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As home repairs go, plumbing leaks can range widely. A typical small leak can cost $250 to $500 on average in 2024, not counting cleanup. But hidden pipe failures that take longer to discover and more major issues that send H2O spraying everywhere can easily lead to thousands of dollars in water damage.

The best way to minimize plumbing repair costs is to stay vigilant to potential problems and to fix even little trickles quickly. Here, you’ll learn more about the different levels of plumbing leaks and the typical cost of cleanup and repairs.

Common Types of Plumbing Problems

Water leaks can happen anywhere in the home — not just the bathroom or kitchen. That’s because plumbing systems can be as complex as a spider’s web. Plumbing leaks can cause damage ranging from the trivial to the catastrophic, with repair costs to match. Supply chain issues and inflation can drive the cost up even further.

Smaller Plumbing Leaks

Leaking sinks and toilets are the most obvious and least damaging kind of plumbing issue. If you’re lucky, a trickling noise will alert you before the flood waters rise. While there’s no exact plumbing repair cost calculator, the leak itself typically can be fixed for $125 to $350.

However, hidden leaks can spread quickly and easily erode your cabinetry. Leaks that occur around the base of your faucet can also damage your countertop. Surface or cabinet repairs can cost a few hundred dollars — not including the price of new materials.

Garbage disposals can spring a leak in a number of places. Depending on the scale of the issue, it might be possible to DIY the repair. But if the garbage disposal needs to be replaced, you’ll pay about $225 including parts and labor.

Larger Plumbing Leaks

Leaks behind the walls can go undetected for some time. Contrary to what homeowners like to believe, many leaks don’t cause any change in water pressure or visible wall stains. (Plumbing issues are just one reason why the cost of a home inspection is worth it.)

Leaks stemming from water-using fixtures can also travel through walls to any room in the house. Eventual signs may include a lingering musty smell, mold, and dampness of the surrounding flooring or drywall.

The real doozy with repairing this kind of leak is that you usually have to cut into your wall to fix it, with wall incision and repair amounting to most of the cost. While the actual leak repair will often run to several hundred dollars, when you add in the diagnosis (made after carving into your wall) and wall repair, it can all add up to $1,000 or considerably more.

Water heater leaks can damage the foundation of a house and ruin any property kept in the lowest level of your home. Beyond the damage that the leak itself may cause, the problem triggering the leak can also prove costly. If your water heater is damaged, often through sediment buildup in the tank, it may need to be replaced. A new water heater can cost around $1,300 for a tank-based unit and labor.

Disaster Plumbing Leaks

Some plumbing leaks can be a lot worse than others, and slab leaks can be among the very worst. This type of leak occurs when the pipes under the foundation start to leak. Repairs for a slab leak can be costly if you have to remove flooring and jack-hammer through the foundation.

Homeowners should keep an eye out for a decrease in water pressure, warped hardwood floors, warm flooring, and moist patches. Slab leaks can be pricey to diagnose and pricier to fix, costing an average of $2,200 according to Angi.com.

Washer leaks are another common yet costly water problem. The water leading to your washing machine is constantly running, so any leaks will continually push water into your walls and flooring and flood your home fast.

To appreciate the total cost of a major basement flood, another significant issue, you’ll want to consider water removal, cleanup, ventilation, and decontamination, as well as any building and structural repairs. There may also be costs associated with the replacement or cleaning of personal property and mechanical equipment. Final price tags vary greatly but can be as much as $16,000.

Repair Costs by Type of Leak

Another way to look at the cost of plumbing leak repairs is by the type of leak. Here are some numbers for first-time homebuyers and homeowners to consider.

Water Line Leak

Water line leaks can have a wide range of price tags, from $500 to $5,000, depending on the degree and location of the problem.

Waste Line Leak

The cost of this kind of repair can depend on the length of the pipe needing repair, as well as how much damage the sewage leak caused. That said, the average price is currently around $4,000, though small repairs might be only about $650.

Heating Line Leak

Not all systems can experience this kind of plumbing leak. You will usually find this issue with boilers vs. furnaces. If your home does have a boiler and a pipe fails, you could pay anywhere from $150 for the repair of a small, accessible leak to a few thousand or more for a difficult-to-access or major leak.

Recommended: What Is a Credit Card Consolidation Loan?

Fixing the Leak

While minor leaks in accessible areas can be fixed by a competent homeowner, it can pay to call in the pros for an assessment and for assistance with larger problems. When it comes to how to find a contractor, consider the following:

•   Ask trusted friends or neighbors for references. Good word-of-mouth can be important.

•   Read online reviews. There are trusted sites with robust listings of local professionals.

•   Make sure that any plumbers you are considering are licensed (plumbing is a highly regulated field of work) and carry adequate liability insurance.

•   Get a few quotes, compare them, and check references.

