A roof loan is a personal loan that you use to cover the cost of repairing or replacing a roof. With a roof loan, a lender, either online or through a traditional bank or credit union, offers you a lump sum up front. The amount offered, as well as the interest rate charged during the life of the loan, depends on your credit rating and history. A home equity loan, also known as a second mortgage, uses the portion of your home that you directly own, the equity of the home, as collateral for a loan that you pay in fixed monthly payments.
The repayment term of a home equity loan generally lasts five to 30 years. Interest rates on home equity loans are usually fixed, so you'll know before you accept the loan what you'll pay each month of the repayment term. One advantage of using a home equity loan to finance roofs is that you may be able to deduct the interest you pay on the loan from your federal income taxes, as long as you itemize the deductions. Consider talking to a financial professional to find out if this is possible for your individual situation.
A home equity line of credit (HELOC) also uses home equity as collateral, but instead of offering a lump sum loan, it establishes a revolving credit account that you can use much like a credit card. As with a home equity loan, a HELOC allows you to access a maximum of 85% of the home value minus the remaining balance of your mortgage. During a period of time called the withdrawal period, which typically lasts 10 years, a HELOC allows you to write checks or use a debit card to make payments against the account's spending limit, and then pay the balance as quickly or slowly as you choose, as long as you meet a minimum monthly payment. After the withdrawal period ends, you must settle the outstanding balance in a lump sum or in a series of fixed monthly payments.
HELOCs often come with variable interest rates and can offer low promotional rates for the first 12 months, after which borrowers can see significant annual increases. That, and the variable balance nature of all revolving accounts, can make it difficult to predict how much a HELOC will cost you over the life of the account. In a cash-out refinance, you apply for a new mortgage on your home, based on part or all of its current market value, pay your current mortgage, and treat any remaining cash income as a lump sum loan. You can use the cash to finance a roof or other home repairs, or for any other purpose you choose.
A cash-out refinance can make a lot of sense if you can secure the new mortgage at a significantly lower interest rate than the original mortgage, or if you replace a variable-rate mortgage with a fixed-rate loan. As with home equity loans and HELOCs, the approval process for a cash-out refinance is very similar to applying for a mortgage for the purchase of a home. Expect to document your income and expenses and close in about 30 to 45 days, although this period will ultimately depend on your lender. If you don't have enough equity in your home to cover roof financing, one option is a 203 (k) mortgage issued through the Federal Housing Administration (FHA).
These mortgages are issued by FHA-approved lenders to allow the purchase or refinance of homes in need of repair, and fixed-rate and adjustable-rate loans are available. If you apply for a standard 203 (k) mortgage, you will need to hire an FHA-approved 203 (k) consultant to act as a liaison between you, the lender and the roofer (and other contractors, if any). The consultant draws up a work plan for the project, ensures construction meets proper standards, and approves the release of funds for the roofer and other contractors. If your credit score is 580 or higher, you qualify for the minimum down payment of 3.5% required for a 203 (k) mortgage; if your score falls below 580, you will need to deposit 10% of the amount you borrow.
Financing a roof with a credit card should probably be your last resort. With average APR on new cards hovering around 19.33%, according to the Federal Reserve, putting a new cap on your credit card (s) would likely be a very expensive option. If your roof repair estimate is quite low and you can pay a large portion of the total cost in about a year, financing the roof with an introductory 0% APR from a new credit card might be a good solution if there are no better options available. If you can pay off the entire balance within the promotional period (usually 12 to 18 months), you will have managed an interest-free loan, but any remaining balance after the launch period will be subject to the card's standard interest rate.
Is interest on a home equity loan tax-deductible? Find out the conditions under which you can get a home equity tax deduction. Learn the ins and outs of a home equity loan vs. A home equity line of credit (HELOC) to decide which option is best for your financial goals. Wondering if it's a good idea to apply for a home equity loan for a mutual fund? Learn the pros and cons of this group funding option.
A HELOC, or home equity line of credit, is commonly used for a variety of home improvement projects, including roof replacement. You can use this line of credit to finance your new roof and pay the amount for a specific period of time. In this type of roof financing, you will be given an amount that you can borrow against and you will only have to pay the amount you have used for your project. It's a bit similar to how credit cards work, but a HELOC will generally require your home as collateral.
Another financing option for roofs is to apply for a home equity loan. A home equity loan is a type of secured loan, which means that your home acts as collateral. Secured loans tend to have low interest rates. Roof financing is the best way to pay for your roof replacement in monthly payments.
Roofing companies have in-house repayment plans or offer loans through a lender. Whether your new roof is the result of a planned project or due to unexpected circumstances, it can represent a significant, but necessary, investment in the home. A roof helps keep your home and family protected from the elements. You should also consider using this method to pay off your new ceiling if you can change a variable-rate loan such as HELOC to a fixed-rate mortgage.
However, if your credit card has generous rewards, incentives, and even cashback bonuses, it may be worth financing your new roof with your card.
When you finance a new roof through an independent roof contractor in the Owens Corning Roofing Contractor Network, you can benefit from low monthly payments.. Withdrawing money from the accumulated value of your home through a cash out refinance can also help you finance the repair or replacement of your roof. It is essential to review the terms of the roof loan, including the interest rate and monthly payment, before signing on the dotted line to ensure you find the best personal loan for you.
Because contractor financing is often approved faster than a personal loan through a bank, working with a trusted contractor can streamline the process when repairing a roof can't wait. Make sure they are clearly defined in your contract, so that you have proof and know how much it will delay you in the coming months. When your roof is damaged or reaches the end of its useful life, your top priority should be to repair or replace it. A roof loan may offer the best lending features available, but you won't know if you don't look.
Once you have an idea of the structural work your roof requires, you can get an estimated price for the project. In many cases, roofing professionals know that the cost of repairing or replacing a roof is too high to pay for it all at once, so they offer financing options that allow payment over time. If your home emergency fund can't cover the full cost, it might be time to consider financing options for roofs. The size of the roof, its current state and the time of year play an important role in dictating expenses.