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Even in the age of furnaces and smart thermostats, the fireplace is still a focal point of the home. It’s not necessarily keeping you toasty in the cold months, but it is serving as the visual frame of reference in a living space.

So when your fireplace is boarded up, or drably dated, remodeling it can breathe new life and warmth into the entire area.

Not only that, it could bring you some extra cash. An Angie’s List survey of real estate agents revealed that more than 68% believe that having a fireplace in the home increases its value.

So before you try to board it up or knock it down, explore trends and tips for how to remodel a fireplace.

Your fireplace might be housed in a brick wall, meaning you have not only the fire box to contend with, but an entire brick wall to reimagine. While exposed brick is on trend, it can also make a room feel dark or small.

Reimagining your brick wall and brick fireplace may seem daunting, but there are several ways to update the brick, or remodel over it for a fresh new look.

Before you commit to a remodeling plan for your fireplace, consider the following questions:

•   Do I mind if this is permanent? Some fireplace updates won’t be reversible, so you may want to sleep on it before you dive into something you’re not in love with.

•   Do I want wood, gas or both options? Some areas or individuals prefer gas over wood burning options. Wood burning can add to poor air quality in some cases.

•   How much do I want to spend on the project? Materials, installation, and time can be costly, and some updates are more affordable than others.

•   Are you updating the fireplace for potential sellers or yourself? Answering this question might give you a better idea of how much you want to spend, and which style might appeal to a future buyer.

Depending on what you have in mind for your hearth, options for updating may vary. Warm yourself up with these fresh takes on the fireplace.

Painting the Fireplace

Painting your fireplace is likely the most affordable way to give the room an update. Paint can cost anywhere between $30 to $100 per gallon , depending on where you live and what type and brand you go with.

1. Applying a coat of paint to the fireplace shouldn’t take more than an afternoon, but some professionals recommend you prep with these steps beforehand:

2. Brush the wall to clear off mortar or debris.

3. Vacuum the debris from the brick.

4. Clean and degrease the fireplace brick with a sponge.

5. Choose indoor, latex, heat resistant paint (200 degrees).

There are seemingly endless colors and types to choose from, but many designers recommend a neutral black, gray, or white.

A white or neutral tone can have a space-opening effect, making the room seem larger. Some colors will make the room look smaller, and might turn off potential buyers in the future. Flat, semigloss or gloss can be used.

Remodeling the Mantel

Adding a mantel or remodeling your existing one can change the entire look of a fireplace. Your mantel could include additional built-ins around the fireplace, or a simple minimalist board above the firebox.

Switching up your mantel is typically an easy remodel since it’s just a frame for the fireplace itself. The costs associated with it are likely tied to how ornate your plans are. Out-of-the-box mantel kits start around $180 , and can be assembled and installed in a day by a DIY novice.

If you have more ambitious plans for your mantel, it’ll likely cost you. Stone and marble mantels start at $3,000 , and a custom mantel costs a similar amount. The more complicated the design, the higher the price of creation and installation.

Mantel installation can be pricey, but in many cases it can also be reversed, making it an appealing option in the event that you decide to sell the home down the line.

Tiling Over the Existing Fireplace

If you’re looking to refinish your fireplace, tiling might be the right choice for you. Try a white subway tile for a sleek, modern finish, or a printed tile for a unique pop of color in your space.

The cost of remodeling your fireplace with tile will vary widely based on the size of your fireplace, as well as the cost of tile per square foot.

Tile installation averages around $1,500 for a project this size. However, depending on the condition of your fireplace, you might choose to consult with a brick mason in addition to a tiling professional.

A mason can let you know if its possible for the brick to be covered evenly. But, be warned—once you start tiling over your fireplace, you likely can’t reverse the process.

Covering Your Brick Fireplace with Stone

If you’re looking for a natural but updated treatment on your fireplace, stone might be the right fit. However, if your brick is already painted, it’s likely the mortar required to attach the stone won’t adhere. Consult with a masonry professional to see if your brick is porous enough to cover over.

If your fireplace is a good candidate for stone work, you’ll want to install a cement board over the existing brick as a template for the stone. The resurfacing process costs on average, $1,100 for labor , but depending on which stone you use, expenses can balloon.

•   Artificial stone veneer is the most common choice for most fireplace projects. Although it might look like real stone, it’s not as heavy as the real thing. Installation is similar to that of real stone, but on average, it costs less than real rock.

