Do you know you need a roof replacement but are feeling overwhelmed by the cost? Are you uncertain about which loan option will fit your budget and long-term financial goals?
At RoofSmart, we know that everything is expensive in the Seattle area and that not every homeowner can afford to pay for their roof replacement right away. We do hundreds of roofing projects every year and before each one, we make sure to have an in-depth discussion about payment options with each customer.
We give customers information and advice not just about our own financing programs, but also their other options for acquiring loans outside of their roofing contractor.
Financing a major home project like a roof replacement can be stressful. That’s why we’ve outlined the pros and cons of four financing options—including contractor-offered loans, home equity loans, and personal loans—to help you make an informed decision. By the end of this article, you’ll understand which loan option best fits your needs and budget so you can move forward with confidence.
Wondering how much a roof replacement would cost? Use our Instant Estimator tool to find out:
What are the different types of loans you can get?
If you’re looking to finance your roof replacement, you’ll have two general options for financing. You can either get financing through your roofing contractor or you can find an independent financial service provider to work with.
1.) Financing through your roofing contractor
Roofing contractors typically partner with financial service companies and then choose which financing programs they’ll offer to customers. Every roofing company is somewhat different, but typically they all offer similar types of financing programs.
If you choose to finance through your roofing contractor, you’ll have access to long-term financing programs and programs that offer 0% for a period of time. There are also hybrid programs.
Approval for these programs is based on your stated income and the debt-to-income ratio stated on your credit report. It’s a much quicker approval process than with other loan programs that dig further into your financial history.
Depending on which financial services your roofing contractor works with, it’s possible that they can put a UCC 2 lien on your home as collateral in case you don’t pay. It’s important to ask your roofing contractor if the UCC 2 lien will apply to you if you use their financing (RoofSmart’s financing program DO NOT. Read about our financing here).
2.) Home equity line of credit (HELOC)
A home equity line of credit opens up a line of credit on your home based on the amount of equity you have available. In other words, it functions like a credit card, giving you an established credit limit that you can borrow from and pay back.
The rate that you’ll get for this changes all the time. Depending on the other loans you’re considering pursuing, this one might have lower interest rates. It is convenient if you need a way to get a secure loan for a large-scale purchase like a new roof.
If you are unable to make payments, you risk losing your home.
3.) Home equity loan
A home equity loan allows you to take out a loan using the equity of your home as collateral. This is a one-time sum that gets taken out and then paid back over a predetermined period of time. Interest rates are usually fixed.
This is different from a HELOC because it is not a recurring loan that can be paid off and replenished. You take out the amount you need, pay it back, and then you’re done. However, it is similar in that if you don’t pay back the loan you might lose your house.
4.) Signature loan
You can also go through your bank and get approved for a fixed-rate signature loan. This means that instead of providing collateral to the bank you give your signature as assurance that you will pay back the loan. But before that, you do have to go through the process of getting approved.
Interest rates on these types of loans are usually high because they are unsecured. If you have great credit, that might bring it down a little bit. However, the fact that there is no collateral really impacts interest rates.
How do I know which type of loan is right for me?
This can be a tough question to answer. It really depends on your situation and which loan you feel most comfortable using.
For example, if you don’t want to have to spend time finding an independent financial service or you want a quick approval process the financing through your roofing contractor will probably work best for you.
If you’re getting a new roof because you’re planning on living in your house for a while then a long-term payment plan might make more sense. Or, if you want to get the loan paid off quickly and you know you’ve got money coming your way soon, you could consider the shorter-term plan that has 0% interest for a while.
If you want to take advantage of your home’s equity and you feel confident that you can pay the loan off in the allotted time, then a home equity loan or line of credit would be a good fit.
If you don’t want to list your house as collateral and you have strong credit history, you might go for a personal loan like the signature loan.
At the end of the day, it all comes down to what you feel is realistic for your financial situation and which type of loan you feel is feasible to take on.
Choosing the Right Loan for Your Roofing Needs
Financing a roof replacement doesn’t have to be overwhelming if you understand the options available to you. Whether you choose to work with your roofing contractor for quick approval and convenience or explore independent financial options for potentially lower rates, each path has its pros and cons.
It’s important to consider factors like interest rates, repayment terms, and potential risks to help you make your decision. You know your financial situation better than anyone, so only you can decide which option will work for you.
After reading this article, you might be wondering how else you can pay for your new roof. Check out our article “When and How Do I Pay For My Roof?” to learn more about your options. Though this article is specific to RoofSmart, it still provides valuable insights into how you can expect to pay whichever roofing company you decide to work with.
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