How to Finance a New Roof, the SMART Way

Quick answer: Most homeowners finance a roof one of three ways: a signature loan, a HELOC, or a second mortgage. The approach we recommend at Excel Roofing is what we call SMART Financing. You go through a credit union instead of a high fee dealer lender, and you do it in stages. You start with a fast signature loan to get the work done, then convert that loan into a HELOC for flexible, long term credit.

At a glance

• Insurance now covers less of a roof replacement, so financing a roof has become more common in Colorado and Wyoming.
• The three main options are a signature loan, a HELOC, and a second mortgage.
• A credit union usually beats dealer or contractor financing on both fees and interest.
• Excel SMART Financing means starting with a signature loan, then converting it to a HELOC.
• Interest on a HELOC or second mortgage may be tax deductible when the money is used for home improvement. Ask your tax advisor.

Why are more homeowners financing their roofs?

For many years, financing a roof was uncommon because insurance paid so much of the bill. That has changed. Insurance companies have been decreasing coverage and increasing deductibles, so more of the cost now falls on the homeowner. Because of that, financing a roof has become common. It also gives you the option to upgrade to a more durable product that is less likely to be totaled by hail.

What are the three main ways to finance a roof?

There are three common loan types, and each one can get you the roof your home needs while reducing the chance of a future hail claim. Here is how they compare.

What is a signature loan?

A signature loan does not use your home as collateral. It is based on your credit score and your debt, which makes it the quickest of the three to obtain. The trade off is that most signature loans come with an upfront dealer fee.

What is a HELOC?

A HELOC, or home equity line of credit, generally does not have upfront dealer costs. Because it is secured by your home, the approval process takes a little longer. A HELOC works like a credit card. You can draw money out as you need it and pay back only interest during the draw period. One of the biggest benefits is that when the loan is used for home improvement, the interest may be deductible from your income taxes. Talk with your tax advisor about your situation.

What is a second mortgage?

A second mortgage usually takes the longest because it requires a home appraisal and a longer approval process. The upside is that it comes with a fixed interest rate and a fixed payment schedule, so your payment never changes. Just like a HELOC, if the loan is used for home improvement, the interest may be deductible. Again, check with your tax advisor.

Should I use a contractor's financing or a credit union?

Because financing has become a necessity, many companies in the home improvement space now offer it. What they do not always tell you is that some of these lenders can be predatory. By predatory, I mean high upfront fees and high interest costs that quietly add up over the life of the loan. If you have good credit and equity in your home, the best thing you can do is go to a credit union, such as ENT Credit Union, and explore your options there. You will almost always come out ahead on both fees and rate.

What is Excel's SMART Financing approach?

SMART Financing is simple. You obtain your financing through a credit union, and you do it in stages. You start with a signature loan, which lets you get funded quickly without a large upfront dealer fee. Then you convert that signature loan into a HELOC. That revolving line of credit gives you ongoing access to funds and the ability to deduct the interest payments when the money is used for home improvement. You get the speed of a signature loan up front and the flexibility and tax advantages of a HELOC down the road.

Is it worth financing a more durable roof?

Many homeowners who have had to replace their roof more than once are choosing more durable products like concrete tile or stone coated steel. These roofs are not easily totaled by hail, which can save you from repeat claims and repeat deductibles. The downside is cost, since these systems can run up to twice the price of an asphalt roof. Financing is what makes that upgrade realistic for most families.

Frequently asked questions

Is it common to finance a roof in Colorado? Yes. As insurance has reduced coverage and raised deductibles, financing a roof has become common across Colorado and Wyoming.

What is the best way to finance a roof? For most homeowners with good credit and equity, going through a credit union is the best route. Our SMART Financing approach starts with a signature loan for speed, then converts to a HELOC for flexibility.

Can I deduct roof loan interest on my taxes? When a HELOC or second mortgage is used for home improvement, the interest may be tax deductible. Your situation is unique, so confirm with your tax advisor.

Is a signature loan or a HELOC better for a roof? A signature loan is faster and needs no collateral, but it often has an upfront fee. A HELOC takes a little longer, has no dealer fee, and offers revolving access. Many homeowners start with one and convert to the other.

Does Excel Roofing help with financing? Yes. We can point you to our credit union partner to see what you qualify for, and we will help you plan the SMART Financing approach that fits your project.

Ready to talk through your options?

If you have questions about SMART Financing, check with our credit union partner to see what you qualify for. Visit our Learning Center to explore the many products and services we offer, and when you are ready, give us a call or use our easy online scheduler to pick the day and time that works best for you.

At Excel Roofing, You Don't Pay A Cent Until You're Content. We're On Top Of It.