give you the loan under better terms. In fact, nearly 90% of all VA-backed home loans are made without a down payment.
Lenders follow our VA standards when making VA-backed home loans. They may also require you to meet additional standards before giving you a loan. These standards may include having a high enough credit score or getting an updated home appraisal (an expert’s estimate of the value of your home).
Other considerations on how to afford a new roof
Q: What is a reasonable price for a new roof?
A: With the cost of replacing your roof, neither your neighbor nor the “average” homeowner is a reliable guide.
A “midrange” roof replacement costs $20,670, on average, according to Remodeling magazine’s analysis of select construction estimates.
But the U.S. Census found Americans typically spent $6,800 to have their roofs replaced.
The size of your roof, its condition, and even the roof replacement season determine the expense.
One of the most important things you can do is hire the best roofing company you can find. Be sure to understand that roofing contractors don’t charge the same amount or perform the same level of work. Finally, and most importantly, be aware that cheaper does not mean better.
It is essential to get referrals, review testimonials, and get references before selecting your roofing company.
You can generally break down a new roof’s cost into three categories: materials, labor, and disposal.
Materials: The material you use for your new roof is a significant component of cost. If expense is an issue, then your best bet will be asphalt shingles.
However, if you’re looking never to replace your roof again, metal may be a better option. It’s more stylish and eco-friendly and can last between 50-100 years.
The downside of metal roofs is the high upfront cost, although nowadays, there are new types on the market that are more affordable.
Labor: Roofing materials aren’t cheap, especially if you have a large or complex roof, but professional installation boosts the expense.
The more complicated a roof, the more labor it takes and the higher the costs.
Disposal: The price of removing your old roof and disposing it should be factored into your total cost estimate.
Q: How should I shop around for affordable roof financing?
A: We recommend you compare rates and terms from various lenders to maximize savings.
Q: What is the average interest rate for personal loans?
A: The average APR is 10 to 15 percent. Some lenders offer lower rates if you have good credit, so comparing them before applying for a loan is essential.
Q: How much can I borrow with home renovation loans?
A: Home renovation loans range from $5,000 to $40,000 depending on what renovations you need and how much equity you have in your home.
However, the maximum loan amount will vary by state and county. It’s best to contact local housing authorities or reputable lenders who specialize in this field for more information on eligibility requirements and details of the program.
Q: Can I get roof financing with bad credit?
A: Homeowners with fair to poor credit may have difficulty getting a personal loan through traditional means, but some lenders offer home equity loans that are more flexible with credit.
Some also accept FHA or VA-guaranteed loans. You can check out local recommendations for reputable home renovation companies in your area that work with homeowners who have less than perfect credit.
Q: Can you pay for a new roof in installments?
A: Yes. Many lenders will let you repay the loan in equal installments over a set number of months.
Q: How do I know if I need a roof replacement or if there are required roofing repairs?
A: You can have a general contractor or an experienced roofer inspect your roof and give you a broad overview of the work needed. We can do this for you with full forensic evidence, including photographs.
Q: Where can I find affordable roof financing?
A: It isn’t easy finding lenders who offer unique finance options with low interest rates, but some local companies specialize in this type of funding, so look online for information on those providers in your area.
Sometimes, applying for a home equity loan or cash-out refinancing might also be an option.
To determine the best option that fits your budget, contact several nationwide lenders to see what they offer.
Unfortunately, if you have poor credit, you can improve it, but it isn’t straightforward. It’s best to use a professional credit score company for help.
Q: Is a home equity loan better than a personal loan?
A: Home equity and personal loans offer some of the same benefits, but they also have differences.
For example, personal loans usually require better credit histories than home equity loans, making it more challenging to get approved for a personal loan if you don’t meet the criteria.
You also need some home equity since that is what you’re borrowing against for your roof replacement project.
Q: Can an insurance company deny my claim even when I need a new roof?
A: Unfortunately, insurance companies may deny your claim if they feel there are any signs of neglect. However, we can help you with your claim to make sure everything is legitimate.
Q: What other fees should I know about when replacing my roof?
A: There are other expenses involved with roof replacement projects that aren’t always apparent at first glance.
These include removing old shingles, disposal costs for hazardous materials, and permit fees in some areas.
Q: What is required by lenders to qualify for a roof replacement loan?
A: Lenders typically look for credit scores 620 and above. They also look for a debt-to-income ratio between 43% and 50%.
You can calculate your debt to income ratio by adding up all of your monthly debt payments and dividing it by your gross monthly income.
Q: What about using home improvement credit cards?
A: Be aware that home improvement store credit cards don’t cover the labor costs of a professional roofing company.
These types of cards are more often used by homeowners who are doing the roofing project themselves.
Of course, there are many reasons to avoid doing DIY roof replacement or repair too many to list here.
Q: What are some things I can do to ensure credit approval?
A: Getting credit approval is a significant stressor for most homeowners.
When searching for companies that provide financing, be sure to keep these factors in mind:
- Know your monthly budget
- Understand how interest payments wor
- Know the available equity in your home
- Have a price estimate for your roof replacement
- Make sure you have a strong credit score
If you’re like many RGV homeowners trying to decide between getting a loan for a new roof and paying the entire sum out-of-pocket, consider some of these financing options.
With many Americans struggling to keep up with their bills, it only makes sense to look for the most affordable means of getting a new roof.
Having to pay for a roofing project may seem overwhelming, but with these tips, you’ll be able to get on the right track.
Whether through homeowner’s insurance, roof financing options, or other roofing project strategies, there are ways to pay for a new roof without breaking the bank.
Texas Damage Consultants is one of the most trusted roofing companies in the Edinburg, RGV area. Call (956) 253-1206.
Every project begins with a free roof inspection. Enter your details here to get started.
With all of this in mind, what other questions can I answer about roof replacement or repair?
*Disclosure: We are not attorneys, bankers, insurance, tax, or mortgage professionals. Please contact the appropriate professional for accurate information as this blog post is to be considered for entertainment purposes only.