Payment for roof replacement and roofing repairs can be handled in a variety of ways with each option offering pros and cons to the home owner (buyer) and the roofing contractor (seller).
Which choice is best for you and your home depends on a the following factors:
- The amount of funds you have on hand
- How many hoops you’re willing to jump through to save money
- Your yearly income
- Your credit rating (whether you have good credit or bad credit)
- Whether your home has roof damage because of a major storm
We’ll discuss each of your options in detail below.
But before we do, here are the 7 most popular ways to pay for a roofing project:
- Credit card
- Personal loan
- Home equity loan
- Insurance coverage
- Roof company financing
- Government funded home improvement loans
7 Payment Methods For Your New Roof Project
Cash or Check (Easiest Method)
Paying all at once with cold hard cash is certainly the easiest and simplest way to get the job done! Not everyone has the means to pay for a new roof with 100% cash (or check), however. And even if you do have cash on hand to pay for the project in full, doing so may not be your preference.
Why is this method so simple? There’s no complicated paperwork or approval process to bother with, besides the contract with your chosen roofing company to complete the work. All that’s required is a deposit, then the remainder of the funds transferred after the roof is installed.
Why do roofers require a deposit? Because deposits mutually assure that everyone is serious and on the same page about the project. Without a deposit, contractors run a risk of ordering the materials, spending time on planning, then having the homeowner ultimately back out at the last minute. Though this isn’t common, it is a major drain of resources for contractors large and small wherever it happens.
Can I put my roof replacement on a credit card? The short answer is yes!
Putting your new roof on a credit card can be beneficial if you have a card with generous rewards and incentives, especially cash-back bonuses. A new credit card offering 0% interest over 12 months, for example, allows you to put the entire project on the card then pay it off throughout the next year.
High interest rates (if you don’t have a “no interest” incentive) are a significant deterrent to using your credit card for roofing. If you have other loan options available (like a home equity loan), you’ll save extra money over time compared to using a higher interest credit card.
Another disadvantage of using a credit card is the processing fees charged to the roofer when they run your payment. These transaction fees can range from 3%-5% depending on the card you’re using, which adds up a significant amount when you’re talking about a $10,000 price tag. For this reason, almost all roofers who accept credit cards will pass these fees on to the buyer if this method is chosen. However, using a credit card to finance your roof or other major home improvement project may still be optimal if your credit card’s rewards and bonuses are excellent enough!
Are personal loans available for roofing, vinyl windows, and other home improvement projects?
Depending on loan approval factors which vary from lender to lender, you may be able to use a personal loan to fund your roofing project. The most common funding source for a personal loan is a bank or financial institution such as Bank of America, Chase Bank, Wells Fargo, or a local bank in your town.
If you choose this route, you’ll want to shop around in order to save the most money in the long term. Different creditors will offer varying rates of interest and repayment terms, so it is important to consider which factors are most important to you before you start looking for a lender. The two major factors when considering a personal loan are loan length and interest rate.
Some loans, for example, will be short term (2-6 years) while others will be long term (15+ years). Interest rates can vary from under 5% to over 20%, depending on your credit score, income, and general creditworthiness determined by the lender.
Home Equity Loan
According to the Federal Trade Commission, a home equity loan is a “loan for a fixed amount of money that is secured by your home.” These loans are repaid much like your mortgage, with fixed payments over a set term. For example, $99/month for 10 years.
Home equity loans can be great if you have equity built up on your home and if you’re looking for a non-variable and predictable payment schedule. This type of loan is preferred by many homeowners because interest rates tend to be much lower than personal loans and loans offered through a roofing company. Unfortunately, it can’t be all sunshine and rainbows. There are significant downsides to this method of financing…
The most substantial drawback of a home equity loan is that if you fail to make payments (aka ‘default’ on the loan), the lender can foreclose on your house! This is because the collateral for the loan is your home. As you can imagine, most lenders require great credit scores and consistent income to qualify for a home equity loan. If this sounds like you, then we suggest looking into it.
And if you want to quickly calculate how much funding may be available to you by means of home equity loan, use this formula to calculate your available equity:
- Get the current value of your home
- Subtract the amount you still owe on your mortgage
- Multiply the difference by .85
You can only borrow 85% of your available home equity by law, so if the current value of your home is $400,000 and you owe $350,000, then the remaining is $50,000. Now multiply that $50,000 by 0.85 (to get 85%), and your available home equity is $42,500.
As you can see, the amount of funds that may be available to you through a home equity loan could be substantial. So if you think this option may be available to you, reach out to your bank or preferred lender to check current interest rates and availability.
One of the trickiest and most difficult means for paying for a new roof is through an insurance claim.
If the cause of the roof damage is obvious, then it may be a bit easier. For example, if a tree falls through your roof. In this case, we recommend you do whatever possible to make sure your insurance company pays for the repair or replacement. But in less apparent circumstances, getting help from your homeowner’s insurance company can be very challenging.
Insurance payouts for roofs that have gotten progressively worse over time start to become impossible because most homeowner insurance policies do not cover normal “wear and tear” on any part of your home’s exterior. In these cases, insurance companies (such as Geico, Allstate, or Metlife) will often cite the roof’s age or lack of maintenance when they deny your claim.
If you think you may be eligible for insurance to cover your roofing project, then we recommend reaching out to your insurance agent directly to discuss a potential claim. Just remember that if the exact case is not obvious, you will likely be denied.
Roof Company Financing
If you don’t have cash on hand to pay for the roof in full or any home equity available to spend on replacing your roof, then you could decide to choose a contractor who offers financing themselves.
Since most homeowners don’t like to pay cash for large home improvement projects, some established roofing companies can help by offering financing directly through them or through a third-party financing vendor. Compared to home equity and personal loans, this process can be much more simple and straightforward because most of the steps are done in-house.
Another benefit most folks don’t think about is that if a roofing company can help you with financing, then they are much more reputable than a company who does not have access to these resources. It means that they are in good standing with their own lenders and you can place greater trust in them to do a great job replacing your roof!
If you’d like to finance your roof through Roof Hub, please reach out to us directly and we’ll be happy to help you get started on a preliminary financing application.
Government Funded Home Improvement Loan
Want the United States government to pay for your roof? It may sound like a dream scenario, but there’s a possibility you may qualify for the FHA Title I Property Improvement Loan if you own a single family home.
The Department of Housing and Urban Development offers these loans through pre-selected lenders and in order to qualify, there are a few conditions you need to meet. The property must be a single-family home that has been occupied for at least 90 days or one of the other types of properties listed here.
According to HUD, the loan must also be used to “substantially protect or improve the basic livability or utility of the property” and “be used in conjunction with a 203(k) Rehabilitation Mortgage.”
There is no prepayment penalty on these loans. For more information, please view this page.
How Should I Pay For My New Roof?
The decision is ultimately up to you…
If you have enough cash in your bank account to comfortably pay for the project in full, we suggest cash. It’ll be the easiest way, and when it’s done, it’s done.
If you have adequate home equity and can secure a home equity loan from a trusted lender, then this is one of the most cost effective options, as long as you’re okay with using your house as collateral.
If neither of the above work for you, then consider financing directly with the roofing company who gave your best estimate.
Whichever you choose, know that Roof Hub is here to help you get the job done right. We have lots of experience helping homeowners who choose to use any of the 7 methods of payment discussed above and would love the opportunity to earn your business too. To get started on a no obligation roofing estimate, click here.