Whether it’s a roof, a vacation, or any considerable purchase, the question always pops up about how to pay for it. Multiple methods are available, but when it all comes down to it, the answer is usually cash or a credit/loan. Here are some of the financing options.

Cash sources

Emergency Funds

Some of our parents (or even classes in school) taught us to set aside funds in case of emergencies. If you become stuck on the side of the road because your vehicle’s transmission fails, you may need to dip into the emergency fund to get back on your feet again, so to speak. If your roof replacement or purchase is an emergency, then it’s up to you to determine if this is a good place to start.

Savings

Savings are usually created for long-term goals like retirement, family vacations, or purchases where your normal work paycheck won’t cover the cost entirely. But most people use Savings for emergencies if they don’t have a separate emergency fund. They are sometimes treated as one and the same. Dipping into this fund usually requires the okay of all the financial decision-makers.

Credit sources

HELOC

A Home Equity Line of Credit, or simply HELOC, is a flexible borrowing option secured by your home. It offers a revolving credit line that you can tap into for significant expenses or to consolidate high-interest debts, like credit cards. HELOCs often feature lower interest rates compared to other loans, and the interest paid may be tax deductible. However, it’s advisable to consult with a tax advisor regarding the current rules.

With a HELOC, you’re essentially borrowing against the equity in your home, using your house as collateral. As you repay what you’ve borrowed, your available credit increases again, similar to how a credit card works. This means you can borrow against it repeatedly as needed, up to your credit limit, throughout the draw period, usually around 10 years. After this, a typical repayment period of 20 years begins.

To qualify for a HELOC, you must have available equity in your home, meaning the amount you owe on your mortgage must be less than your home’s value. Generally, you can borrow up to 85% of your home’s value minus what you owe. Lenders also consider factors like your credit score, employment history, monthly income, and existing debts, much like the process of obtaining your first mortgage before you moved in. HELOCs can have variable interest rates, meaning the rate can fluctuate from month to month. This rate is typically based on an index and a margin.

Personal loans

Your bank may approve a personal loan, depending on the strength of your credit and the loan amount. A benefit of a personal loan is that your home isn’t used as collateral in case of default. Another benefit is that the interest rate is usually locked instead of variable. The loan officer may ask for the nature of the loan. Home improvement is a common reason listed.

A loan from a friend or relative falls under the same umbrella as a personal loan. The funds will still achieve the same end result, but the details of obtaining one are beyond the space we have here to outline. In other words, we’re leaving that one up to you as it is a personal and complicated matter.

Credit cards

Credit cards can also be used to pay for a roof or any of our services. We all use credit cards as a payment source for purchases, big and small. Our thought is to pay off the credit card within the month (ideally), which is basically a short-term loan until the next payment is due.

Here at Community Roofing & Restoration, we want everyone to have the safest home possible, and that often involves making an investment in a new roof. Our business practice is standard for contractors with 1/3 due at signing, 1/3 when the materials are delivered and the job begins, and the final 1/3 upon completion. We know that having more information is paramount in making a decision, and we hope that you’ve found this helpful.

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