Owning a home is a rather expensive endeavor. Homeowners pay yearly property taxes, monthly mortgage payments, and also finance general upkeep for their property. This is why so many people choose to finance the work they do on their roof. The cost of replacing or repairing a roof costs on average $7,500.
Sometimes loans sneak up on us, however, and it becomes difficult to stay up to date with a payment schedule. Unfortunately, it’s not an uncommon instance that homeowners will finance the work they’re doing to a financer and cannot keep up with the loan costs. Because of this, homeowners end up defaulting on the loan.
So, what happens when a homeowner defaults on a loan they’ve taken out for work on their roof? The short answer is that it depends on what kind of loan you take out.
Unsecured Personal Loans
Home repair loans can take many different forms. You may take out a personal loan to finance your roof. This is an option worth considering because an unsecured personal loan does not put up your house as collateral.
Since this loan is unsecured, homeowners are not guaranteed a lower interested rate. However, if you can’t pay the loan back and end up defaulting, you’re not at risk of losing your new roof or your new home.
Home Equity Loans
Home equity loans are attractive loans for homeowners to consider because they allow you to borrow money against the worth of your home. Most often, homeowners can’t borrow more than 85% of their equity in the home. Home equity loans are secured, which means that homeowners will receive a lower interest rate than with an unsecured loan.
However, home equity loans tend to come with fees, and if you default on a home equity loan, you’re at risk of losing your house.
Home Equity Line of Credit
A home equity line of credit is very similar to a home equity loan in that you need to put up your home as collateral for the loan. It is also a secured loan so interest rates should be reasonable. But instead of receiving a lump sum of cash, you’re given a line of credit, which can make payments easier to keep up with. However, one catch to keep in mind is your budget. If you borrow more than you can pay back, you’ll risk foreclosing your home. Contact Steele Restoration if you need a new roof.