Learn About Roof Financing: 8 Options to Consider

When it’s time to replace a leaking roof, the phrase “save for a rainy day” takes on new meaning. If you need a new roof but don’t have the money in savings to pay for it, it may be time to look into financing options.

Roofing replacement can cost anything from $5,569 to $11,415 across the US, with an average price tag of $8,349. This data comes from HomeAdvisor, a website that provides information on home improvement projects.

After putting down tarps and buckets to prevent more water damage, you can take your time deciding which of the numerous available roofing financing options is ideal for you. There are 8 ways to pay for a roof.

1. Home equity loan

A home equity loan, also known as a second mortgage, is a loan that is secured by the amount of your property that you own entirely. The loan is repaid in equal monthly installments. The typical payback period for a home equity loan is between five and thirty years.

Taking the current market value of your house and subtracting the amount you still owe on your mortgage gives you your equity. For instance, if your home is worth $300,000 and you have a $200,000 mortgage on it, you have $100,000 in equity.

Generally speaking, lenders will not provide you with a loan for more than 85% of the value of your home (after deducting any existing mortgages). For the same $300,000 house, that would be $300,000 x 85% = $255,000, followed by $255,000 – $200,000 = $55,000.

Home equity loans often have set interest rates, so you’ll know exactly how much you’ll have to pay back each month when you commit to the loan. If you itemize your deductions on your federal income tax return and take out a home equity loan to pay for a new roof, the interest you pay may be tax deductible.

You might want to consult a financial advisor to see if this is a realistic option, given your current circumstances. It’s important to remember that there are a few disadvantages to using home equity loans for roofing financing. Close dates for these loans are often two to four weeks away, and the approval process can take as long as a first mortgage.

The possibility of losing your home is another drawback of home equity loans. A default on a mortgage loan could result in the loss of your home.