Best Roof Financing Options Of [2022] – Forbes Advisor

A personal loan isn’t your only option for financing a roof replacement. Here are some alternatives to consider.

Home Equity Loan

As a homeowner, you may be able to borrow up to 85% of the equity you hold in your home with a home equity loan. Similar to a personal loan, a home equity loan is an installment loan that provides a lump sum upfront that you pay back over time.

Taking out a home equity loan, also known as a second mortgage, can be a more time-consuming process, though. It might take weeks to get the funds, whereas a personal loan can be funded in days. What’s more, your home serves as collateral, which means the lender can repossess it if you default.

Home Equity Line of Credit

A home equity line of credit (HELOC) also uses your home as collateral but gives you access to a credit limit instead of a lump-sum amount. You can borrow from this line of credit during a specified draw period, typically 10 years, and pay it back as you go. This flexibility might be preferable if you expect project costs to fluctuate or want to finance additional projects.

Most HELOCs come with variable interest rates, but some lenders give you the option of locking in a fixed rate during your draw period.

Cash-out Refinance

When rates are low, it can make sense to refinance your mortgage for better rates. With a cash-out refinance, you borrow a larger mortgage than you have currently and use the extra cash to finance your roofing project.

This approach can make sense if you can get a better interest rate than you have now, but it probably wouldn’t work if you already have a low interest rate. It can also be risky if your home value drops, leaving you with a loan that exceeds the value of your home (also known as being underwater).

Government-insured Loan

Homeowners who don’t meet the credit or equity requirements for other roof financing options may also explore government-insured loans to cover their project.

One option is the Federal Housing Administration (FHA) 203(k) standard loan, which lets you refinance your existing mortgage while rolling in your roofing costs, as long as they exceed $5,000.

Another is the FHA Title 1 loan, a fixed-rate loan that you can use for home improvements. FHA Title 1 loans are unsecured up to $7,500 while larger loan amounts are secured by your home.

Contractor Financing

Your roofing contractor may also offer financing options, likely in the form of a personal loan or credit card. It may be worth checking rates through your contractor as you shop around for the best deal. Make sure to read over any terms and conditions carefully so you know what you’re signing up for.

Credit Card

If you can pay off your roofing project costs quickly, a credit card could be helpful. Credit card APRs tend to be high, but you could consider signing up for a new card with a 0% APR promotional period that spans up to 18 months. If you don’t pay off your balance during this time, you’ll owe interest on the remaining balance.

Homeowners Insurance or Warranty

If your roof was damaged in a storm or a fire, rather than from normal wear and tear, your homeowners insurance may cover the costs of repair. Most insurance policies require you to pay a deductible before your coverage starts. If you have a home warranty policy, check to see if it could cover your roof issues.

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