Whether you’re replacing your roof or undergoing repairs, there are probably dollar signs at the forefront of your mind. While you might have a solid insurance policy that’s going to cover the bulk of the cost, you still have to pay your deductible, which may be $1,000 or more. Many people don’t have that kind of money available at any given moment, but the good news is there are options to address that. Here are a few things you can do (and one thing you definitely should NOT do) to help:
Review Your Financing Options
If you don’t have cash on-hand to cover your roof deductible, you certainly don’t want to put that payment onto a high-interest credit card. There are better financing options to consider that will cost you less money in the end – here are a few common ones for roof expenses:
Ask Your Contractor About Payment Plans
Most reputable contractors have financing options; if they do, it’s a positive sign in general because it means they have the resources and the good standing with their lenders to offer it. A great first step when considering financing is to ask your contractor what they offer. Depending on the company, they may provide payment plans in-house or through a third-party vendor. Be sure to ask about the monthly cost and terms associated with a payment plan before agreeing to anything.
Home Equity Loan or Line of Credit (aka HELOC)
A home equity loan or line of credit allows you to borrow against the equity you have built up in your property. If you’ve been living in your home for a while or you have a lot of equity in it, these may be good options. It can also be an ideal choice if your credit score could use some work. Just like your mortgage, you would make fixed payments on a home equity loan over a specific term until it’s paid off.
A particular drawback you should consider about this type of loan is, if you fail to make payments on it, your lender could foreclose on your house. This could happen because your house serves as the collateral for the loan. If you’re confident you can make the payments, this could be the right option for you.
Unlike a home equity loan, a personal loan doesn’t require you to put your house up as collateral. You would typically get this type of loan from your financial institution, whether it’s a bank or a credit union. If you’re leveraging a personal loan to pay your roof deductible, you may be able to find a particularly low interest rate because it would be a small loan resulting in a short payment term. Be sure to compare at least a few different institutions to improve your chances of getting the lowest interest rate.
It’s also a good idea (for any loan, not just a personal loan) to ask if there are any penalties for paying off your loan early. You might be tempted to do so if the funds become available to you, but you could be faulted for it depending on what’s in the fine print.
FHA Title I Loan or FHA 203(k) Loan
If you own a single-family home, you may qualify for an FHA Title I loan, which covers small and large home-improvement projects. These loans are government-funded through the Department of Housing and Urban Development and must be used to “substantially protect or improve the basic livability or utility of the property,” and, “be used in conjunction with a 203(k) Rehabilitation Mortgage,” as the Department puts it.
An FHA 203(k) loan requires lower minimum credit scores than some of the other roof financing options. It can cover costs of at least $5,000 and allows you to refinance your existing home, rolling the costs for the roof replacement into the new mortgage.
Get Other Repairs Approved by Insurance
When you need to repair or replace your roof, you’ll always be required to pay your insurance deductible. However, it works differently with other elements of your home such as your gutters or siding. Let’s say you incur storm damage to those areas and you’d like to cash in on the credit owed to you by your insurance company; you aren’t required to actually repair those things when requesting reimbursement for storm damage. It’s possible to use the ACV (Actual Cash Value) of those items without having to file with your insurance company for depreciation. There’s nothing illegal about keeping the ACV! If you do this, you’ll have more money to put toward your deductible for your roof work.
Do NOT Allow Your Contractor to “Pay the Deductible”
Homeowners occasionally run into contractors who offer to cover their deductible in order to win the job. While this seems like a great deal you’d want to jump at, it’s also too good to be true because it’s actually illegal – more specifically, it’s insurance fraud that’s punishable by a felony for both the contractor and the homeowner.
This sales tactic is a major problem because the contractor won’t actually cover that cost – they’ll increase your insurance company’s bill by that amount so it doesn’t have to come out of their pocket, thereby throwing off the balance of costs for the entire insurance pool. If they aren’t caught, they’ll move on to their next job while you’re left with the risk of your premium increase, on top of potential legal ramifications.
Best Roof Contractor in Indianapolis
Need to repair or replace your roof? Indy Roof Company is a trusted name for Indianapolis homeowners, and we always have your best interest in mind. Our team has not only the highest standards and a wealth of knowledge in roofing services, but we also care about our clients. We’re happy to provide more guidance on paying your deductible and the insurance claims process as a whole. Call Indy Roof Company for a professional, no-hassle opinion today!