How to Finance a New Roof

Alternative Financing for Home Improvements

Financing a New Roof It’s raining again. And every time it rains you get a big, wet reminder of the repair you’ve been putting off–that bucket in the laundry room just keeps filling up. You have been putting off this major home repair for too long now, and you’re well aware of all the damage that is only getting worse with every rain shower, but how will you shoulder the significant expense of a new roof?

Major home repairs are the bane of every homeowner’s existence. According to one study by the National Center for Healthy Housing, 40 percent of metropolitan homes in the United States contain one or more health or safety hazard, and the most common repairs that are not fixed are water leaks from outside. A new roof can be one of the most expensive repairs that homeowners have to face.

When considering ways to pay for costly repairs, one option many homeowners tend to forget about is selling a few portable luxury assets, like a Swiss timepiece or diamond jewelry. Diamond Estate Jewelry Buyers has helped thousands of people convert their old fine jewelry into cash for any number of reasons, including home repairs and the financing of a new roof.

And if your need for cash is short term in nature, perhaps a collateral loan is more appropriate for your situation. Your forgotten Rolex watch or diamond cocktail ring might just keep that bucket from filling up in the laundry room. However, there are many ways to secure financing for a new roof, and in this article, we’ll take a look at a few of the most common ways homeowners raise the needed money.

Using Home Equity to Finance a New Roof

One way to finance your new roof is to use the equity you have in your home–the difference between what you still owe on your mortgage and what your house would be worth if you sold it in today’s market. Home equity loans use your home as collateral, just like a primary mortgage.

The amount you borrow is fixed, which makes this a good option if you are only financing a one-time project, like a roof. And interest rates are fixed on these types of loans, so you will be able to plan a budget around the regular loan payments. Another advantage of a home equity loan is that the interest you pay on the loan is tax deductible up to $1 million.

A Home Equity Line of Credit (HELOC) is another equity option to consider. A HELOC also uses your home as collateral, and functions as a revolving line of credit. You can withdraw money based on your evolving needs over time, up to a certain maximum. These equity loans work well if you have a longer term project, or will be considering additional home improvements in the future. HELOCs usually feature a variable interest rate, meaning that the rate can climb over the term of the loan, though the interest you pay is still tax deductible.

With both kinds of home equity loans, you will have to pay closing costs, and, as with any loan secured by your home, you risk foreclosure if you are unable to make the payments on the loan.

Using an Unsecured Personal Loan to Finance a Roof

With this type of loan, you borrow money without using your home as collateral. Some banks offer unsecured personal loans, but usually for sums under $10,000. And because the loan is not backed by your home or other collateral, you are likely to pay a much higher interest rate as the lender is assuming more risk.

You may be able to secure this type of loan from a family member or friend, but be aware of the potential personal costs of such an arrangement. If you do borrow from family or friends, be sure to treat the loan the same way you would treat a bank loan. Agree to terms like the length of the loan and size of payments, and stick to them.

If you choose to take out an unsecured personal loan from a non-bank lender, be sure to do your research and read all the fine print. You don’t want to be surprised by hidden fees, or interest rates that multiply over the term of the loan.

Using Credit Cards to Finance a New Roof

If your new roof is a simple project and won’t cost more than you can repay in several months, you might consider using a credit card. The major benefit of using credit cards is that you’ll avoid paying any loan fees or closing costs. But interest rates on credit cards can be quite high, so make sure you crunch the numbers carefully. You may be able to use a new card’s low introductory interest rate to pay for your roof, but make sure you keep track of when the interest rate will go up, and stick to a strict payment plan.

Using a Title 1 Loan to Finance a New Roof

Title 1 loans are bank loans that are insured by the federal government, and specifically designed for home repair projects. Like home equity loans and HELOCs, Title 1 loans use your home as collateral, and you’ll have to pay interest and closing costs. The big difference with a Title 1 loan is that you do not have to have equity in your home, making it a good option for a relatively new homeowner who has been surprised by a leaky roof. To apply for a Title 1 loan, you’ll need to own the property, fill out an application that shows you’re a good credit risk, and execute a note agreeing to repay the loan.

Borrowing from Your 401(k) to Finance a New Roof

If you have a 401(k) retirement plan at work, you may be able to borrow money against it. The interest rates are usually low, and you shouldn’t have to pay loan fees or qualify. If you are going to borrow from your retirement plan, be aware that you will incur penalties and taxes if you don’t repay the entire amount within five years. And you should also be aware that even if you do pay all the money back, you’ll have less in your retirement account than if you hadn’t borrowed the money in the first place.

With all of these options, you can lower the financial risk and loan amount by selling a valuable item from your jewelry box. To see how much money is stored in your old fine jewelry, contact Diamond Estate Jewelry Buyers today for a free verbal appraisal and immediate cash offer.

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If you have been looking for ways to help finance elder care for your parents as they enter an assisted living facility or continuing care retirement community, please see our article: Bridge Loans for Seniors.