While there are no guarantees, homeowners can help avert plumbing disasters by staying on top of regular maintenance, being alert to the signs of hidden leaks, and responding rapidly if they suspect a problem. As mentioned above, a gradual decrease in water pressure can indicate a leak or buildup in the pipes. Another red flag is a sudden increase in your water bill.

Not letting minor problems progress can help you avoid a major plumbing repair bill (and as a general policy, can help you avoid other common home repair costs, too).

Financing a Plumbing Leak

Homeowners dread plumbing problems due to the widespread damage they can inflict. Caught early, a simple under-the-sink leak can set you back just a couple of hundred dollars. But major leaks and floods can end up costing tens of thousands of dollars in professional water removal, cleanup, decontamination and mold remediation, wall and floor restoration, and property replacement. That can leave a person scrambling to pay for emergency home repairs.

If you do wind up with a big-ticket plumbing repair, consider these sources of funding:

•   Emergency fund: If you’ve followed the advice about setting aside three to six months’ worth of living expenses in an emergency fund, then this could be the time to dip in and finance a repair.

•   Personal loan: A personal loan can provide a source of cash for almost any purpose, from a plumbing repair to a vacation. This kind of unsecured loan can often be quickly obtained and at interest rates below that of credit cards.

•   Home equity: Tapping into a home equity loan or line of credit could unlock funds for a major plumbing repair. With these options, you are using your home as collateral (meaning the lender could seize it if you default) and may be able to access money at a competitive rate. However, the process can take a few or several weeks, as it requires a home appraisal.

•   Credit card: Charging a plumbing repair can be a quick and simple solution, but keep in mind that credit cards typically charge high rates of interest that can lead to credit card debt.

•   Friend or family loans: Borrowing from a friend or relative could be how to pay for plumbing repairs. Just be sure you can repay your debt to avoid causing issues with the relationship while getting your emergency plumbing assistance.

Recommended: Personal Loan Calculator

The Takeaway

Plumbing repairs can cost from a couple of hundred dollars to tens of thousands, depending on how big and complex the leak is and what kind of damage it has done to a home. To pay for a major plumbing repair, you might access your emergency fund, a personal loan, or home equity options, among other sources. Tackling small repairs (before they grow in scope) can be a smart way to avoid major plumbing problems.

Thinking a personal loan might be a good option for a home repair? See what SoFi offers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is the most common plumbing leak?

Bathroom plumbing fixtures, perhaps because they are used so often, tend to be the most common source of residential plumbing leaks. Toilets and their tanks in particular can frequently require the help of a plumber to repair a leak.

How much does the average plumbing leak repair cost?

The average pipe leak repair can cost between $250 to $500, although major leaks, with resulting damage, can cost considerably more.

How much do most plumbers charge an hour?

Depending on your location and other factors, a plumber can charge on average $45 to $150 per hour. There may be a minimum charge for a plumber to visit and assess a leak. This is often a flat fee between $50 and $200.

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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.

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 .

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.

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Turning a new space into a home can be daunting. By far the hardest part of furnishing a house from scratch is figuring out where to start. One good first step is deciding on a budget — ideally, before you move out of your old place.

However you proceed, recognize that it’ll take some trial and error: At some point, you’re going to realize that something you had your heart set on is not what you want to spend your money and time on after all.

Whether you’re a minimalist or maximalist, we’ll show you tips for furnishing a home on a realistic timeline and budget.

6 Tips for Furnishing a Home

The key to finding the right home furnishings is to follow your instincts. There isn’t one universal definition of good taste. This is your taste, and your home. Here are a few guidelines.

1. Consolidate Your Stuff

Before you set a budget for new home furnishings, walk through your old place and identify what you want to keep (if anything) and what you’ll need to purchase. A new home is the perfect opportunity to say goodbye to pieces that don’t suit your lifestyle anymore. (“What would Marie Kondo do?” is still a good mantra.)

Start with the key pieces of furniture you’ll need for your home to be functional — beds, couches, dining table, area rugs. Did you recently purchase your dream bed, or have you had the frame since college? Decide what to move and what to chuck.

You can sell or donate furniture, depending on value.

2. Prep Before the Schlep

A rule of thumb for interior decoration: Pulling up carpeting and painting the walls are much easier to do before any furniture is brought into the house. Before move-in day, create a list of any changes you would like to make to the existing interior. Ask yourself if you want to include minor home repairs in this budget or create a separate one.

Here are some basics to consider before furnishing a house:

•   Walls and ceilings: Choose a paint color, patch holes, remove popcorn ceilings

•   Floors: Remove or add carpet, put in hardwood floors, refinish floors

•   Appliances: Select kitchen appliances, bring in a washer and dryer, install ceiling fans and lighting fixtures

•   Kitchen and bath upgrades: Redo the kitchen counters, choose a backsplash, retile the bathroom

•   Laundry room: A laundry room remodel can create a more efficient space or a room with a dual function.

