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A home equity line of credit or HELOC is a revolving credit line secured by your home. HELOCs have two phases: a draw period and a repayment period.

Your HELOC draw period is the window of time in which you can access your credit line before you must begin repaying what you have borrowed. A typical HELOC draw period is five years, though yours may be shorter or longer, depending on the terms of your borrowing agreement.

Here’s a closer look at how a home equity line of credit draw period works.

Understanding the Draw Period

What is a HELOC draw period? Simply put, it’s when you’re allowed to access your credit line. During the draw period, you can spend up to your credit limit and make payments to reduce the outstanding balance. That’s similar to how a credit card works.

Your choice of lender can influence how long your HELOC draw period lasts. Some lenders offer HELOCs with a five-year draw period; others extend it up to 10 years. Comparing HELOC options can help you decide which line of credit best suits your needs. Examine mortgage rates and consider getting preapproved for a HELOC to see what you might qualify for. Look for HELOC lenders that offer mortgage preapproval with no impact on your credit.

Recommended: HELOC Definition

How the Draw Period Works

The draw period on a home equity line gives you freedom and flexibility to spend, up to your credit limit. There are a few key details to know, however, about how a HELOC draw period works.

Accessing Funds

HELOC lenders can offer multiple ways to access funds during the draw period. Your options might include:

Paper checks

•   An ATM card or debit card

•   ACH transfers to a linked bank account

•   In-person cash withdrawals (if you opened your HELOC at a local bank)

Your HELOC lender should provide monthly statements showing your transaction activity, including how withdrawals were made, the amount, and the date. Keeping track of draws can help you calculate what your repayment installments may be later on.

Payment Structure

Your lender may require monthly payments during your HELOC draw period. The payment may be a set minimum dollar amount, or a payment equivalent to the interest only.

HELOCs typically accrue interest daily. Here’s how to find your daily interest accrual.

•   Divide your annual percentage rate (APR) by 365 (number of days in the year)

•   Multiply the result by your balance to find your daily interest accrual

For example, say you owe $50,000 to a HELOC at an annual APR of 5.00%. If you plug in the numbers, the math looks like this:

0.05/365 = 0.0001369863 x $50,000 = $6.85

Note that some lenders might use 360 instead of 365 to find your daily interest rate. That number assumes that every month has 30 days.

Your loan agreement should specify whether you’re required to make interest-only payments or a flat minimum payment. Keep in mind that if you can pay more than the minimum due, that’s usually a good idea. The bigger dent you can make in your balance during the draw period, the less you’ll have to repay later.

Have questions about home equity lines work in general? Explore our in-depth HELOC loan guide.

Interest Rates

HELOCs may have fixed or variable rates. A fixed interest rate stays the same for the life of the loan; variable rates, meanwhile, can increase or decrease over time based on changes to an underlying index or benchmark rate.

Variable-rate HELOCs can use the prime rate, LIBOR, or Treasury bill rate as their index rate. The prime rate is common, as it represents the rate at which banks lend to their most creditworthy customers. Lenders may charge a prime rate + a margin rate to set your HELOC rate.

Recommended: Understanding the Mortgage APR

Transitioning from Draw to Repayment Period

If you’re asking what is the draw period on a HELOC, it’s also important to ask what comes after. As you get closer to the end of your draw period, you’ll need to begin preparing for the repayment phase.

End of Draw Period

The end of your HELOC draw period is determined by the lender at the outset. Again, you may have five years, 10 years, or somewhere in between to spend with your credit line. Once the draw period ends, you can’t make any more withdrawals.

Your loan agreement should specify the end date of your draw period and when you’re expected to make your first regular monthly payment.

Can you extend a HELOC draw period? Maybe. Your lender might offer the option to renew your draw period so you have more time to access your credit line. You might pay a fee for the convenience.

The other option would be to refinance your HELOC into a new HELOC. That would give you a new draw period, followed by a new repayment term.

Repayment Terms

HELOC repayment may last anywhere from 10 to 30 years — it depends on the terms of your loan agreement. During the repayment period, you’ll make payments to the principal (meaning the amount you originally borrowed) and the interest.

HELOC repayment is amortized the same as other home loans, such as FHA loans or VA loans. Your lender should give you an amortization schedule showing how many payments you’ll make total and how much of each payment goes to principal vs. interest.

Can you pay off a HELOC during the draw period? Yes, if your lender allows you to do so. Be aware, however, that your lender might assess a prepayment penalty for an early HELOC payoff. Prepayment penalties allow lenders to recoup some of the interest they lose out on collecting when a borrower pays a loan off early.6

Impact on Monthly Payments

How much will you have to pay monthly to your home equity line of credit? It’s an important question to ask when planning your budget once the draw period ends.

