Understanding Your Options for Siding Financing
Siding financing can help you afford the hefty cost of adding new siding to your home — typically between $5,000 to $14,050, according to HomeAdvisor data — and can give you extra funds for other home improvements.
We’ll break down several common financing options and different types of siding so you can pick the best financing and material for your home renovation.
8 options for siding financing
There are many options available for borrowers looking to pay for new siding on their home, including:
- FHA 203(k) loan
- FHA Title 1 loan
- Cash-out refinance
- Home equity line of credit (HELOC)
- Home equity loan
- Personal loan
- Contractor financing
- Credit card
1. FHA 203(k) loan
An FHA 203(k) loan is a government-backed mortgage designed for fixer-uppers. It gives you the opportunity to refinance your existing mortgage (or purchase a new home) and make home improvements at the same time.
If you use a 203(k) loan to refinance, you’ll use a portion of the new proceeds to pay off your original mortgage. The remainder of the funds go into an escrow account, which you can then use to cover the cost of home improvements — such as new siding.
2. FHA Title 1
You may qualify for up to $25,000 worth of siding financing with an FHA Title 1 loan. These government-backed home loans are designed to help low- to moderate-income homeowners pay for renovations that will “substantially protect or improve the basic livability or utility of the property,” according to the U.S. Department of Housing and Urban Development (HUD). You can also stack these loans with the FHA 203(k) loan if you need access to more financing for eligible home improvements.
Learn more about FHA loan requirements today.3. Cash-out refinance
A cash-out refinance allows you to take out a new mortgage that pays off your original home loan. The new mortgage amount is larger than the balance you owe on the existing loan, and you get the difference in cash to use as you wish.
Interest rates can be very competitive, depending on your credit and other factors. However, you’ll need to have enough home equity to qualify. Lenders usually don’t let you go over an 80% loan-to-value (LTV) ratio, which means the combined cost of paying off your old loan and the cash together can’t exceed 80% of your home’s value. You’ll also have to pay closing costs on your refinance.
4. HELOC
Home equity lines of credit (HELOCs) are similar to credit cards, in that you can withdraw funds multiple times up to a certain credit limit. There’s one big difference, however: If you can’t make your payments, you could lose your home. That’s because a HELOC uses your home equity as collateral for the credit line.
HELOC rates are typically variable but may still be competitive if your credit is in good shape.
Use our HELOC calculator to estimate how much money you could borrow.5. Home equity loan
Home equity loans also use your home equity as collateral and offer a lump-sum cash payout that can be used to cover the cost of new siding. With a home equity loan, you can usually borrow up to 85% of your home’s overall value, minus the amount you owe on your first mortgage.
Home equity loans typically offer decent interest rates that are higher than HELOCs and cash-out refinances but lower than unsecured loans. Of course, your exact rate will depend on the condition of your credit and other factors. However, if you can’t repay the loan as promised, you risk losing your home to foreclosure.
6. Personal loan
Personal loans are fixed-rate loans repaid over a set period of time. They can be used for many purposes, including home repairs like siding installation. Depending on the lender and your financial profile, you may qualify to borrow up to $100,000.
Personal loans are usually unsecured — this means that interest rates are higher than both traditional mortgage rates or second mortgage rates, since there’s no collateral backing the loan.
Learn more about current personal loan requirements.7. Contractor financing
If you hire a contractor, you may be offered a package plan that includes financing for the work as well as the siding itself. The contractor doesn’t actually loan you the money, but rather has a relationship with a lender that can sometimes result in an expedited loan process.
Contractor financing may even feature an interest-free period as an added bonus. But if an interest-free period is available, it’s important to do your research. Some lenders will forgive the interest, but some simply defer it unless you repay your balance before the promotional period ends.
Read more about home construction loans and how they work.8. Credit card
Credit cards are one of the most flexible forms of financing available and, since they’re unsecured, they won’t put your home or other collateral at risk. At the same time, credit card debt can be notoriously expensive and can snowball quickly if you fall behind on payments.
Browse our picks for the best credit cards today.
Beware of high interest rates on credit cards
Types of siding to choose from
One of the most important decisions you’ll make about your new siding is what material you want to use. It’s best to pick the siding that will give your home the best look and enhance or maintain its value, as well as one that fits your installation and maintenance budget. The total cost will be based on the price per square foot for both the siding you choose and the installation.
Here are some of the most common types of siding, though there are many other options, as well:
Vinyl siding
Vinyl siding may range anywhere from $3 to $12 per square foot, with an additional average cost of $7.50 per square foot to install it, according to HomeAdvisor. Since this type of siding is made of polyvinyl chloride plastic, it’s not likely to rot, but does have the potential to crack as time goes on.
Aluminum siding
Aluminum siding can also be fairly inexpensive, typically costing about $3 to $6 per square foot installed, per HomeAdvisor. This material stands strong in cold weather and salt air, and won’t crack over time. But beware — it can dent.
Stucco siding
Stucco comes with an average price of about $8 per square foot for materials, equipment and labor, according to HomeAdvisor. That price does go down slightly if your house is large, reaching a low of about $4.50 per square foot for homes of at least 5,000 square feet. If you live in warmer areas, this might be the material that works best, as it helps retain the cool air while blocking out the heat.
Wood siding
Wood clapboard is made from trees including pine and spruce, and priced accordingly. This siding can typically start at around $1 per square foot and goes up to $15 per square foot, depending on the type of wood, according to HomeAdvisor. The standard installation price is about $2 to $5 per square foot. In total, it’ll likely be more expensive than either vinyl or metal. It may also require more maintenance, including regular staining, to keep it looking its best.
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5 steps to take before making a siding financing choice
Before you start filling out credit applications or even selecting your contractor, here are five important steps to follow:
1. Get multiple quotesAs you shop around for contractors, be sure to get quotes from several different companies. You’ll usually want to have a minimum of three quotes to get a good sense of what the job should cost.
2. Compare what’s included in each priceEach quote you receive should break down everything that’s included in the price, such as labor, materials and the estimated time of completion. Feel free to inquire about all the different material options you’re interested in to get an idea of what might fit within your budget.
3. Check referencesGoing online to check out a company’s reviews — for instance, at the Better Business Bureau’s website — is a good start, but getting actual references from real customers will put you ahead of the game. This can provide some reassurance that the company has done good work in the past and has the customer satisfaction to back it up. If you find that a neighbor has used a particular contractor, you could even see their work in person.
4. Watch for red flagsBe on the lookout for contractor scams, which can involve paying a lot of money upfront and having the contractor disappear when it’s time to get started. Watch out for “cash-only deals” and high upfront payments. You should also steer clear from a contractor that prefers a handshake to a written contract. It’s also important to work only with contractors who are licensed, insured and have proper work permits.
5. Consider paying cash, if possibleIf you can manage it, paying cash for home improvements is a financially savvy move. However, if you can’t afford to cover the cost of repairs out of your own pocket, that doesn’t necessarily mean you should take more time to save. In some situations, delaying the work could be more expensive in the long run. A house with damaged or missing siding is vulnerable to issues like water damage, mold, insect infestation and even structural problems.
Learn more about how to compare lender offers for your home loan.