•   Natural stone veneer is the priciest and trickiest stone to install. It’s heavy, hard to come by, and expensive. Additionally, since it’s more difficult to work with than the alternatives, you may want to work closely with a professional.

•   Faux stone is affordable, lightweight, and has no actual stone. Instead of installing piece by piece, faux stone can be installed in larger panels. However, unlike artificial stone veneer, faux stone bears less resemblance to the real thing and is often hollow.

Drywalling Over the Fireplace

You might be done with brick entirely, and just want a white wall to work with. In that case, drywalling over most of the fireplace might be the solution for you.

With drywall, you can choose to cover all, or a portion of the brick wall and fireplace. You might choose to reveal some bricks, but minimize the overall look of exposed brick in the space.

To drywall around the fireplace, you’ll use two-by-fours and attach sheetrock to them. From there, you’ll paint and have a new wall.

But, be warned, this method can leave your room slightly smaller. Work with a contractor to get a better idea how room dimensions might change. Typically, installing drywall costs $1.50 per square foot, and jobs cost $1,711 on average .

Financing Your Fireplace without Burning up Your Budget

Depending on the route you choose to take, updating your fireplace could turn into a pricey venture.

Remodels can sometimes take longer and creep outside your budget. If you don’t have wiggle room in your savings, you might consider an installment loan with SoFi.

SoFi offers unsecured personal loans for loan amounts up to $100k, it won’t be a lien against your property and you could receive the funds you need in as little as 3 days. with low rates and no fees required, you can focus on your focal point for the fireplace of your dreams.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL19061

You remember how psyched you were when you got to sign the lease for your current apartment. Especially in a huge city where finding a place that meets your specifications can be like searching for the holy grail, once you find that perfect spot, you hold on tight.

That makes sense. But even if you’re happy paying rent for your place now and have been for the last several years, you might have moved up in your career since then, or you’re thinking about having a kid and need a place that’s nearer to school districts than bars. Plus, depending on marketing conditions, putting that rent money toward owning a place would likely become a great investment.

In that goal, you’re not alone, According to a 2018 Homebuyer Insights Report , 72% of millennials say that owning a home is a top priority.

It’s an exciting time, for sure, but a major financial decision like buying a home can be daunting—or even terrifying, especially if you have student loans to worry about.

Since you don’t want to be hasty or over-buy and hinder your efforts to reach financial wellness, here a few ways to help you know if you’re ready to take the leap to homeownership.

You’ve Saved for a Down Payment & Homeownership Costs

This is one of the most important steps in the home buying process. According to a 2018 report report from the National Association of Realtors (NAR), of the buyers who took out a mortgage, 5% of them made a downpayment worth 6% or less of their home value. So, the traditional 20% down isn’t as common as believed. But, 6% down is still a chunk of change. And, the down payment is just one of the costs associated with buying a home.

It is important to consider other costs such as mortgage payment, closing costs, insurance, taxes, and more. So, when you are thinking about buying a home you should factor in all of these potential costs and make sure you have that saved or a plan of action to pay for these costs.

Double-Check How Much Home You Can Afford

As mentioned above, it’s a good idea to check if you can afford the additional costs that are associated with the home buying process. Use the home affordability calculator below to estimate the cost of purchasing a home and your monthly payment – including additional costs such as property tax, insurance, and closing costs.

You’re a Good Candidate for a Mortgage Loan

Not surprisingly, mortgage lenders pay close attention to job continuity and consistent income.

Another biggie is your debt-to-income ratio, which will give lenders insight into whether you can truly afford mortgage payments (seeing whether or not you have too much debt to buy a house). To determine your ratio, it is a good idea to get prequalified for a mortgage loan to see what you would qualify for.

Then, you would take that estimated housing payment which would include principal, interest, taxes, insurance, and HOA (if applicable, along with ongoing monthly debt payments to help you understand what your DTI is.

If you’re at that threshold, but haven’t saved enough for a huge down payment, don’t worry. Some lenders are prepared to help—SoFi, for example, offers flexible down payment options starting at as little as 10% on loans up to $3 million, with competitive rates.

Remember, there’s a lot of competition among lenders, so shop around to choose the one that offers terms to suit your needs.

You’re Ready to be Your Own Landlord

Are you ready to handle home repairs? If something breaks it is all on you.

A condo can be a good choice if you travel a lot or if you don’t want the responsibility of maintaining a yard. Condos can be a good stepping stone to owning a house as the property is less time consuming because you don’t have any exterior or lawn maintenance to handle.