Your HELOC payment amount is determined by:

•   Your principal balance

•   Interest rate and fees

•   Repayment term

If you have a fixed-rate HELOC, your monthly payments will be the same for the entirety of your repayment term. If you took out a variable-rate HELOC, your payments could change over time if your rate rises or falls.

Strategies During the Draw Period

Your HELOC draw period is for spending, but there are some things you can do to minimize what you’ll have to repay later. Here are a few tips for managing your home equity line of credit during the draw period and beyond.

Making Principal Payments

You may be obligated to make minimum or interest-only payments during the draw period, but consider whether you could make payments to the principal as well. For example, you might:

•   Apply your tax refund to the principal

•   Use a year-end bonus to wipe out some of the balance

•   Make biweekly payments or micropayments toward the principal

•   Double up on your regular monthly payments

Reducing your principal balance can shrink the amount of interest that accrues. And it can lower your monthly payments once you enter the repayment period.

Monitoring Interest Rates

If you have a variable-rate HELOC, it’s a good idea to keep an eye on interest rates. If you anticipate a rate hike sometime in the future, you may want to explore HELOC refinancing options.

Refinancing a variable-rate HELOC into a fixed-rate line of credit can offer some predictability with monthly payments. You don’t have to worry about your rate — and your payment — going up over time. You could also consider using a fixed-rate personal loan to pay off your HELOC debt. The advantage of this approach is that personal loans aren’t tied to your home. So if you lose your job or get sick and can’t work, you don’t have to worry about losing your home if you fall behind on the loan payments.

Monitoring Interest Rates

If you have a variable-rate HELOC, it’s a good idea to keep an eye on interest rates. If you anticipate a rate hike sometime in the future, you may want to explore HELOC refinancing options.

Refinancing a variable-rate HELOC into a fixed-rate line of credit can offer some predictability with monthly payments. You don’t have to worry about your rate — and your payment — going up over time. You could also consider using a fixed-rate personal loan to pay off your HELOC debt. The advantage of this approach is that personal loans aren’t tied to your home. So if you lose your job or get sick and can’t work, you don’t have to worry about losing your home if you fall behind on the loan payments.

Planning for Repayment

Your regular monthly HELOC payments may be significantly higher than your minimum or interest-only payments. So it makes sense to look at your budget to make sure you can afford what you’ll be expected to pay.

A HELOC repayment calculator is a helpful tool for estimating monthly payments and the total interest paid. You can just plug in your HELOC balance, rate, and repayment term to see how your payments might add up.

The Takeaway

What is a draw period on a HELOC? It’s your window to spend before repayment begins. The tips we’ve shared here can help you make the most of your draw period. If you’re still in the “shopping for a HELOC” phase, do your research: Look at different lenders’ interest rates, find out what is a HELOC draw period at various lenders, and inquire about prepayment policies and annual fees to find a lender whose offerings fit your needs.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

Can I make principal payments during the draw period?

Yes, you should be able to make principal payments during the draw period if your lender allows it. You can review your loan agreement or contact your lender to ask if principal payments are allowed and how to make them. Paying down the principal during the draw period can reduce what you have to repay later and potentially save you money on interest.

What happens if I don’t use my HELOC during the draw period?

One of the great things about a HELOC is that you only pay interest on the amount of your credit line you use. If you don’t use your HELOC during the draw period, there would be nothing to repay with interest later. You may still be responsible for paying annual maintenance fees or other fees associated with your line of credit.

Are there fees associated with the draw period of a HELOC?

HELOCs can come with a variety of fees, including annual or membership fees. If your lender charges an annual fee, you’ll pay it yearly during the draw period and the repayment period. The same goes for membership fees, which should all be explained in your loan agreement.7

How does the draw period affect my credit score?

HELOCs can affect your credit scores in the draw period in two key ways: payment history and credit utilization. Making the required monthly payments on time and keeping your HELOC balance low, relative to your overall credit limit, are the simplest ways to keep your credit score in good standing. Once you enter the repayment period, you’ll just want to continue making monthly payments on time.8

Can the draw period be extended?

Your HELOC lender may allow you to extend your draw period by renewing your line of credit. You may pay a fee to do so. If your lender doesn’t offer renewal, you might look into refinancing your line of credit into a new HELOC with a new draw period.

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Photo credit: iStock/milorad kravic

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.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q125-055

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Home equity loans and lines of credit (HELOCs) can put cash in your hands to fund home improvements, debt consolidation, or other financial goals. But if you have a HELOC, what happens if you sell your house?

