Understanding Your Options for Siding Financing
New siding can improve your home’s curb appeal and energy efficiency, but financing new siding can be costly. The cost to put siding on a house can range from about $5,300 to $16,000, according to home improvement services resource HomeAdvisor — though this cost will depend on your location and the material you choose.
We’ll break down several common financing options that may help you if you’re trying to figure out how to pay for new siding. Plus, we’ll also include a guide to the different types of siding, to help you pick the best material for your home renovation.
8 options for siding financing
1. Cash-out refinance
A cash-out refinance is a term that describes the process of taking out a new mortgage to pay off your original home loan. The new mortgage amount is larger than the balance you owe on your existing loan, and you get the difference in a lump sum. If you’re looking to lower your mortgage rate while also getting cash for your new siding, this loan option might make sense.
Interest rates can potentially be competitive, depending on your credit and other factors. However, you’ll need to have enough equity in your home in order to qualify, and you’ll also incur closing costs.
2. FHA 203(k) loan
An FHA 203(k) loan is a government-backed mortgage product designated 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.
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With this loan, you 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 siding replacement.
3. FHA Title 1
If you don’t have a lot of equity in your home, you may still be able to qualify for up to $25,000 worth of siding financing with an FHA Title 1 loan. These government-backed home loans are available 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. You can also stack these loans with the FHA 203(k) loan if you need access to more financing for eligible home improvements.
4. Home equity loan
Home equity loans, also called “second mortgages,” represent another potential source of financing to help you cover the cost to install vinyl siding or other types of siding materials. With a home equity loan, you may be able to borrow up to 85% of your home’s overall value, minus the amount you owe on your first mortgage.
Interest rates are typically fixed and can be competitive, depending 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.
Home equity lines of credit are similar to home equity loans, in that you borrow against the equity in your home. Yet with HELOCs, you can withdraw funds multiple times during the “draw period,” as long as the account remains open and in good standing.
Interest rates on HELOCs are typically variable, but they may still be competitive if your credit is in good shape. On the downside, HELOCs sometimes feature prepayment penalties and, again, you could lose your home in the event of a default.
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, you may be able to borrow between $1,000 and $50,000 — sometimes, even more.
Your credit score and debt-to-income ratio can both play a role in your ability to qualify for this type of financing, and these factors also typically influence your loan interest rate, fees and terms. For example, you may still be able to qualify for a personal loan with bad credit, but you should expect to pay more.
7. Contractor financing
The contractor you hire may offer a package plan that includes financing for your home siding update. The contractor doesn’t 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 research whether the lender will forgive the interest or simply defer it unless you repay your balance before the promotional period ends.
8. Credit card
Credit cards are one of the most flexible forms of financing available. At the same time, credit card debt can be notoriously expensive, and could damage your credit score as well.
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The average interest rate on new credit card offers is 19.47%, as of May 2021. Unless you qualify for a 0% promotional APR offer (and can pay off your siding purchase before the promo period ends), you’re probably better off searching for a more affordable siding financing option.
Types of siding to choose from
If you’re considering new siding for your home, you’ll first need to decide the type of material you want to use. There’s plenty to choose from, all coming in at different price points. The total cost will be based on the price per square foot of siding you choose, as well as price per square foot for installation. You’ll want to choose your material based on factors like cost to put siding on a house, maintenance requirements and how it looks. Find out what type of siding homes in your area use most frequently.
Herman Schoening, construction advisor at YouthfulHome.com advises homeowners 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.
Here are a few of the most common types of siding, though the list is far from exhaustive.
Installing vinyl siding may range anywhere from $3 to $12 per square foot, with an average cost of $11,135 for a complete installation job, 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.
Metal siding, especially aluminum, can also be less expensive, typically costing about $3 to $6 per square foot installed, per HomeAdvisor. In addition, the national average cost for this project is listed on the site at $10,403. This material stands strong in cold weather and salt air, and won’t crack over time. But beware — it can dent.
Wood clapboard is made from trees including pine and spruce, and priced accordingly. This siding can typically start at around $3 per square foot and goes up to $15 per square foot for its materials cost, according to HomeAdvisor. The standard installation price is about $12,500, making it more expensive than both vinyl and metal. However, this type of siding may require more maintenance, including regular staining, to keep it looking its best.
Stucco may be one of the more expensive types of home siding on the market, with a starting price of $7 per square foot for materials, equipment and labor, per HomeAdvisor. However, the installation can be less than with other materials, typically between $2 and $3 per square foot — this brings the average cost to stucco a 1,500-square-foot home to $9,525. 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.
Steps to take before making a siding financing choice
Before you start filling out credit applications or even select your contractor, here are five important factors you should contemplate:
Get multiple quotes. As 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.
Compare what’s included in each price. Ensure each quote provides you with a breakdown of 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.
Check references. Going online to check out a company’s reviews 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 had the customer satisfaction to back it up. If you find that a neighbor has used a particular contractor, you can even see their work in person.
Watch for red flags. The Better Business Bureau advises you to watch out for contractor scams, which can involve paying a lot of money upfront and having the contractor disappear when it comes time to get started. The BBB website says there are certain things to watch out for, such as “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.
Be wise about the type of financing you choose. Marina Vaamonde, a real estate investor and founder of HouseCashin, recommends covering your siding replacement with a financing option that uses your house as collateral. “These [options] give you the best interest rates and the longest amortization, and the interest is possibly tax deductible,” she says.
Consider Paying cash, if possible. The U.S. Department of Housing and Urban Development (HUD) encourages homeowners to pay cash for home improvements whenever possible. However, if you can’t afford to cover the cost of improvement or repairs out of your own pocket, delaying the work could be more expensive in the long run in some situations.