Roof Financing Options

Roof financing options for homeowners include coverage from your insurance policy, tapping into your home equity, or taking out a personal loan.
Written by Melanie Krieps Mergen
Reviewed by Melanie Reiff
Thanks to natural disasters, falling branches, and general wear and tear, roofs often need replacing before homeowners are ready to finance them. If you can’t pay for replacement costs upfront, consider exploring roof financing options like coverage from your insurance policy, tapping into your home equity, or taking out a personal loan.
Unlike certain home repairs that allow you to bide some time before you need to address them, a roof replacement is often an urgent issue—especially when the damage was sudden and unexpected.
If you’re exploring new roof financing options, the
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New roof financing: what to consider

The cost of a new roof will vary depending on a number of factors, such as its size and complexity, the type of shingles you’ll be using, and your contractor’s rates. 
With material shortages and shipping delays now plaguing the market, you’re likely to pay even more than you would have 5-10 years ago. 
All this considered, the average cost of a roof replacement often falls between $5,000 and $12,000. For many homeowners, that’s a considerable cost to cover upfront and a substantial portion of a healthy savings account even if you do have the funds on hand.
Arranging a roof inspection can help you determine whether your roof needs repairs or a complete replacement. To make sure you’re getting the best value for your area, it’s always a good idea to seek out multiple roof replacement quotes from reputable contractors, then compare your options. 
Once you’ve gotten a quote, keep in mind what sort of monthly payment you can afford if you need to finance some or all of the amount.
If you need a roof replacement but aren’t able to pay for it out of pocket, the following are some new roof financing options you can consider.

Homeowners insurance coverage

If the cause of damage to your roof is covered by your home insurance policy, your insurance company may provide some much-needed assistance to repair or replace your roof. 
It’s important to note, however, that even if your insurance policy does cover the damage, depending on your coverage level, it might not cover the complete cost of replacing a roof
You may also have to reach a certain
amount before your insurance company will offer coverage.

Using your home equity

Home equity is how much stake you have in your house—it’s based on your property’s current market value minus the balances of a mortgage and any other liens on the property.
If you have enough equity built up in your home, a home equity loan or a home equity line of credit (HELOC) could help finance your new roof.
A home equity loan is a type of second mortgage: you’re borrowing a set amount at a certain interest rate that you pay back over a certain amount of time, and your equity in your home serves as
Meanwhile, a HELOC works more like a credit card and allows you to borrow up to a certain limit over a certain amount of time, which would allow you to borrow continuously up to the amount as you continue making payments.
One plus of using a home equity loan or HELOC is that interest paid could qualify you for a tax deduction if you itemize.
When considering either of these options, you’ll want to make sure you have remaining equity in your property after the amount you’re intending to borrow. A common recommendation is to maintain at least 20% equity in your property at all times.

Cash-out refinance

A cash-out
is another way that the equity you have in your home can give you the cash you need to finance your roof replacement.
A cash-out refinance involves replacing your current mortgage with a new one based on its current market value, then using the leftover funds for whatever you choose—including projects like a roof replacement.
Just like with other home refinances, a cash-out refinance will involve paying closing costs, so keep that in mind.

Home improvement loan

A home improvement loan is a type of personal loan that’s also a possible path to roof replacement financing. As with other loans, you’ll borrow a certain amount at a certain interest rate and pay it back over a set amount of time. 
Unlike a home equity loan, a home improvement loan won’t require you to attach your property to the loan as collateral, but your interest rates can be higher compared to other types of loans.

FHA Title I loan

If your home’s been lived in for at least 90 days, a Title I loan offered through the Federal Housing Administration (FHA) could be a source of new roof financing. 
An FHA Title I loan is specifically intended for home improvements that will preserve or improve a home’s basic livability
There are various borrowing amount and term options with an FHA Title 1 loan based on your property type. 
One consideration with the Title I loan is that if the cost of your roof replacement exceeds $7,500, you’ll need to offer your home as collateral. 
If you’d like to pay off a Title I loan early, there are no
prepayment penalties

FHA 203(k) loan

An FHA 203(k) mortgage can be used to purchase or refinance a single-family home that needs repairs, which could be another path to new roof financing.
The cost of rehabilitating a home with an FHA 203(k) loan must be at least $5,000, and your property value must be within your area’s FHA mortgage limit.
An FHA Limited 203(k) Mortgage can finance up to $35,000 in home repairs and improvements.
A 203(k) mortgage could also be used in combination with a Title I loan.

Credit card

Depending on your card’s limit and your roof replacement cost, using your credit card could also allow you to finance your new roof if your financing options are limited. 
However, in most cases, this option is far from ideal, considering credit card interest rates can commonly be between 19% and 25%.
This option works best if your credit card has an introductory 0% APR and you’re able to pay off your cost within the necessary time frame before a higher rate kicks in.

Roofing company financing

Roofing contractors themselves know how difficult financing a roof replacement can be. For that reason, many companies offer their own roof financing options with varying terms, rates, and repayment options.
Because the terms and conditions can have considerable variance, make sure to read the fine print closely when considering this as an option. It’s also a good idea to compare the rates and terms with other loan options before signing on.

Does home insurance cover roof damage?

Your home insurance policy may cover roof damage, but only if it’s caused by a peril named in your policy. Under a standard homeowners insurance policy, common covered perils include falling objects, windstorms, fire, and vandalism.
Generally, home insurance is meant to offer protection against the unexpected, so if you need a roof replacement due to wear and tear over time, a homeowners insurance policy would not offer coverage.
To get a more comprehensive understanding of what your own home insurance does and doesn’t cover, review the named perils and exclusions listed in the policy.

How to save on home and car insurance

A functional roof over your head is one of the most important things that helps your home keep you safe. This makes finding good home insurance important—but you have to pay an arm and a leg for the best coverage.
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If you can’t pay for a roof replacement out of pocket, there are a number of roof financing options you can consider, like taking out a home improvement loan, using your home equity, and opting for a cash-out refinance.
The average cost of a roof replacement depends on a number of factors, like a contractor’s rates, the cost of materials, and the size and complexity of a roof. All this considered, the average cost of a new roof often falls between $5,000 and $12,000.
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