How to Pay for a New Roof (Financing Guide)

If you’ve had your roof for a while, it might be time to replace it. The same applies if your roof is constantly experiencing minor issues, like leaks, that you must fix. Replacing your roof can help you save money in the long run, but what if you don’t have the cash to pay for your entire roof upfront? Here are some options on how to pay for a new roof.

Fortunately, there are a few ways to finance a new roof. Read on to learn how to pay for a new roof when you can’t pay for it upfront. 

1. Contractor Financing

When considering how to pay for a new roof, look into contractor financing first. 

Many roofing contractors offer financing options to homeowners who qualify. Usually, it takes just a few minutes to see if you are eligible, but it will depend on factors such as your income, credit score, and overall financial trustworthiness. Your contractor may have partnered with a credit agency to offer financing. 

Both short-term and long-term financing plans may be available. Short-term financing plans may last several months and have no or low interest. Long-term financing options may also be available, and they may be more convenient if you want to make small payments. In addition, depending on your credit score, you may qualify for a very favorable interest rate. 

Your roofing contractor may also offer seasonal discounts or special offers to repeat customers. 

2. Take Out a Personal Loan

Another option is taking out a personal loan from your bank or local credit union. Credit unions often offer favorable interest rates, and it may be easier to qualify for a loan there than at your bank. 

Remember, a personal loan can also help you cover part of the roof replacement cost. You can pay for part of it upfront and use a loan for the rest. That will help you lower the amount of interest you pay. 

Your credit card may also come in handy, depending on your credit limit. However, it’s important to consider interest rates, which can frequently be high on credit cards. 

Some credit cards may offer signup bonuses for signing up for the card and spending a minimum amount within a specific period. Others provide an introductory period with no interest. 

Therefore, opening a new credit card may be an excellent way to pay off a new roof without paying a lot of interest or any interest at all. The signup bonus can also be a perfect way to get a nice discount of a few hundred dollars off the cost of replacing your roof. 

3. See If Homeowner’s Insurance Covers It

Your homeowner’s insurance may cover the costs of replacing your roof, but it depends on why you’re replacing it. If you’re replacing it due to age, your insurance likely won’t cover the cost of a new roof. Insurers don’t usually include general wear and tear in their policies. 

However, if your roof sustained damage from heavy winds, hail, fire, or another unforeseeable accident or act of nature, your insurance may cover it. There are caveats to that as well. 

First, you will typically have to pay a deductible before insurance coverage kicks in. If you live in a high-risk area for a natural disaster that can damage your roof, you may have to pay a higher deductible than usual. Some insurers may even require you to purchase add-on coverage for the specific disaster in question.

Furthermore, your insurer might request evidence of the damage. Before and after pictures can be helpful, as the insurance company might try to get out of paying for the damage in one way or another. A home inspection report might also help, but your insurer will send their own adjuster to determine the extent of the damage and coverage. 

If a windstorm only blows off a few shingles, but there are no holes or leaks, the insurance company may classify that as cosmetic damage, even if you feel it’s time to replace the entire roof. 

The age of your roof matters as well. If it’s over 20 years old, your insurer may no longer cover the cost of getting a new roof and only cover its current cash value. 

4. Take Out a Home Equity Loan

Another option is taking out a home equity loan. A home equity loan is a second mortgage that uses your home as collateral. 

Many people use home equity loans for remodeling and repairs, although you can use them for any other purpose. 

The loan amount will depend on how much equity you have, which is the difference between your home’s mortgage balance and value. For example, if you still owe $100,000 on your mortgage, but your home’s total value is $150,000, your home’s equity is $50,000. 

Like any other loan, you will have to pay your loan back monthly, with interest. 

Advantages of a Home Equity Loan

One of the advantages of using a home equity loan instead of a personal loan or credit card to finance your new roof is that you can usually qualify for a lower interest rate. That’s because you’ve put up your home as collateral, though your credit score will also play a significant role in determining your interest rates. 

Another advantage is that if you use your home equity loan for a significant home improvement, like replacing a damaged roof, you may qualify for a mortgage interest deduction, allowing you to save on your taxes. 

On the other hand, it also poses a significant risk. After all, if you don’t manage to repay the loan, the lender can foreclose your home. 

Cash-Out Refinance

Another option is a cash-out refinance. You can refinance your current mortgage and get an extra lump sum, depending on your home’s equity, and then pay it back in a single loan. That way, you won’t have to worry about making two separate mortgage payments each month. 

Final Thoughts

Hopefully, you now understand how to pay for a new roof in different ways. 

Financing your new roof is a great way to pay for a new one when insurance doesn’t cover the total cost of your new roof. However, it’s always essential to ensure you’re financially stable and that taking out a loan won’t strain your budget.