It’s no secret that replacing your leaky or damaged roof is a costly project. So when roof damage occurs, it’s normal for you to wonder “how to pay for a new roof,” Many homeowners go through this. It’s great if you have the money outright to pay for the job if you need a new roof, but if you don’t, you can still get a roof repair, thanks to various financing options.

Replacing a roof will cost you at least a few thousand dollars, so financing options come in handy when you have a leaky roof or other damage. So if you need to know how to pay for a new roof, here are eight roof financing options to help with your roof replacement.

1. Home Equity Loan

A home equity loan is also sometimes called a second mortgage. These roof loans take the portion of your home, your home equity, and use it as collateral on a loan that you can pay back in monthly payments.

How much your monthly payment will be will depend on your roofing project’s entire cost. Home equity loans typically last five to 30 years and have fixed interest rates. It’s one of the best loan options for a brand new roof.

Most lenders usually only lend 85% of a home’s value for home improvement loans. While this is a great option, they can often have a lengthy approval process and take up to four weeks to get approval. You can apply for these through a duly licensed mortgage broker.

how to pay for a new roof loan

2. Personal Loan

You can also use a personal loan to finance your new roof, one most homeowners choose. However, you’ll typically pay a higher interest rate than you would with a home equity loan since you can’t secure these loans with collateral.

Annual percentage rates (APRs) will be high even for those with good credit history with personal loans. For those with a 760 credit score or higher, the interest tends to be around 9%. For those with a bad credit score, interest tends to be over 20%.

A positive thing about using personal loans for roof repairs is that since there’s no collateral, you aren’t at risk of losing your house if you can’t make your payments.

3. Credit Card

Credit cards can help you finance your roofing repairs and the roofing materials, but they probably should be your last resort due to higher interest rates. Now, if your roofing repair is going to be on the lower side, putting it on a credit card might not be the worst option.

If you need to use a credit card for your roof job, getting a new credit card with an introductory 0% APR is the best option if you can’t use any other financing options. Or, if you know you’ll be able to pay off the entire balance when the time comes, this could be a suitable option.

4. Contractor Financing

Nowadays, most roofing companies or roofing contractors have partnerships with various lenders to offer their customers financing options. So if you’re working with a roofing company that offers financing through collaboration, it’s one you’ll want to consider strongly. It is often called contractor financing or roofing company financing.

How much the loan amount will be from a roofing contractor, the interest rate, and credit approval time will vary from each contractor. Still, overall, these are quick-approval loans that are excellent when you need to replace your roof sooner rather than later.

Since they’re usually unsecured personal loans or credit cards, read the terms and conditions carefully before choosing this option. Roofing professionals will often encourage this option.

how to pay for a new roof contractor

5. Home Equity Line of Credit

A home equity loan and home equity line of credit (HELOC) aren’t the same, but they’re similar in many ways. For example, when you need a roof repair, a HELOC can provide you a revolving credit limit that you can use, kind of like a credit card, and not a lump sum upfront.

With a HELOC, you’ll be able to use no more than 85% of your home’s value minus whatever your outstanding mortgage balance is. For a specified length of time, usually ten years, you’ll be allowed to use a debit card or write checks to make payments on the account’s spending limit.

6. FHA Title 1 Loan

This option is a HUD home improvement loan. An excellent roof loan option if you don’t have enough equity to borrow against your home is to apply for a Federal Housing Administration Title 1 loan or a property improvement loan.

These are specific loans for those needing to fund a home improvement project to improve the house’s livability, like a roof. You’ll need a debt-to-income ratio of less than 45%, and if you need to borrow more than $7,500 to repair the roof, you have to put your house up as collateral.

7. Cash Out Refinancing

To cash out and refinance your home, you’ll take out a new mortgage on your home. The amount is based on the market value of your home using a loan-to-value ratio. You’ll pay off your original mortgage, and the rest is treated as “cash.”

This option is excellent if you can get a new mortgage with lower interest payments, but can add more years of payments to your timeline. It can be over 30 days before you get approved, so it’s not the best option if you need repairs quickly.

8. FHA 203(k) Loan

Another FHA loan that’s great for getting your roof installed is an FHA 203(k) loan, which is a mortgage from FHA-approved lenders. It allows you to refinance your home when they need repairs. They come in an adjustable or fixed rate loan.

There are two types of this loan, a standard, and a limited loan. A limited loan covers repairs up to $35,000, which should be more than enough for roof replacements. A standard loan quill usually is more than this, but you can see which one is more and choose that depending on how much you need to fix your roof.

Final Thoughts

Hopefully, this list has helped you if you didn’t know how to pay for a new roof. Choosing a roof financing option isn’t something to take lightly when you need your roof redone. It’s always best to speak with a licensed financial professional if you’re unsure what the best option is for you.

Make sure your homeowners insurance coverage will cover any damage that happens during the roofing project. There is nothing worse than losing a significant amount of money after spending your time to obtain it through these options.

Regardless of which financing option you choose to go with, you’ll be able to replace your damaged roof quickly so you can get back to living in your safe and happy home.

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