If your roof is in bad shape, you’re facing an expensive repair. According to Home Advisor, it costs an average of $7,336 to replace a roof.
Most Americans don’t have anywhere near that amount in savings. Without that kind of money in the bank, you’ll need to use other financing options to cover a roof replacement cost.
Factors that affect roof replacement cost
When it comes to installing a new roof, many factors affect the price you’ll pay.
- Time of year: Late summer through the fall is the busiest time of year for most roofing companies, according to Angie’s List. If you want your roof installed during that time frame, you likely will pay extra. By contrast, you might get a cheaper price by opting for winter or early spring.
- Size of home: Roofers usually base the price on the square footage of your roof, according to the Roofing Calculator. The larger the house, the more you’ll pay.
- Materials: If you opt for an asphalt roof, you’ll pay much less than if you went with metal or wood.
- Labor: Each roofing company charges different hourly rates for labor, and the rates can vary widely.
- Disposal: The roofer also will charge a disposal fee to rent or supply a dumpster for the old roof and supplies.
How to save on a new roof
To minimize how much you need to borrow, follow these tips to save money on your roof replacement.
- Shop around: Before moving forward with a roofing company, make sure you get quotes from multiple businesses. The cost can vary widely from company to company, and you might find a cheaper roofer who delivers high-quality results. If you’re not sure where to find reputable companies, start your search on Angie’s List.
- Consider cheaper materials: Although a metal roof might look nice, it’s much more expensive than some other materials. If possible, opting for an asphalt roof can help you save money.
- Time it right: If your roof doesn’t need to be replaced right away, you could save a significant amount of cash by waiting until the winter to replace it.
5 ways to pay for a new roof
Although replacing a roof can be expensive, there are ways to finance the project to make it more affordable. Here are five of the most common options.
1. Insurance coverage
If you have homeowners insurance, you might be able to use your policy to cover the cost of a new roof. According to Esurance, many insurance policies will cover roof repairs or replacement if it was damaged by a storm, fire, or theft. If your roof degraded because of age or lack of maintenance, however, your insurance company won’t cover its replacement or repair.
Contact your insurance agent to discuss your policy and the needed repairs or replacement to see if the insurance will pay for it.
2. Roofing company payment plans
Some roofers offer payment plans to help make the roof replacement cost more affordable. With this option, you can spread out your payments over the course of several months or even years. Most plans charge you interest, which can add to the total cost of your roof replacement, so make sure you’re comfortable with the interest rates and monthly payments.
Each roofer has its own plans, requirements, and interest rates, so contact your chosen roofing company to find out what’s available.
3. FHA Title I home and property improvement loan
If your roof needs major repairs or a replacement, one of the best ways to pay for it is with a Title I home and property improvement loan. The Federal Housing Administration (FHA) runs the Title I loan program and insures the loans, thereby reducing the risk faced by lenders.
If you own a single-family home, you can borrow up to $25,000 under the Title I program and have up to 20 years to pay it off.
However, keep in mind that loans over $7,500 must be secured by either your mortgage or deed of trust on the property. If you fall behind on your payments, the lender can seize those assets.
Title I loans are offered by banks and credit unions. Each lender has its own requirements and interest rates. It’s a good idea to consult several financial institutions to ensure you get the best deal. Use the U.S. Department of Housing and Urban Development’s locator tool to find an approved Title I lender near you.
4. Home equity loan
If you have equity built up in your home, taking out a home equity loan can be a cost-effective option to pay for a new roof. You work with a bank or financial institution and use your home’s equity as collateral for the loan.
Your home’s equity is its current value minus the amount you owe on your mortgage. For example, if you have a $250,000 home and owe $180,000, your home equity is $70,000. According to the Federal Trade Commission, you usually can borrow up to 85% of your home’s equity. So, on a home equity of $70,000, you could borrow up to $59,500.
However, there are some downsides to home equity loans. Because your home’s equity serves as your collateral, there are steep consequences if you fall behind on your payments. You could even lose your home. To minimize your risk, borrow as little as possible to cover the roof replacement cost and make sure you can afford the monthly payments.
5. Personal loan
If the above options don’t work for you, another way to pay for a new roof is to take out a personal loan. With a personal loan, you work with a bank, credit union, or other financial institution to borrow up to $100,000.
You usually don’t have to offer any form of collateral when taking out a personal loan, so you don’t have to put your home or other valuables at risk.
However, consider some of these drawbacks to personal loans:
- Shorter loan terms: Personal loan terms tend to be shorter than other kinds of home improvement loans. For example, you can have up to 20 years to pay back a home equity loan, but most personal loans need to be repaid within two to five years. That means you’ll have higher monthly payments, which can stretch your budget.
- Higher interest rates: Although you’ll see personal loans with interest rates as low as 4.99%, lenders reserve those rates for borrowers with excellent credit scores and incomes. If your credit score is good or below, you could end up with a much higher rate. With bad credit, you could pay a rate that’s as high as 199.00% on your loan.
A personal loan makes sense when you have good credit and can afford the payments comfortably under a shorter repayment term. If you think this option is right for you, get quotes from low-interest personal loan lenders.
Repairing your home
If you need a new roof right away, the price can be prohibitive. However, there are financing options that can make the cost more manageable with your budget.
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