Once you’ve made the list of potential changes, determine what needs to be tackled now and what can wait. You may be able to live with the blue tile in the kitchen, for instance, but the pink walls in the bedroom aren’t going to cut it. Next, determine what you can do yourself and what will require professional attention. You may want to research reliable contractors in your new neighborhood before you need one.

3. When Buying Furniture, Start with Key Rooms

The living room and main bedroom are two places you likely spend the most time in, so these are good rooms to prioritize. You don’t need to have a fully organized pantry before you have an acceptable place to sleep.

A bed and a couch may be worth spending extra money on in order to get something that will last for years and tie the room together.

•   Bedroom: A good bed frame and mattress are wise investment pieces. And it can be a good idea to choose a whole bedroom vibe before buying new pieces so that you have a cohesive theme.

•   Living room: A couch is the centerpiece here, so that’s the investment piece (and a good decor starting point). Consider size, comfort, and color. A big TV or entertainment center may also be part of the equation.

•   Home office: You may be able to offset some of the cost with a home-office tax deduction.

4. Keep Things Organized While You Unpack

The two elements that really shape the feng shui of a home are organization and decor. An organized pantry or closet makes life easier, while a curated bookshelf can subtly affect the feel of an entire room.

See what you already have that can be functional — baskets, bins, and such. As you unpack your belongings, use these tools to stay organized. Depending on your lifestyle, organizational outlays for your new home could range from slimline hangers to a closet remodel.

5. Little Things Add to the Big Picture

Lay out all the decor pieces you own, including art, books, family heirlooms, photographs, trays, candles, and vases. Ideally, you’ve gone through most of this stuff in the consolidation phase and kept only things that are meaningful to you or fit your home’s aesthetic.

Once you see everything in one place, begin picking out things that go together. There are no wrong answers here — you might choose travel books for your office and a series of family heirlooms and photographs for your bedroom. This is the most forgiving aspect of interior decoration because smaller decor pieces can be easily shifted.

Once all of your belongings are in place and the art is hung, you can browse online to find some great pieces that resonate with you and your space. Now may be the time to frame that print you’ve been hanging on to, or to splurge on the perfect pillows for your couch. These may seem like small additions, but they can make a huge difference.

Recommended: Four Ways to Upgrade Your Home

6. Space Out the Purchase of Big-Ticket Items

It’s OK if your home looks like a work in progress for a while. Once you’ve consolidated, organized, and decorated, you may want to buy your investment pieces. Pick three or four non-negotiables — perhaps a bed, sofa, television, and live edge dining table — and get those into the house. Then focus on buying art, rugs, and lights you’ve been eyeing.

How Much Does It Cost to Furnish a House?

One way to estimate interior costs is to set a budget that’s a percentage of your home’s price. This can range from 10% to 50%, depending on your finances. For a $400,000 home, for instance, you’re looking at a baseline of $40,000.

Remember, that includes any painting, flooring work, and minor updates in addition to new home furnishings. That figure also accounts for all interior-related costs in your first few years of home ownership: the inexpensive starter pieces you tolerated until the perfect item materialized, the well-intentioned mistakes, and so forth.

If you don’t have a separate fund earmarked for new home furnishings, it can be hard to come up with a chunk of cash right after closing. One option is taking out a personal loan. In fact, funding home updates and furnishings is one of the most common uses for personal loans.

There are different types of personal loans. Typically, you can borrow between $5,000 and $100,000, and pay it back in equal installments over a term of up to seven years. Fixed interest rates for personal loans tend to be lower than for credit cards.

Here are some cost ranges for key pieces to help you create a budget.

Recommended: Personal Loan Calculator

Painting: $966 and $3,071

The cost of paint supplies will depend on the number of rooms, amount of trim for doors and windows, and the quality of the paint. Paint is about $20-$30 per gallon, but a designer brand can cost much more than that. A gallon of paint covers about 400 square feet, and two coats may be recommended. Factor in all the myriad paint supplies to buy if you DIY.

Expect to pay a painter $2 to $6 per square foot for labor and materials, according to Home Advisor. For a 2,300 square foot home, you can pay from $4,000 to $11,000.

Bed: $200 to $2,000 and Up

Simple bed frames are available from IKEA or Wayfair in the $100-$200 range. Inexpensive bed frames and headboards are also easy to find at thrift stores and yard sales. While you may not want to furnish your entire house with thrifted pieces, one or two second-hand items can free up a lot of cash to put toward a couch or higher-end mattress.

You can also find mid-priced selections from $300 to $1,000 at those retailers as well as more design-driven vendors such as West Elm, Raymour & Flanigan, and Crate and Barrel.

Mattress: $300 to $2,000 and Up

Mattress-in-a-box brands such as Zinus, Allswell, and Nectar offer mattresses starting at a few hundred dollars. Higher-end brands like West Elm, Raymour & Flanigan, and Tempur-Pedic can run upwards of $3,000.

