How to pay for a roof

Most people replacing a roof are not choosing to. It is a $14,000 bill arriving without notice, and how it gets paid changes the total by thousands.

This is general information about how the options differ, not advice about your finances. What is right depends on your credit, your equity and your circumstances, and a decision this size is worth an hour with someone licensed to advise on it.

The options, roughly cheapest to dearest

Rates move constantly and vary by credit, so compare live offers rather than anything written here.

Secured against unsecured

Secured — home equity loans, HELOCs, cash-out refinances — use the house as collateral. Lower rates, longer terms, interest that may be deductible when the funds improve the home, and a real consequence: falling behind puts the house at risk. Setup takes two to six weeks and involves an appraisal and closing costs.

Unsecured — personal loans, cards, most contractor financing — cost more and put nothing at risk but your credit. Funding can be same-week, which matters when the roof is open.

The speed difference is why many people take an expensive option under time pressure. Emergency tarping costs $300 to $700 and buys two to six weeks, which is usually enough to arrange something cheaper. That is often the best-value $500 in this whole article.

Contractor financing, read carefully

Most roofing companies offer it through a third-party lender, and the terms vary enormously.

"0% for 12 months" is usually deferred interest, not free money. If any balance remains at the end of the promotional period, interest is charged on the original amount from day one, not on what is left. A $14,000 roof with $500 outstanding in month thirteen can produce a four-figure interest charge.

Ask, and get the answer in writing:

• Is the promotional period deferred interest or true 0%
• What is the rate after it ends
• Is there an origination or dealer fee, and is it in the quoted price
• Is there a prepayment penalty
• Who is the actual lender

The other thing worth knowing: contractors pay the finance company a fee, often 3% to 10%, and it is built into the price. Asking what the cash price is sometimes produces a discount that beats the promotional rate.

When it is an insurance claim

Insurance covers sudden damage from a covered peril — hail, wind, a fallen tree. It does not cover a roof that wore out.

Two things decide what you receive:

Replacement cost against actual cash value. An RCV policy pays what a new roof costs, less your deductible. An ACV policy subtracts depreciation for the roof's age, and on a fifteen-year-old roof that can be most of the money. Many carriers have moved older roofs to ACV, sometimes at renewal without it being obvious.

Your deductible, which in hail and hurricane states is often a percentage of the dwelling coverage rather than a flat sum. On a $400,000 house a 2% wind and hail deductible is $8,000.

Filing a claim that is denied still goes on your claims record. If the damage is close to the deductible, paying for it yourself is frequently the better decision.

Programmes worth checking

• Utility and state energy rebates where a reflective or cool roof qualifies. These are regional and change often
• FHA 203(k) and Fannie Mae HomeStyle, which roll renovation costs into a mortgage, relevant when buying a house that needs a roof
• USDA Section 504 grants and loans for low-income rural homeowners, including older applicants
• Local housing rehabilitation programmes, run by counties and cities, which are unglamorous and genuinely useful
• Disaster assistance after a declared event

None of these are quick. They are worth a phone call before signing finance.

Things not to do

Do not let a contractor "waive" or "absorb" your deductible. It is insurance fraud in most states, whatever it is called on the paperwork, and you are a party to it.

Do not pay in full up front. A deposit of 10% to 30% is normal; material suppliers extend credit to contractors, not to homeowners.

Do not sign an assignment of benefits without reading it. After a storm, "authorisation to inspect" forms sometimes sign your entire claim over to the contractor, who then deals with your insurer instead of you.

Do not choose the cheapest quote without comparing what is in it. A quote missing tear-off, flashing or the permit is not cheaper, it is smaller.

Frequently asked questions

Can I finance a roof with bad credit?

Options narrow and rates rise. Some contractors work with lenders who accept lower scores at higher cost. Where there is equity, a secured loan is usually still available and cheaper.

Is roof replacement tax deductible?

On a primary residence, generally not as an expense. It may add to your cost basis, which can matter on capital gains at sale. On a rental, treatment differs. This is a question for a tax professional, not a roofer.

Should I use savings or borrow at a low rate?

That depends on what else the savings are for and what the rate actually is. Emptying an emergency fund to avoid modest interest leaves you exposed to the next unexpected bill. It is a question worth putting to a financial adviser.

How long does financing take to arrange?

Contractor financing, often same day. Personal loans, one to seven days. Home equity, two to six weeks. Plan the tarp around the slow ones.

Is it cheaper to wait and save?

Sometimes, and only if the roof can wait. A roof leaking into the structure costs more every month in damage than the interest on borrowing to fix it. An inspection tells you which situation you are in.