15-30 years is the typical lifespan of an asphalt roof, assuming it’s been installed correctly. But a lot can happen in 30 years. By waiting until the end of its lifespan to replace your roof, it can be difficult to recoup the full potential value of a roof replacement project.
But what if you don’t have the money to pay for it up front? Time to consider financing. While saving money to pay off the project in full may seem like a good idea, financing a new roof may save you more money in the long run.
Taking advantage of the price at the current moment and improving your home right away is better than waiting until the roof falls apart. The price increase just a few years down the line may leave you with a negative return on your investment.
Still, some homeowners are afraid of financing a roof because of the interest rate. But it’s important to consider the variety of financing options available and the potential value a new roof could add to your home. Let’s break down the prospect of financing a new roof and how it can save you money.
To understand why financing a new roof can save you more money in the long run, let’s first look at the potential value it can add to your home.
When it comes to home improvement projects, there’s a big difference between a maintenance expense and an investment. Maintenance projects like plumbing, foundation repairs, and electrical work don’t add value to your home. Instead, the expense prevents your home from losing value.
On the other hand, an investment has the potential to increase the value of your home. Building a new deck, installing a pool, or remodeling your bathroom can all have a tangible impact on the resale value of your property.
While many people see roofing as a maintenance expense, that isn’t always true. Once you understand the potential ROI of a new roof, it can be a profitable investment that adds value to your home for years to come.
A new roof can also help you close a deal on your home. But what happens if you wait too long to replace it? There are two reasons waiting to replace your roof may decrease the value of your home:
Often people choose to finance a new roof because they don’t have the money up front or they want to create a better financial cushion. But why not cut through the paperwork, credit inquiries, and monthly payments with a cheaper job that you can afford up front?
The short answer is this: You get what you pay for.
While paying for a cheaper roofing job up front may seem ideal, it isn’t worth compromising the quality of your home. To achieve a positive ROI on your replacement project, the job has to be done with exceptional quality.
Cheap contractors often cut corners not only with the quality of work, but with customer service, materials, and even their insurance policies. By working with a contractor who tries to win your business with the lowest bid, you risk working with someone who is uninsured, does poor work on your home, or may not even finish the job.
What’s worse than paying for a poor quality roofing job? Having to pay for it again. That’s why it’s important to choose a trusted roofing company with a long track record of high quality work and customer support. You don’t want to work with a roofer who cuts corners to save money.
Whether or not you save money on a home improvement project often depends on how you pay for it and how you recoup the property value. Because of this, it’s important to know what types of financing options are available. Depending on your credit score and a few other factors, there are multiple options you can take to finance a new roof.
A personal loan is exactly what it sounds like: a loan you take out to pay for a personal expense. This means they can be used for virtually anything from overdue bills to groceries. They can also be used to pay for a roof replacement project.
If you have good credit, it’s likely you’ll be approved for a personal loan with a low interest rate. However, if you have a lower credit score, you could be stuck with only high-interest options. Some personal loans also include additional processing fees and penalties for paying them off too early.
Also called a “Second Mortgage,” a home equity loan is basically a loan against your house. To set this up, the lender gives you a certain amount of money (based on the equity you have in your home) and lists your house as collateral. If for some reason you don’t pay off the loan (or if you pay late) the bank may take your home as payment.
While this may seem like a high-risk option, the incentive to pay off the loan may be more in line with your desire to increase your property value. However, you can only use this option if you have positive equity in your home. This is when the market value of your home is less than what you still owe on your mortgage.
A home equity line of credit (HELOC) is similar to a home equity loan, but with a few key differences.
Typically, a HELOC works like a credit card. You can borrow against your home equity multiple times as you repay it.
But whereas a home equity loan has a fixed interest rate, a HELOC may have a variable interest rate for each payment. Aside from that, a HELOC only allows you to pull out small amounts. A home equity loan provides you with a lump sum up front for you to pay off over time.
Some companies can offer a loan agreement where you have a certain amount of time to pay off the principle amount before incurring interest.
For example, “90 days same-as-cash” means that you have 90 days to pay off the full price of the roof replacement (minus the interest). If you do not pay the full amount by that date, you can incur very high interest rates on the remaining balance.
These programs can be great because they allow you to pay for a new roof over time without the extra cost of interest. As long as you make the minimum monthly payment and pay off the full amount in time, you end up with a better cost-to-value ratio.
However, where you may have years to pay off other loans, same-as-cash loans often have much shorter loan terms. You won’t usually see anything longer than 365 days same-as-cash. This means higher minimum payments and a shorter amount of time to save up money. If you think you would need to save money for more than 12 months to pay for the entire project, this option might not work for you.
Sometimes, if your roof needs a full replacement due to incidental damage, you could pay for it with an insurance claim. Hail damage, fallen trees, vandalism, and even aircraft damage are all covered by most homeowner’s insurance policies.
However, this option may not pay for a full replacement if the damage isn’t bad enough. If this is the case, you may still have to finance the remaining amount. Still, it is worth a shot to review your policy and call your insurance company to see how you may be compensated for the repair job.
Depending on the roofing company you choose, they may offer to set up financing on your behalf. With this option, you won’t usually have to jump back and forth between the roofing company and bank or lender. Both the project and the payment terms will be handled by the same company.
That said, it’s important to finance your new project with a trusted roofing company. Some small-time contractors may offer financing options with extremely high interest rates or be dishonest about the final figures.
While financing is a good option for many people, your credit score may limit your loan options. However, that doesn’t mean financing isn’t a good choice for you. Here are a few financing options you can consider if you have a poor credit score:
Even if you choose a cheap roofing contractor to complete your project, a new roof is no small expense. With that in mind, it might seem smarter to save up money until you can afford to pay for all of it. After all, you don’t want to bankrupt yourself with a home improvement project.
But waiting too long to replace your roof may put you in the red anyway. This is a major risk for a couple of reasons:
Financing a big home improvement project can be intimidating. While interest rates can increase the total dollar amount of a project, that doesn’t mean financing a new roof won’t help your investment. A new roof can add value to your home in more ways than one.
By waiting too long to replace your roof, you risk dealing with price increases, damages, and costly repairs while you save up money to pay for the entire project. Beyond that, if you spend all of your money repairing your home in the meantime, you may never save up enough to replace the roof before it falls apart.
Many people underestimate how much a roofing project will truly cost them. When the time comes to get estimates and real figures, it can be difficult to commit to a higher price. But it is often worth the extra money to ensure your new roof provides more value to your home.
Just because you don’t have the money up front for a big roof replacement project doesn’t mean you have to sacrifice quality to stay within your budget. Take advantage of current prices and the value of immediate installation by considering the financing options available to you.
At the end of the day, it’s about what makes the most sense for your home. At Baltic Roofing, we work with you to help you choose a solution that adds the most value to your property. To see if a full roof replacement project is right for your home, contact us today for a roof inspection and consultation.
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