Sofa: $200 to $3,000

The IKEAs, Wayfairs, and Targets of the world offer many starter pieces for a few hundred dollars. Midrange selections run from $300 to $1,000 from these and other retailers, such as Ashley Furniture, West Elm, Raymour & Flanigan, Crate & Barrel, and CB2.

At the higher end of the spectrum, more sophisticated designs are available at Roche Bobois, Ligne Roset, Design Within Reach, and other luxury brands. And don’t forget second-hand designer marketplaces — such as Apt Deco, Kaiyo, 1st Dibs — and antique stores.

Dressers and Wardrobes: $200 to $5,000 and Up

Bedroom furniture can be found at the same kinds of retailers and run from modest to extravagant. While coordinating bedroom sets used to be de rigueur, in recent years they’ve been replaced by a less matchy-matchy aesthetic.

Recommended: 25 Tips for Buying Furniture on a Budget

Rugs: $30 to $1,000 and Up

Rugs are a cost that’s easy to forget about, and they can be a lot more expensive than you expect. A high-quality Persian rug can run thousands of dollars, but some of the midrange retailers discussed have area rugs starting at $100. Look out for Labor Day and Black Friday sales, too.

Organizational Pieces: $20 to $300 and Up

Baskets, bins, storage ottomans, and closet systems can bring order to chaos. The Container Store offers inspiration.

What Home Decor Style Fits Your Personality Quiz

The Takeaway

When furnishing a home, start with a budget. One rule of thumb suggests putting aside 10% to 50% of your home’s price for interior decorating. Before you move, cull your belongings and prepare the new space for move-in (pulling up carpet, redoing countertops, remodeling a closet). Then identify initial key purchases. Many homeowners today choose a mix of high- and low-end furnishings, plus second-hand items from thrift stores and online designer dealers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What is a good budget for furnishing a new home?

Some experts recommend setting your home furnishings budget as a percentage of your home’s price: say, 10% to 50%. That includes any cosmetic work done on the interior before you move in, as well as new home furnishings and decor pieces.

Can you furnish your home with a personal loan?

If you have an emergency fund tucked away and feel comfortable making another monthly payment on top of your mortgage, a personal loan can be a good option. In fact, home furnishings and updates are one of the most common uses for a personal loan. Just be prepared to prove to lenders that your debt-to-income ratio will remain below 36%.

Can you furnish a new home with a $10,000 personal loan?

A personal loan can be a good option for covering new home furnishings. Just make sure $10,000 will cover your costs — you can’t add to a personal loan amount after the fact. One rule of thumb suggests budgeting 10% to 50% of your home’s price for furnishings and interior updates.

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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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

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A home equity loan is a secured loan, using your home as collateral, while a personal loan is unsecured, meaning you don’t put up any collateral. Beyond this key difference, these borrowing options are similar in that both are typically lump-sum, fixed-rate loans that you’ll repay over a specific length of time.

If you’re wondering which is the better choice for your current financial needs, it can be wise to take a closer look at how each one works and the pros and cons involved.

What Is a Home Equity Loan?

Sometimes referred to as a second mortgage, a home equity loan allows you to use your home as collateral when you need to borrow money. Here are a few key points to note:

•   With this type of loan, the amount you can borrow is based on the equity you have in your home. Your home equity is the difference between your home’s current value and what you currently owe on your mortgage. Lenders may require that you have a minimum amount of equity (typically, at least 15% to 20%) to qualify.

•   If you’re a new homeowner, you may not have built up enough equity to qualify for this type of loan. But if you made a substantial down payment, you’ve owned your home for a while, or your home’s value has increased substantially since you purchased it, a home equity loan could be an option worth considering.

•   Lenders typically offer more competitive terms for this type of secured loan because it’s a lower risk for them. To put it another way: If the borrower defaults, they can foreclose on the property and recover the amount they’re owed.

Recommended: Understanding Home Equity

How Does a Home Equity Loan Work?

Home equity loan funds are generally distributed in a lump sum with fixed-rate monthly payments, though variable-rate options are offered by some lenders. Repayment periods can vary from five to 30 years. Here’s a closer look at how they work:

•   When you apply, you can expect lenders to look at your personal creditworthiness, including your debt-to-income ratio (DTI) and credit score. In most cases, you will need a credit score of 680 or higher to unlock favorable terms. A higher three-digit score may help you get approved for a better rate.

•   Your lender will likely require a home appraisal to verify your home’s value. (This is one of the reasons why snagging a home equity loan can be a more time-consuming process than getting an unsecured loan.)

•   If you’re eligible, you may be able to borrow up to 80% or, in some cases, even 90% of your home’s equity. So, for example, if you have $150,000 in equity, you might qualify to borrow $120,000 to $135,000.

It’s important to note that a home equity loan is not the same thing as a home equity line of credit (HELOC). A HELOC is a type of revolving credit (you draw against your limit over time), while a home equity loan is an installment loan, paid out in a lump sum.