But you’ll still need to be prepared to make small repairs yourself, hire a pro, and replace big-ticket items, such as major appliances, now and then. So make sure there’s enough money in your reserve fund to cover the routine stuff and the surprises.

A good rule of thumb is to set aside about 1-3% of the home’s value each year. Some years, you might not need to pay that much. But, if you live in your home long enough, you’ll likely shell out for hefty repairs in other years. Once you buy your home you can use SoFi’s Home Improvement Cost Calculator to get an idea of how much your renovation projects will cost.

You’re Ready to Settle Down

It is harder to move cities once you buy a home. You can’t just pick up and leave as you can if you are renting. Buying a home is a big decision, so it is important to make sure you are ready to settle down in that location for a while.

You Know Location is Everything

Ernst and Young’s The Millennial Economy 2018 study reported that 62% of Millennials live outside of the city either in the suburbs, small towns, or in rural areas. The location of your home—whether it’s a big city or on the outskirts—could impact your budget and overall enjoyment as a homeowner.

If you’re serious about buying your first home, you’ve already taken the time to scope out neighborhoods and to understand how to choose a location best fits your lifestyle. You know that the overall feel of a neighborhood, the quality of life it offers, and its proximity to your job matters—a lot.

Preparing to Take the Next Big Step

If you’re definitely ready for homeownership, you’ll need to get your financial ducks in a row. Here are a few tips to get you started:

Getting Out of the Student Loan Debt Shadow

Don’t fret if your student loans aren’t paid off yet. You can Look into refinancing your student loans, which may lower your monthly payments, and/or decrease the loan term, and allow you to save faster for a home down payment.

Hitting the Homebuyer Books

Download The SoFi Guide to First Time Home Buying to learn some essential steps to take, the types of mortgages available, and common real estate terms.

Keeping Track of Your Credit Blemishes

Your credit score is one factor that will help a lender determine if you qualify for the loan; if it’s high enough, you could possibly snag better terms on your mortgage loan.

Follow a step-by-step plan for paying down debt so you can work toward boosting your credit rating. Buying a home with a significant other or a spouse is a huge personal accomplishment and major financial milestone.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

MG17114

The path to homeownership isn’t always a straight line. After all, there are so many factors that could come into play in the rent vs. own debate. Considerations might include how long you plan to stay in a specific home and location, have you saved enough for a down payment, if you are ready for the responsibility that comes with maintaining a house.

However, one of the biggest considerations when thinking about your housing options comes down to the cost of rent vs the cost to own in any town or city. Often referred to as the price to rent ratio, this calculation can be a helpful tool when determining the rent to value ratio in a certain area.

This ratio is a benchmark that can help potential homeowners as they decide whether or not to plunk down their life savings on a home. Here’s exactly what that ratio is and what it looks like in the top five major metro areas in the United States.

What Is the Price to Rent Ratio?

The price-to-rent ratio may sound intimidating, but fear not, it’s easier to break down than you may think. It’s compares cost of rent to mortgage in a ratio format.

Here’s an example for you: Let’s say the average annual rent paid in the city you are considering living in is $3,000 a month and the average property selling price is $1,000,000.

The price to rent ratio would be calculated by taking the $1,000,000 property value and dividing it by 12 months. That equals $8,333.33 a month.

Next, divide that number by the average rent. In this case, that would be $8,333.33 ÷ $3,000. This gives you the price to rent ratio, which in this example is 27.78.

Alternatively, you could divide the median home price by median “yearly” rent, so $1,000,000 / $36,000. This will give you the same price to rent ratio of 27.78.

This rent to price ratio can indicate whether housing may be overpriced in an area. It can also be helpful when estimating whether it is cheaper to buy or rent. Investors who purchase rental properties often look at this ratio before purchasing an investment property to rent out later as well.

The price to rent ratio can sometimes be used as an indicator of an impending housing bubble. Since a substantial increase in this ratio could mean that renting is becoming a more attractive option in that specific housing market.

Understanding what this ratio means and learning how to calculate this ratio for yourself could be useful information as you consider whether to rent or buy.

There are a variety of resources that describe price to rent ratios in different communities that can helpful in determining what areas are best to rent in or to buy across the country. There are even some helpful online calculators that can give you an estimate of the price to rent ratio in specific zip codes.

Price to Rent Ratio: When to Buy and When to Rent?

