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Maximize your bottom line

You’ve done the research, weighed the choices, and finally made the decision on which roofing system you want and the best contractor to install it. Now comes the important part: How will you pay for the roof?

Out of Pocket

Let’s be honest; cash is king, and the ideal project would involve a home expense savings account with sufficient funds designated for such an occasion. The fact of the matter is, most people are not in a favorable situation to pay out of pocket for costly expenses such as a roof replacement. In the real world, roofing problems are usually something that just can’t wait. A seemingly minor leak can do extensive damage to the entire building envelope, so time is of the essence.

Insurance

Insurance policies may cover damage to your roof if it was caused by something beyond your control, but keep in mind, it probably won’t cover any problems related to a lack of maintenance or natural wear and tear. Make sure to check your policy and/or verify with your insurance company what is covered and what is not.

There is a good chance you will be responsible for a deductible before your coverage kicks in, so depending on your current financial situation and how long you are willing to gamble with the safety of your house, there is a good chance you will find yourself looking for one type of financing or another.

Financing Options

A Bank-Direct Home Improvement Loan is a solid option, for those who have good credit or equity built up in their home, but you’ll need to seek out the loan on your own. The most common types of loans in these circumstances are personal loans and home-equity loans.

Personal loans, as the name implies, are loans direct to the consumer based on terms agreed upon with the bank. They’re a good option if you have strong credit and can pay the amount back in a timely manner to avoid eating serious interest. Roof replacements can end up costing $10,000 (or more in some cases), so if you have other obligations, carefully consider what your monthly payments will be and how that will impact other spending. In the case of a personal loan, the bank will disburse the money directly to you and you will then be responsible for any payments related to the roofing work.

Home Equity loanswill have lower rates than personal loans, but they can take 4-6 weeks to approve. You’re also likely to pay hefty closing costs, and could face prepayment penalties if you pay the loan back early. Like personal loans, home equity loans are also good for financing a roof replacement or major repair, if you fit all of the criteria. You can borrow from a home equity line of credit, as needed, up to a predefined limit. However, your bank uses your home equity as collateral for your loan. In return for offering you lower rates than you’d find elsewhere, your bank can seize your home if you default on the loan. Using a home equity loan to repair or replace your roof is tax deductible.

Collaborative financing through the contractor – Another popular option is finding a contractor that has built-in financial capabilities and relationships with lending institutions to streamline the roofing loan process. In this situation, after the initial application process, the contractor works directly with the bank freeing up your time and energy. This is an excellent option to consider if your not comfortable dealing with banks or you are just too busy to sift through the field of financing options out there.

One thing is for sure, regardless if you need a leak repaired or your entire roof replaced you will need to pay for it somehow. Hopefully this information makes it easier for you to navigate the difficult financing process, and answers some questions. It is important to consider all the options and ask the right questions to ensure you select the avenue of financing that best fits your needs, budget and lifestyle.

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