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Roof Financing: 2 Loans You Should Consider

November 29, 2021 | 4 min. read

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You’ve got the news that you need a roof replacement, and now you’re wondering, “how on earth do I come up with that kind of money?”


New roofs can run anywhere from around $8,000 to over $20,000. So finding the right financing option for you can be essential in the process.


But we can’t all be financial experts navigating the world of banking and loans. So if you don’t have that cash-on-hand (and let’s be honest, the majority of us don’t), what are the options available to you to pay for a new roof? 


Rescue My Roof has been in the industry for over a decade, and we’ve assisted hundreds of people just like you. They need to know how to get the money for their brand new roof – and fast.


That’s where we come in. We provide assistance and education for those who are stuck in a rut and need a new roof.


In this article, you’ll learn the difference between a Home Equity Line of Credit and a Home Equity Loan, which are two of the most popular loans you can choose. By the end of this article, you’ll be able to tell the difference between them and decide which one may be best for you. 


HELOC vs. Home Equity Loan


The two sound very similar in name, so what’s the difference?


A Home Equity Line of Credit, or HELOC, functions a lot differently than a Home Equity Loan.


Before we dive in, let’s start with the basics:


What is Home Equity


Home equity is the difference between what you owe on your home mortgage and the value of your home.


For example, if you owe $125,000 on your mortgage, and your home is worth $175,000, you have $50,000 of home equity. 


There are two ways you can build home equity: by paying down your mortgage, so the difference is higher, or putting in the work to make your home value higher. 


What is HELOC, and How Does It Work?


A HELOC is a line of credit that you can use for big home projects like a roof installation.


With a Home Equity Line of Credit, you are borrowing against the equity in your home. It works similarly to a credit card, where when you pay back the balance, the funds can be used again. 


HELOCs are typically beneficial because they have low-interest rates, and you can spend as you go. This means that if your roof only ends up being $7,000 when you originally planned for $8,000, that’s an extra $1,000 that you don’t have to pay back.


How Do I Qualify for a Home Equity Line of Credit?


To qualify for a HELOC, you must have equity in your home. So the value you owe on your mortgage must be lower than your home value. 


Depending on the bank, you may be eligible for up to 85 percent of your home’s equity. 


As a part of the qualification process, your bank may take a look at your credit score and financial history and much of the same information they went over when you first got a mortgage. 


If you have equity in your home and want a loan that functions more like a credit card, a HELOC could be for you.


The first step to securing this loan is to talk to a banking professional, ideally the one you have your mortgage through. They will have easy access to your records, and there is already an established relationship.


After visiting them and securing the line of credit, you will be ready to begin your roofing purchase.


How Does A Home Equity Loan Work?


While they sound similar, a Home Equity Loan is much different than a HELOC.


A HELOC functions like a line of credit, whereas a Home Equity Loan is just that – a loan. You take out a lump sum, which is the total amount (plus interest) you will have to pay back.


A Home Equity Loan is a secured loan, meaning there is collateral involved. The collateral in question is your home’s equity. You will be borrowing against it to secure the amount you need. 


These loans will require you to make a monthly payment on top of your existing mortgage, and unlike a HELOC, the funds will not be reusable. However, they do have another benefit. Home Equity Loans have a fixed rate, so interest rates will not vary throughout the loan’s term. 


The most essential thing to remember about this loan type is that you may qualify for more than you need, so evaluate your budget beforehand to determine what you can pay monthly. While it may seem nice to borrow some extra cash now, paying it off in the long run with interest may not be pleasant. 


Want to learn more about the ins and outs of Home Equity Loans? Click here. 


What Happens Next?


How do you determine which is the right loan type for you? Here are some questions you can ask yourself: 

  • Do I want payments similar to a credit card or a mortgage?
  • Is it financially wise to take out a lump sum when it may be greater than what I need?
  • How much can I afford monthly?
  • How much time do I have?


If you don’t want a second mortgage, have a smaller budget, or are on a time crunch, a HELOC may be your preferred payment method.


However, if you want to take out a flat lump sum and don’t mind the larger monthly payments, a Home Equity Loan may be ideal. However, be aware that these loans typically take longer to receive the funds than alternative methods. 


After that, the next step is finding the right contractor for you. You can start here with “9 Questions You Should Ask Before Hiring A Roofing Contractor” and “The 5 Best Roofing Companies in Milwaukee.”


Still unsure of what payment method best suits you? We’ve got you covered. Visit “Six Ways to Pay for a Roof Replacement” to learn more.

Have you found your preferred payment method? Contact us today to receive a free estimate and begin your roofing journey with Rescue My Roof!