What Is a Personal Loan?

A personal loan is similar to a home equity loan in that it allows you to borrow a lump sum of money, and you’ll repay those funds — with interest — in regular installments over a set period of years.

To understand what defines a personal loan and distinguishes it from a home equity loan, consider these points:

•   Most personal loans are unsecured, which means you don’t have to use your home or any other asset as collateral to borrow the money.

•   Because the lender is taking more risk with this kind of loan than a home equity loan, interest rates may be higher.

•   Since you don’t need to have a home appraisal and other steps completed, you may find that securing a personal loan vs. a home equity loan is a significantly quicker process.

How Does a Personal Loan Work?

If you decide to go with a personal loan, you’ll likely have a number of options to choose from — they’re offered by many banks, credit unions, and other lenders. And because lenders’ terms can vary significantly, you may want to do some comparison shopping before you make a choice.

When applying, it’s wise to be aware of these points:

•   If you aren’t using an asset to secure your personal loan, you can expect lenders to put a high priority on your credit score, income, and DTI when you apply. The higher your credit score, the better in terms of getting approved and securing a favorable rate. Many lenders look for a FICO® score of at least 580, but applicants who have scores over 700 are likely offered the most favorable terms. (Personal loan rates are usually lower than credit card rates, however, even if the loan is unsecured.)

•   Pay attention to how the length of the loan affects your payments. Personal loans are typically repaid over a term of two to seven years. If you’re looking for smaller monthly payments, a longer term may suit your needs, but that may increase the overall cost of the loan. A personal loan calculator can help you compare your monthly payments and the total (principal plus interest and fees) to be repaid.

Comparing Home Equity Loans and Personal Loans

Both home equity loans and personal loans usually offer fixed-rate, lump-sum financing options with terms that can be tailored to fit the borrower’s needs. And both offer borrowers a certain amount of flexibility in how the money can be used.

But there are some questions you may want to consider when deciding between the two, including:

How Much Do You Plan to Borrow?

If you need to borrow a large amount and you’re looking for a lower interest rate, you may find a home equity loan is the right product for your needs. Your monthly payments may be smaller if you sign up for a longer repayment period.

If you need a smaller loan — a few thousand dollars, for example, or even just a few hundred — a personal loan may be the more practical choice. But even if you plan to borrow a large amount, you may choose a personal loan to avoid tying your home to your loan. Some lenders offer large personal loans — as much as $100,000 or more — to well-qualified borrowers.

What’s the Timeline?

One of the major drawbacks to a home equity loan is that the approval process can take weeks (say, two to six weeks). Lenders typically will require an appraisal to determine your home’s current value, and there’s usually more paperwork involved with this type of loan.

A personal loan application, on the other hand, can take just minutes to complete online, and some lenders offer same-day approvals. If you’re approved, it may take only two or three days until the money lands in your checking account.

What’s the Risk?

Home equity loans come with more risk for the borrower than a personal loan. If you default on your payments and the lender decides to foreclose, you could potentially lose your home. Also, if you decide to sell your property, you’ll have to pay back the home equity loan.

Personal loans also carry some risk for borrowers. If you default on a secured personal loan, the lender could take whatever asset (a car or bank account, for instance) you used for collateral. And whether your loan is secured or unsecured, late or missed payments could lower your credit score (this can be true for home equity loans as well). If the account goes to collections, you could be sued for what you owe.

How Do You Plan to Use the Money?

You can use funds from both types of loans for just about any (legal) purpose. Borrowers often use them to:

•   Consolidate debt (say, to pay off high-interest credit card debt)

•   Pay for wedding or vacation costs

•   Make home improvements

•   Pay off medical or dental bills

•   Finance car repairs or the purchase of a vehicle

•   Fund moving expenses

There may be benefits to one or the other loan type that makes it a better fit for your specific plans. For instance, with a home equity loan, you can deduct the interest on funds you used to “buy, build, or substantially improve” the home you used to secure the loan, according to the IRS. So if you’re hoping to make home renovations, one of the different types of home equity loans may be the right choice.

You typically can’t deduct the interest on a personal loan. But the ease and speed of getting a personal loan may make it the better pick if an unexpected expense comes up — say, if your refrigerator or air conditioning system goes out, and you need money quickly for a replacement or major repair.

Pros and Cons of Home Equity Loans vs Personal Loans

Here’s a look at some of the advantages and downsides of a personal loan vs. home equity loan:

Personal Loan Pros

•   Flexible borrowing amounts and terms

•   Often unsecured, meaning there’s no risk of losing your home

•   Convenient and fast access to funds

Personal Loan Cons

•   Interest rate may be higher if loan is unsecured

•   Depending on borrower’s creditworthiness, may require collateral

•   Lenders may charge a loan origination fee, late payment fees, and/or a prepayment penalty

Home Equity Loan Pros

•   Flexible borrowing amounts and terms

•   Interest rate may be lower than unsecured loans

•   Interest may be tax-deductible if used for home improvements

Home Equity Cons

•   If you default on the loan, the lender could foreclose on your home

•   Approval process can take longer (two to six weeks) and may include additional costs

•   Some home equity loans have prepayment penalties and/or other fees

•   Must have enough equity in your home to qualify for the amount you want

•   If you sell your home, you’ll have to repay the loan

Carefully considering the upsides and downsides of a personal loan vs. a home equity loan is an important step in making the financial decision that suits you best.

