Financing Your Roof Replacement: Tips for a Stress-Free Process

Financing Your Roof Replacement: Tips For A Stress-Free Process 

Knowing that your roof needs replacement shortly (one to five years) but not having the financial means to pay for it can be incredibly stressful. As a homeowner, you understand the responsibilities of homeownership. You accept that components of your home (siding, roofing, windows, etc.) age and deteriorate, requiring repair or replacement. Seeking financing for roofing replacement can be daunting.

In many instances, you have time to prepare by budgeting for the eventuality of a significant financial expenditure (such as a roof replacement). In other cases, you must change the component immediately because it is failing. When financing a roof replacement, you have several options depending on the imminency of the project. We’ll explore.

House with a roof replacement

Financing Options to Consider For an Immediate Roof Replacement 

Woman looking over budget with a calculator.

As the famous saying goes, “Cash is king.” A roof replacement can cost anywhere from $5,000 to $20,000. If you access cash (or a cash equivalent), you can avoid delays in beginning the roof replacement. You also steer clear of potentially high-interest rates, origination fees, transaction fees, prepayment penalties, late charges, and a host of other expenses associated with purchasing on credit or borrowing via a loan.

A homeowner with good credit (including a decent credit score) should have access to a reasonable amount of funds. Many borrowers with a strong credit history can obtain anywhere between $5,000 and $10,000 through one or more credit card companies. In some cases, the borrower may qualify for more credit. However, exorbitant interest rates (after a low introductory rate) could make this option less appealing.

For an urgent home improvement project, including a roof replacement, established local, regional, or national lenders (including banks and other financial institutions) may be willing to extend a short-term personal loan (2-5 years). Interest rates can vary substantially from 5% to over 20%. If the personal loan requires fast repayment, you will need access to liquid resources sooner rather than later.

Options to Consider for a Roof Replacement in the Future

If you have time before needing a roof replacement, you may wish to consider a cash-out refinance. This approach allows you to pay off your existing mortgage with a new one at a higher loan amount. The difference between what you owe on the current mortgage and the new one represents the cash-out portion of the loan. Remember that current interest rates on the new mortgage may be higher than rates on your existing one.

Like a credit card, a HELOC provides a viable alternative for homeowners to access funds quickly. Essentially, as a borrower, you are converting your home equity into liquid cash (on an as-needed basis). You only make payments on the balance owed (i.e., the amount withdrawn). Typically, a HELOC can be processed in a matter of weeks (if not sooner). However, avoid defaulting at all costs at the risk of foreclosure.

This loan allows borrowers to access a fixed amount of money secured by their home as collateral. Because this alternative typically offers a non-variable and predictable payment schedule, borrowers appreciate its clockwork precision. Interest rates also are lower compared to other lending options. Perhaps the most significant drawback of this loan is that if you default, you may face foreclosure of your home.

If the need for a roof replacement is not urgent, you may want to evaluate a government-backed home renovation loan (i.e., a “fixer-upper loan”). This loan is based on the estimated value of your home after the roof upgrade. Two of the most common alternatives are (i) FHA 203(k) and (ii) Fannie Mae Homestyle loans. To help qualify for one of these loans, lenders have more relaxed or lenient credit score requirements. 

Many homeowners never consider a sinking fund when evaluating financing alternatives. This personal fund allows the homeowner to prepare a long-term savings plan. Each month, the homeowner sets aside a certain amount of money for a specific purpose (in this case, a roof replacement). It may take 2 to 5 years to accumulate the necessary funds. However, this fund helps the homeowner avoid borrowing money from a lender and offers substantial peace of mind.

Established roofing contractors often offer financing to qualified homeowners. This method allows a homeowner to proceed with an important or necessary home improvement (including a roof replacement) without delay. Financing comes directly from the contractor or a third-party vendor (typically a bank or other lending institution). Compared to other borrowing alternatives, this avenue can be much more efficient.

Hiring A Knowledgeable Roofing Professional With Access To Contractor Financing

For homeowners in Grand Rapids, MI, and surrounding Central Michigan communities, Moore and Sons Roofing provides unparalleled residential roofing services. We also offer flexible financing options (that are not one size fits all) through various payment plans and interest rates. Contact us today to learn more about our contractor-based financing solutions or to schedule an appointment to discuss your residential roofing needs.

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