So, is the theoretical town with a price to rent ratio of 27.78 a better place to buy or to rent?

A price to rent ratio ranging from 1 to 15 typically indicates that it is better to buy than it is to rent in a given community. A price to rent ratio of 16 to 20 indicates it is typically better to rent than buy, and a ratio of rent to home price of 21 or more indicates it is better to rent than buy.

Since the theoretical town falls into 21+ category, it would be a rent friendly community. Of course, like all things in life, there are a few exceptions to this rule, but these are general guidelines to follow when making the all-important housing decision.

Looking for a few real-life ratios? Here are five popular metropolitan areas in the United States and their price-to-rent ratios to help you make a better informed decision on your next move.

New York, NY

According to SmartAsset’s 2019 analysis , New York City’s price to rent ratio is 36.83 based on the equivalent of a $1,000 rental to its $441,987 purchased home counterpart. And, as described above, that makes the city a renter’s market rather than a buyer’s one.

San Francisco, CA

It’s no secret that San Francisco’s housing market is one of the most competitive in the country . So, perhaps unsurprisingly, its price-to-rent ratio is a whopping 50.11 based on a $1,000 rental that is equivalent to a $601,362 purchased home, according to SmartAsset.

Boston, MA

In Boston, SmartAsset found that would-be residents will find a price-to-rent ratio of 29.23 based on that $1,000 rental equivalent to a $350,811 home. While that’s lower than New York and San Francisco, but the price to rent ratio indicates that it may still be a renter’s market.

Denver, CO

Compared to SF and NY, Denver may have a more buyer friendly market, with an estimated price to rent ratio of 25.60 based on a $1,000 rental and a $307,232 home. That still puts it above the threshold for those wavering between renting and buying.

Chicago, IL

One major city to make the list of places where it’s better to buy than rent is Chicago, which scored a 19.99 based on a $1,000 rental and a $239,831 home price.

But not all cities have price to rent ratios as high as these five hot markets. For example, Detroit has one of the lowest price to rent ratios at just 5.35 when comparing a $1,000 rental price and a $64,194 home.

Deciding You’re Ready to Buy

If you decide you’re ready to buy there are ways to make it more financially feasible, no matter your chosen city’s price-to-rent ratio. And that includes looking into mortgage options so you can find the best option. As you embark on your search, consider SoFi.

SoFi Mortgages offer qualifying borrowers competitive rates and no hidden fees. Plus some people can qualify for a loan with as little as a 10% down payment. You can find out if you pre-qualify for a mortgage in just a few minutes. That way, when the right home comes along—at the right price—you’ll be ready.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SOMG19037

Buying a house is quite possibly the largest investment that most people will ever make. And when you consider that the median price of a new home in the U.S. is $342,000 , the thought of actually hitting that milestone may seem out of reach for some. It is also one of the most confusing, especially for first-timers. Homebuyers attempt to master a whole slew of new vocabulary terms, from “contingencies” to “escrow” to “fixed versus adjustable rate mortgages.”

One of the most mystifying terms is PMI, which stands for “private mortgage insurance.” When you hear “insurance,” you may think it’s there to protect you in case something goes wrong with your home loan.

Actually, PMI is there to protect the lender that’s likely offering you a conventional mortgage whether it be a refinance or a purchase loan.

If you are making a down payment of less than 20% of the home’s value, the lender will typically require PMI on the mortgage from a private insurance company. Why would you pay for insurance that benefits your lender and not you? And should you take on this expense? Read on to find out how PMI works.

Why PMI?

The purpose of PMI is to make low down payment mortgages less risky for the lender so they in turn can offer you a loan if you don’t have sufficient funds for a 20% down. If you have PMI and default on your home loan, the insurer will be responsible for paying a portion of the loan balance, so that the lender isn’t on the hook for the entire amount.

When a lender is considering whether to extend a mortgage loan, and on what terms, they look at something called the loan-to-value ratio, or LTV. This is equal to the mortgage balance divided by the value of the property.

The more money you have for a down payment, the less you need to take out a loan for, and therefore the lower your LTV ratio. Whether you’re buying a home or refinancing, the higher your LTV ratio, the more of a gamble you’re likely to appear to lenders. And they’ll usually want you to have PMI when your LTV is less than 80%, which is what happens when you put less than 20% down.

Who Takes Out PMI?