The Takeaway

Home equity loans and personal loans both typically offer lump-sum payments at a fixed rate for a specified term. Home equity loans use your property as collateral, while personal loans are often unsecured.

It’s important to look at how each one might sync up with your particular financial situation and your reasons for borrowing the money. If you’re a homeowner, tapping into your home equity might get you a lower interest rate and a possible tax break. But the loan process is typically quicker and easier for a personal loan — and you won’t have to tie the loan to your home and put your residence at risk.

If you think a personal loan might be right for you, see what SoFi offers.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can personal loans be used to consolidate debt?

Yes, debt consolidation is one of the top reasons borrowers choose to get a personal loan. You might use this kind of loan to pay off one or more high-interest loans or credit card accounts, potentially simplifying repayment and lowering your costs.

What credit score is needed for each loan type?

Here are how credit scores for home equity loans vs. personal loans typically stack up: Lenders typically like to see a credit score of 680 or higher for home equity loans and 580 or higher for personal loans. Borrowers with higher credit scores usually qualify for more favorable loan rates.

What is the downside of a home equity loan?

The biggest drawback to a home equity loan vs. a personal loan is that it’s tied to the home you use to secure the loan. This means that if you default on your payments, the lender could foreclose on your home. Also, if you decide to sell your home, you’ll have to pay back your home equity loan as well as your mortgage.

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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.

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.

SOPL-Q324-016

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A due-on-sale clause — also known as an alienation clause — is wording commonly found in the fine print of a mortgage agreement. It allows lenders to enforce being repaid for the balance of a home loan when the property is either sold or, in some instances, transferred to another owner. That’s a simple explanation, but there is more to it so let’s dig a bit deeper.

What Is a Due-on-Sale Clause?

Understanding how home loans work is an important part of the home-buying process. Here’s what to know about a due-on-sale clause before you sell or purchase a home:

Definition and Purpose

A mortgage due-on-sale clause or alienation clause requires that the loan be paid in full when the home is sold. You may have heard about assumable mortgages becoming more popular as a way for buyers to sidestep higher interest rates by taking over a seller’s mortgage at a lower-than-typical rate. The due-on-sale clause prevents one buyer’s mortgage from being assumed by whoever purchases the house next.

Lenders began using due-on-sale clauses in the 1970s as interest rates spiked and buyers assumed the seller’s loan instead of applying for a new one with a higher rate. While homeowners won several court battles against this rule during the time, the U.S. Supreme Court ultimately ruled in favor of the banks. Congress formally legalized the due-on-sale clause for mortgages with the Garn-St. Germain Federal Depository Institutions Act in 1982.

Where It’s Found in Mortgage Documents

A due-on-sale clause should be located in your loan agreement. If you can’t find it in your paperwork, it’s worth calling your lender, especially if you plan to sell your house soon. Most, if not all, conventional loans are not assumable, meaning there should be a due-on-sale clause in place.

Some mortgages are assumable, and don’t have this type of clause in the loan agreement. Assumable loans include:

•   FHA loans backed by the Federal Housing Administration

•   VA loans backed by the U.S. Department of Veterans Affairs

•   U.S. Department of Agriculture loans

Remember, though, that even if a loan is assumable, the new borrower still needs to qualify for the loan. In many situations, however, they don’t have to go through the whole mortgage process. They simply get to assume the existing mortgage from the original owner. Also note that there are unique FHA flipping rules that you may need to be aware of if purchasing a home that has been owned by the seller for a brief time is a part of your plan.

Recommended: Choosing a Mortgage Term

How the Due-on-Sale Clause Works

Now that you understand what an alienation clause or due-on-sale clause is, find out how it works so you can avoid lenders invoking this portion of your loan agreement.

Triggering Events

Lenders are notified when ownership of a property securing a loan is transferred. If the seller doesn’t automatically pay off the loan balance at closing, the lender may choose to invoke the due-on-sale clause.

There are a few other situations that would cause a lender to invoke the due-on-sale clause. These include:

•  Transferring the property to a family member without a death or divorce

•  Transferring the property into an irrevocable trust

•  Transferring the property into a lease of more than three years

•  Changing ownership from a personal property to an LLC or vice-versa

•  Creating a junior lien that would lower the lender’s stake in a property

Lender Rights and Actions

In these cases, the lender could require the recipient of the property to transfer the title back to the original owner. The recipient usually has a set amount of time to do this, such as 30 days.

