Asked by trish  |  Submitted July 29, 2016

Should we take out a home equity loan to replace the roof on our home? Or is there another option that's better?

We are going to need a new roof in the next year, maybe two. We have some equity in our home and our interest rate is 4%. Would it be better to take out a home equity loan or a bank loan to cover the cost of the new roof?

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  Answers  |  1

August 02, 2016

The answer to your question depends on several factors. What's the rate on your current mortgage? What's the value of your home, and how much do you owe? How are your credit scores and debt ratios? In general, a home equity line of credit is faster and less expensive to obtain than refinancing. If your first mortgage is at 3.5%, refinancing it makes no sense, so go with the home equity line. If your first mortgage is at 5%, and/or you're paying mortgage insurance despite having 20%+ equity, refinancing and taking out the money for the roof may be the best route. As you can see, there's a lot to consider, which is why it's really best to discuss your scenario with a mortgage lender. Hope that helps, if you have any other questions, please contact me through my profile, I write loans nationally. Ted

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