Private mortgage insurance has been around for more than 60 years . Over that time period, more than 30 million families , including 1 million in 2017, relied on PMI in order to buy or refinance a mortgage. A significant amount of those who did were low-income or buying their first homes.

Specifically, more than 40% of borrowers who have taken out PMI earned less than $75,000 a year, and 56% were first-time homebuyers. In 2017, the top five states for homeowners with PMI were Texas, California, Florida, Illinois, and Michigan.

PMI generally costs between 0.55%-2.25% of the mortgage amount annually, but premium costs can vary depending upon the loan scenario.

How to Pay PMI

There are a few different options for paying PMI, which depend on your preferences. Most borrowers pay PMI as a monthly premium that is added on to the mortgage payment. You can see what the premium is in both the loan estimate you get when you apply for the mortgage and again in your closing disclosure.

The PMI factor can change between these two estimates because the appraisal valuation which drives the final LTV (loan to value) may be received by the lender after the Loan Estimate is generated. Another option is to pay your PMI all at once in a single sum when you close on the house. Or you can ask the lender if they can cover some or all of the PMI cost through lender rebate money.

Generally, in this scenario a borrower accepts a higher rate and the rebate money in that higher rate comes back to the borrower as a credit and the borrower can use that lender credit to cover some or all of the PMI cost. Ask a lender to generate a quote with different PMI payment options so you can compare and choose the best plan for your budget.

Keep in mind that some PMI policies are refundable and some are non-refundable. A third scenario is to pay some of the PMI up front and get the rest added on to your mortgage payment each month.

If you’re confused about the different policies and payment options, ask the lender’s representative to explain the options to you and ask for a quote on how much you will owe in different scenarios. If you are purchasing a home you may be receiving a seller credit towards your closing costs, this can be another way to cover the PMI in one lump sum and not have ongoing monthly payments.

How to Get Rid of PMI

For a principal residence or second home, the borrower can initiate cancellation of PMI under the following scenario: The LTV ratio must be:

•  75% or less, if the seasoning of the mortgage loan is between two and five years.

•  80% or less, if the seasoning of the mortgage loan is greater than five years.

If Fannie Mae’s minimum two-year seasoning requirement is waived because the property improvements made by the borrower increased the property value, the LTV ratio must be 80% or less.

For automatic termination of PMI the guidelines are:

•  Loan is closed on or after July 29, 1999 and is secured by a one-unit principal residence or second home.

•  on the applicable termination date, provided the borrower’s payments are current on the termination date.

The applicable termination date is:

•  the date the principal balance of the mortgage loan is first scheduled to reach 78% of the original value of the property, or

•  the first day of the month following the date the mid-point of the mortgage loan amortization period is reached, if the scheduled LTV ratio for the mortgage loan does not reach 78% before the mid-point.

How to Avoid PMI

PMI can come in handy for people who want to become homeowners and otherwise wouldn’t qualify for a mortgage. However, the costs can add up, and unlike other types of insurance, you’re not gaining any protections yourself. Luckily, there are ways to avoid PMI altogether.

As stated above, lenders can cover the cost of PMI through lender credit. Lender credit can be generated by the borrower taking a higher rate in exchange for rebate money which is used to pay for some or all of the PMI cost. Whether or not this higher rate ends up saving you money vs paying a lower rate and monthly PMI depends on your unique situation.

An alternative is to take out a mortgage that is not a conventional loan, such as a Federal Housing Administration Loan . FHA loans require a government insurance (MIP) which usually runs with the life of the loan. FHA loans have an upfront premium as well as a monthly premium. Whether a conventional or government loan is the best fit for you depends on many factors , such as your credit history and the mortgage market.

The most surefire way to help avoid paying PMI is to save 20% down before you buy a house. Even if it might take you a bit longer to become a homeowner, consider whether it makes sense to rent until you can save up that magic number.

There are also some loan programs that do not require PMI. VA loans would be one loan program that does not require PMI and some lenders do not apply PMI requirements to their Jumbo loan products. It is good to note that SoFi offers as little as 10% down on their Jumbo purchase loans with no PMI.

If you’d like to put away more than you currently are, start by making a budget. Note down all the money coming in and going out every month, and see if there’s room to cut expenses so that you can save a bit more. Once you’ve freed up some cash, set up an automatic transfer from your savings to your checking account to make sure that money is set aside.

If you don’t have a lot of wiggle room as far as cutting spending, you may want to consider ways to increase your income. This can include asking for a raise, applying for a higher-paying job, or taking on a side hustle.