Another option for lenders, however, is to foreclose on the home if the original borrower is unable to provide the remaining mortgage balance. In these situations, refinancing the property or possibly modifying the original loan are also possibilities. (To see how much your monthly payment would likely be after a refinance, use a mortgage calculator.)

Impact on Property Transfers

The due-on-sale clause makes it more difficult to transfer properties to new owners. After the Supreme Court ruling, those recipients must meet certain criteria. Plus, even if they do meet the criteria, they must still qualify for the loan.

Exceptions to the Due-on-Sale Clause

There are exceptions that cause the due-on-sale clause to not take effect. Those exceptions are:

•  Divorce: If the original borrower loses the house in a divorce settlement, the due-on-sale clause should not go into effect.

•  Inheritance: Should the primary borrower die, then their children or surviving spouse can inherit the house without triggering the due-on-sale clause. With the average mortgage length being 30 years, it’s understandable that unique rules had to be put in place to account for buyers dying before their mortgage was fully paid.

•  Joint tenancy: If two or more people jointly own a property, then the death of one owner doesn’t trigger the due-on-sale clause. Instead, whatever portion of the property was owned by the deceased borrower is transferred to the other remaining borrowers.

•  Living trust: When a property is transferred to a living trust, there are no legal ramifications. A living trust is when a trustee is designated by a property owner to manage an estate.

Implications for Buyers and Sellers

If you’re the seller, the due-on-sale clause simply means that whatever money you make in the sale of your house must be adequate to satisfy your remaining loan balance. If it doesn’t, you have to be able to pay off your remaining mortgage obligations with other funds.

For the buyer, the implication of the due-on-sale clause is that the seller will have a minimum price that needs to be met in order for them to sell the home. The original lender must receive the amount it is due, or the house will not be free and clear for sale.

Fortunately, the desire to transfer an existing mortgage to a new borrower who is unrelated to the seller doesn’t happen very often.

Legal Aspects and Enforcement

It’s important to remember that there are situations where the due-on-sale clause cannot be invoked. As noted above, a title transfer that occurs because of a divorce or death usually forbids lenders from seeking immediate repayment. And even if lenders are within their rights, they still must provide ample notification before invoking the due-on-sale clause.

Recommended: Active Contingent in Real Estate: What You Need to Know

The Takeaway

The due-on-sale clause (or alienation clause) limits who can take over an existing mortgage from a homeowner, and it essentially establishes a minimum sales price that a buyer would have to meet in order for a seller to be able to agree to a contract. This is because lenders must always receive any remaining money owed on a mortgage when a home is sold.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can I transfer my property without triggering the due-on-sale clause?

It depends on the situation, but there are some situations where it can be done, depending on the original loan agreement. For example, it’s often possible to transfer a property during a divorce, and it’s also possible to transfer the property to an immediate family member after the death of the primary borrower.

What happens if I violate the due-on-sale clause?

If you violate the due-on-sale clause, the biggest thing that can happen is that your lender can demand immediate full repayment of your outstanding loan balance. If you are unable to pay, then you are at risk of foreclosure, which can damage your credit score for seven years.

Are there any mortgages without a due-on-sale clause?

It’s rare to find a conventional mortgage without a due-on-sale clause because it’s in the lender’s best interest. However FHA, VA, and USDA loans typically don’t have this clause.

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Photo credit: iStock/Perawit Boonchu

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-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency. This article is not intended to be legal advice. Please consult an attorney for advice.

SOHL-Q324-026

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If you’re buying a flipped property and are planning to use a loan backed by the Federal Housing Administration (FHA), you need to be aware of the FHA flip rule, also known as the 90-day FHA flip rule. It could prevent you from buying the property or cause delays.

The main thing to know is you can’t use an FHA loan for properties that have been owned for less than 90 days by the seller. This is to prevent fraud and to protect you and the lender.

We’ll explain everything you need to know about the rule, including:

•   What is property flipping and what to watch out for

•   The purpose of the FHA flipping rule

•   How timing of the purchase contract affects FHA financing

•   What exemptions there are

•   How to comply with FHA guidelines on flips

What Is Property Flipping?

Property flipping is where an investor acquires a property with the intent of quickly selling it for a profit. The investor can renovate, landscape, develop raw land, or complete other projects to improve the property and then put it right back onto the market. It’s also common to generate profit through rapid property appreciation in hot real estate markets.

None of the above activities is prohibited. But when a property is sold for a large profit soon after being acquired, it could potentially signal illegal activity. Illegal property flipping is where the investor sells the property at an artificially inflated price, usually through collusion with the appraiser. Overvalued properties can be a problem for legitimate buyers as well as mortgage lenders, including with FHA loans. Hence the flip rule the FHA has created to protect borrowers.

Reasons for FHA Flipping Rules

The purpose of the FHA flip rules is to prevent the FHA from taking on loans at inflated values, and in the process, protect buyers from being taken advantage of. The FHA states that most flipping occurs within days of the original purchase with little improvement taking place. (An FHA loan buyers guide details other important rules surrounding FHA loans.)

