If your roof has been damaged from a weather-related event or has just deteriorated from many years of wear and tear, a new roof may be your only option. But, having a new roof installed can be a costly project, and figuring out how to pay for it can be a headache in itself.
With a roof replacement often being in the tens of thousands, it’s easy to understand why homeowners may be concerned about how to pay for one. Luckily, if you can’t pay for the project out of pocket, there are multiple other ways to finance your new roof.
To help you sort through the different payment methods, we’ve made a list of the five best roof financing options available.
How much does a roof replacement cost?
The typical cost for a roof replacement can be anywhere from $3,500 to $44,000, with most people paying around $14,000 for replacing 2,000 square feet of architectural shingles on a 2-story home. Roofing projects have such a wide price range due to several factors, such as roof size, pitch, and more.
Factors that affect roof replacement cost
When it comes to installing a new roof, several factors can affect the overall price. Let’s take a closer look at each of these factors and see how they can impact your roof replacement cost.
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Size of your roof: The size of your home and in particular the size of your roof will have a big influence on the overall cost of your roof replacement. Roofing materials are sold in squares of 100 feet, meaning the bigger your roof, the more you can expect to pay for your roof installation.
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Pitch: Roof pitch refers to the steepness of your roof. In most cases, the steeper the pitch the more your roof replacement will cost. For example, a low-slope roof replacement can cost between $4.50 to $7 per sq. ft. while a steep-slope roof can cost anywhere from $5 to $12.
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Shingles: The cost of the shingles you put on your roof has perhaps the most significant impact on your overall roof replacement cost. The more features and benefits your roofing material has, the higher the cost. For, example, materials with additional benefits, such as energy efficiency, algae protection, hail protection, or rainwater management, also have higher costs.
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Shape: The shape and type of roof can not only affect how your home looks, but also makes things more or less difficult for a roofer to install the material. Common roof shapes such as gable and hip roofs are the easiest to install while shapes such as A-frame and mansard are more complex.
Five ways to pay for your new roof
Cash
The most obvious and straightforward way to pay for a roof replacement is with cold hard cash. Paying for your new roof in cash will not only help you avoid the stress of getting a personal loan but it will also save you time in the process.
If you are looking at paying for your new roof with cash, there are a few things to consider. You should first make sure that paying for the roof out of pocket will not affect other aspects of your finances, such as your emergency fund or other payments. You will also need to ensure that you work with a reputable and licensed roofing company.
While cash can be a fast and easy payment option, it is not going to be viable for everyone. Many homeowners will not have the available funds to pay for a roof replacement in cash and for some it is simply not their preference.
Insurance claims
Using an insurance claim to pay for your new roof can be one of the more tricky and challenging methods, but it may be worth investigating.
If you are looking to replace your roof due to its deteriorating condition over the years, then it will be virtually impossible to finance through an insurance policy. This is because homeowners insurance companies will rarely cover wear and tear on your roof. If this is your situation, you may not be able to lean on an insurance claim to finance your new roof.
However, if your roof was majorly damaged by a weather-related event, then you may have more success making an insurance claim. If your roof has substantial damage from something such as wind or hail then you should get in contact with your insurance company as soon as possible.
Home equity loan
One of the most popular options for financing your roof replacement is a fixed-rate home equity loan.
Home equity loans allow homeowners to borrow against the equity they have built up in their homes. Your home equity is the difference between the perceived market value of your home and the amount you still owe on your mortgage. In most cases, if you have over 15% equity in your home, you could be eligible for a home equity loan.
The benefits of a home equity loan are that it gives you access to the fund quickly and you’ll pay a fixed low-interest rate with lower borrowing costs. However, make sure you are confident that you can make the monthly repayments, as your home will be used as collateral.
To learn about a similar financing option, read our article about home equity lines of credit.
FHA Title 1 Home and Property Improvement loan
If you lack the equity for a home equity loan, another option to finance your roof replacement is with a Federal Housing Administration (FHA) Title 1 loan. An FHA Title 1 loan is a fixed-rate loan used for home improvement projects such as roof repairs, or anything that will make your home more liveable and useful.
For owners of single-family homes, the FHA offers Title 1 loans of up to $25,000 with a maximum loan repayment term of 20 years. However, be aware that if you borrow more than $7,500 you will have to offer your home as collateral to secure the roof loan. This means that if you default on the loan, the lender can seize your home.
Title 1 home improvement loans are available from a range of FHA-approved lenders. Be sure to look at multiple options as each lender will have its own interest rates and requirements.
Personal loan
You may also have the opportunity to pay for your new roof with a personal loan. To get a personal loan, you have the option of going directly to one of the many lenders offering loans or through certain roofing contractors who will provide financing options.
While a personal loan can be a great financing option for many homeowners, not everyone will get through the application process. When applying for a personal loan, the lender will look thoroughly into your financial situation. The lender will also run a hard credit history check which may temporarily affect your credit score. After examining your financial position, the lender will decide on your eligibility. You will need to have a good credit score of over 600 to qualify for most personal loans.
If you are choosing to finance your roof replacement with a personal loan, make sure to do your research. Before getting any personal loan, you should review all the terms of the loan including the interest rate, loan length, and monthly payments. This will ensure you do not get stuck in a dangerous or predatory loan.
What is the best financing option?
While we would love to tell you that there is one payment option that sits above all the others, the perfect way to finance your new roof will rely entirely on your individual situation and preferences.
If your roof is being replaced due to large amounts of damage from a weather-related event, then it may be your best option to investigate your insurance coverage and go down that path.
If you have the available cash for a roof replacement and using those funds will not put you under financial stress, then that will be the easiest and fastest option.
Whatever payment method you chose make sure that before you enter into a financial commitment you do your research and look closely at each of your options. This will ensure you make the best choice available.