If you can save 20% down before applying for a mortgage and avoid PMI, you may save yourself a significant chunk of money for years to come. That said, only you can decide whether paying PMI is worth it in your particular situation and housing market.

Looking Into a Mortgage with SoFi

With SoFi, you make your dream home a reality with competitive rates, no hidden fees, and as little as 10%. When deciding on loan eligibility, SoFi, like other lenders, will consider your credit history, your income, your employment, and other factors. You can see if you pre-qualify in just two minutes online.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SOMG19003

There’s a great Apple commercial spoof where an iPhone®​ owner is trying to upgrade to the new model without his current model’s Siri finding out she’s getting dumped. She freaks him out and hijinks ensue.
And while the connection may seem flimsy at best, upgrading to your next home can feel equally precarious, at least when it comes to your mortgage. After all, what do you do when you’ve found your new dream home, but selling your current one could take months, if not longer?

That’s where bridge loans can come to the rescue. A bridge loan, also known as a swing loan, gap financing, or interim financing, is a temporary loan that bridges the gap between the down payment of a new property and the mortgage balance of your previous home. Basically, a bridge loan is a short-term loan taken out by a homeowner against their current property in order to finance the purchase of a new property.

Bridge loans are designed to help home buyers purchase a new property in the event that their old property has not yet been sold. And assuming you don’t have a contingency contract or an extra couple hundred thousand dollars in the bank, you may well need to bridge that gap.

Pros & Cons of Bridge Loans

Bridge loans can be a major benefit in a time crunch: The home seller can immediately put their home on the market and move into another house. This can be especially helpful if you are a homeowner going through a period of sudden transition.

For example, if you have a new job or have children who need to switch schools soon, this could be necessary. Bridge loans are not a replacement for a mortgage but a temporary solution. They are generally designed to be repaid within six months to three years.

The terms vary widely for bridge loans, but they can have high interest rates because bridge loans are usually tied to a variable rate index such as the Prime Rate.

Borrowers may also encounter differences in how lenders deal with interest payments . Some require monthly interest payments while others require an upfront or end-of-term lump sum interest payment.

Bridge mortgage loans are secured to the borrower’s existing home, which means your old house can be claimed in the event of defaulting repayments. The standards for qualifying for a bridge mortgage tend to be high. After all, you’re trying to prove that you can afford not one, but two homes.

Many lenders do not actually have a set credit score requirement or a maximum debt-to-income ratio. Most of the time, your ability to qualify will depend on your future home purchase and the long-term financial benefits the lender predicts.

Exploring Other Financing Options

Borrowing a bridge loan can be risky—you may be required to start paying off your mortgage and the bridge loan at the same time. You are also depending on the sale of your home in order to pay off the bridge loan, which could take time depending on the state of the real estate market as you are selling your home.

If you are planning on taking out a bridge loan to cover the cost of a new home, you may want to negotiate for the extension of your bridge loan in the event that your home does not sell in a timely manner. Bridge loans can be a risky investment for banks too , which means they can be extremely difficult to get.

Due to the risks and costs that come with a bridge mortgage, borrowers may want to consider other options. One alternative to a bridge loan is a home equity line of credit (HELOC) which allows you to draw equity against the value of your current home in a similar way to a bridge loan.

With a HELOC you’ll usually get a better interest rate, pay lower closing costs, and have more time to repay the loan than you would with a bridge loan. It’s important to note that many lenders will not loan a HELOC on a home that is currently on the market for sale, so it may require advance planning.

If you are considering borrowing a HELOC, you may want to look for one without any prepayment penalties or early closure fees, which could significantly cut into your profits in the event that your home sells quickly.

Another alternative to bridge loans is borrowing a personal loan. If you have decent credit history and a solid income, you may consider applying for a competitive-rate personal loan, especially because bridge loan interest rates can run fairly high .

In addition, because personal loan lending is a more diversified market, you can likely find personal loans without the expensive origination fees. Personal loans, including the ones available with SoFi, are often unsecured and therefore require no collateral.

And when you borrow a personal loan with SoFi there are no prepayment penalties, which means if your home sells quickly, you can pay off the loan without losing any of your profits.

No matter what, make sure to do your research. As long as you do your homework, you can find the option that works best for your personal situation, so you can get the home you need at a cost that works for your budget.

Looking to move into a new home? With SoFi personal loans, you can bridge the gap so that you can move into your new house now instead of later.

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