FHA Flipping Rules Explained

The FHA flip rules are primarily concerned with the amount of time the property has been owned prior to being resold. It was implemented in 2003 by the Federal Housing Administration to try and prevent the kind of illegal flipping mentioned previously. Lenders rely on information provided by an appraiser to follow the rule. The nitty gritty:

90-Day Flipping Rule

Under the FHA 90-day flip rule, you can’t finance property with an FHA loan if it was bought by the seller less than 90 days ago. Other requirements include:
The property must be sold by the owner of record
The lender must obtain documentation verifying the seller as such
The purchase can’t involve a sale or assignment of contract

The FHA counts 90 days from the seller’s day of settlement to the day the next contract is signed. There are some additional requirements for purchasing a flipped property from 91 to 180 days after the seller’s day of settlement.

How the FHA Flip Rules Work from 91 to 180 Days

If the property is sold between 91 and 180 days from the settlement date, a second, independent appraisal may be required to verify the value. The second appraisal is required if the value is more than 100% above the price the seller paid. The seller cannot require the buyer to pay for the second appraisal. For example, if the home was purchased by the current owner for $100,000 and the new value is $200,000 or more, a second appraisal would be required.

Exceptions to the 90-Day Rule

There are a few exceptions to the 90-day rule. A property may be eligible for an exemption from the FHA flip rule if it was acquired for its owner by an employer or a relocation agency or if it is:

•  HUD Real Estate Owned

•  Sold by local, state, or federal government agencies

•   Sold by Fannie Mae or Freddie Mac

•   Inherited property

•   In a presidentially declared disaster area

•   An initial builder sale

Property Eligibility Requirements

There are no property requirements with the FHA flip rule — the rule applies equally to all properties with the exception of those noted above. The only factor the FHA is concerned with when it comes to this rule is the amount of time the seller has owned the property. If it’s less than 90 days, you can’t finance it with an FHA loan. And if you’re between 91 and 180 days and the amount is 100% more than what the property previously sold for, two appraisals may be required.

Recommended: Minimum Down Payment for FHA Loan

Complying with FHA Flipping Guidelines

It’s easy to comply with FHA flipping guidelines. That’s because your lender can’t give you an FHA loan if the property has been owned less than 90 days.

The onus falls to the FHA appraiser to properly document the date and amount of prior transactions in the appraisal report. The lender submits this information to the FHA when making your application.

Documenting Property Acquisition

The appraiser is tasked with documenting the date of acquisition for the seller and will also verify that the seller is the owner of record. Verification may include documents such as the property sales history, a copy of the recorded deed, a copy of the property tax bill, and a title search.

Appraisal Requirements

Appraisers must include all transactions in the previous three years on their Uniform Residential Appraisal Report (URAR) to submit to the lender. They must also consider and analyze the comparables used to determine the value of the property being sold.

Consequences of Not Following the FHA Flip Rules

The main consequence for not following the FHA flip rules is that your mortgage application may be denied.

Alternatives to FHA Loans

If you have your eye on a flipped property that has miraculously been significantly improved in less than 90 days, there are other roads you can take to acquire it. These include:

•  Waiting to write the contract until the seller has owned it 91 days (and getting that second appraisal if necessary)

•  Financing with a conventional loan, or applying for a VA loan if you are eligible

•  Arranging seller financing

No other loan type has a flip rule like the FHA, so if you’re really intent on buying that flip, you can also explore another loan type. Read up on FHA loans vs. a conventional mortgage, then talk to a lender, ideally one that offers both FHA and conventional loans.

The Takeaway

For the most part, the FHA flip rules are simple to understand and follow. Basically, you won’t be able to get an FHA loan on a property that the seller purchased less than 90 days ago. The lender is the one who is required to follow the rule.

Documentation requirements fall on the appraiser and the lender, so it’s important to start with a lender you trust. There’s nothing more steadying than a lender that can be there for you every step of the way.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.

Another perk: FHA loans are assumable mortgages!

FAQ

What qualifies as a property flip under FHA rules?

It’s not the property that has requirements, it’s the timeline. Any property can be considered a flip if it’s owned for fewer than 90 days.

Can FHA borrowers purchase a recently flipped property?

FHA borrowers are allowed to purchase a recently flipped property as long as the owner of record has owned the property for at least 90 days. The amount they’re purchasing it for has a limit of 100% of the original value if purchased between 91 and 180 days after the original owner’s purchase, or else they’ll need an additional appraisal. After 180 days, the extra appraisal is asked for at the FHA’s discretion.

How is the 90-day flipping period calculated?

The FHA counts 90 days from the settlement date of the current owner to the day the new purchase contract is executed.

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Photo credit: iStock/warrengoldswain

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-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
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.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency. ^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q324-024

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