The good news is that you won’t carry the debt with you. Balances owed to HELOCs are paid off using proceeds from the sale. (The same is true of selling a house with a home equity loan.) This is a requirement before the property can change hands.

Understanding HELOCs and Home Sales

Can I sell my house if I have a HELOC? Absolutely, though it’s important to understand how having a HELOC to repay affects the sale process and the amount of profit you get to walk away with.

Here’s a simple HELOC definition: A HELOC is a revolving line of credit secured by your home. When a home is sold, any debts attached to the property, including all mortgages, must be cleared so the new owner can take possession. That applies to your primary mortgage as well as any HELOCs or home equity loans you owe.

HELOCs and home equity loans are junior liens. A lien is a legal claim against a piece of property that protects a lender or creditor’s interest in it. Junior liens are subordinate to senior liens, which in the case of a home would be your primary mortgage — assuming you still have one. Liens, whether senior or junior, must be cleared before a piece of property can be sold.

In other words, you can’t take your HELOC with you. Once the HELOC is paid off after you sell, you won’t have access to your line of credit any longer.

Recommended: HELOC Loan Guide

Settlement of HELOC Upon Sale

HELOC debts must be settled when you sell the home; you can’t take your line of credit with you. Settlement means the debt is paid or cleared and is no longer attached to the property. Here’s what happens to a HELOC when you sell your house.

Paying Off the HELOC Balance

Who handles the repayment of a HELOC balance when a home is sold? Typically that responsibility falls to the title company. Title companies conduct title searches when a home is sold to ensure that there are no outstanding liens on the property. They also offer title insurance to buyers.

HELOC payoff happens during the closing process.

•   The title company requests a payoff amount from the HELOC lender.

•   Funds to buy the home are sent to an escrow account that’s controlled by the title company.

•   The title company uses funds from the escrow account to pay off the HELOC lender, along with your primary home loan.

•   All remaining funds are forwarded to the seller.

Can you pay off a HELOC prior to closing? Certainly, though you’d need to come up with the money to do so out-of-pocket. If you don’t have cash on hand to settle the debt, you’ll need to use the proceeds from the sale.

Once a HELOC is paid off, you can check state or county property records where you live to make sure the lien was released. Lien release means the debt is cleared from the home.

Closing the HELOC Account

After a HELOC is paid off, you’ll need to make sure the line of credit is closed, since this may not happen automatically. Your lender might require documentation to close your HELOC, including:

•   Closing documents showing proof of sale

•   Payment receipts from the title company showing the HELOC was paid off

•   Authorization from you to close your credit line

In turn, you should get a statement in writing from your lender attesting to the HELOC’s closure. It’s also wise to follow up with a check of your credit reports to make sure your line of credit is listed as closed and paid in full or paid as agreed.

Impact on Sale Proceeds

Selling a house with a home equity loan or HELOC shrinks the amount of profit you get to keep. The share of proceeds you keep depends on how much you owe on the home, including the first mortgage and HELOC, and the sale price.

Deduction of HELOC Balance from Sale Proceeds

When a home is sold with a HELOC, it’s usually the title company that handles repayment of the debt. The upside is that you don’t have to worry about calculating how much you’ll need to pay to settle the HELOC or arrange for payment to be sent to the lender.

Instead, the money comes right off the top. So, for example, say you sell your home for $500,000. You owe $250,000 on your first mortgage and $50,000 to a HELOC. After you deduct $300,000 for the combined mortgage debt, you’d be left with $200,000.

Potential for Remaining Equity

Selling a home with a HELOC assumes that your home’s value has increased since you bought it. If your home value climbed substantially, it’s possible that you could still have a decent amount of equity in the home even if you sell it with a mortgage and a HELOC in place. You may find it helpful to calculate your total equity before making a move to sell a home with a HELOC. You just need to know what you owe on the home in combined mortgage debt and your home’s approximate value.

A home equity calculator can help with this step. You can then decide what you’d like to do with the proceeds from the sale, once your HELOC is paid off. For example, you might apply it as a down payment on the next home you buy.

When you’re ready to buy your next home, you can research what’s required for mortgage preapproval and shop around to find the best mortgage rates. Some options, like FHA loans, allow for a smaller down payment.

Considerations for Underwater HELOCs

Being underwater in a home means you owe more than it’s worth. So, what happens to a HELOC when you sell upside down? And can you sell in that scenario? The answer is yes, but being underwater can add a wrinkle to the process.

Insufficient Sale Proceeds to Cover HELOC

Your first mortgage takes priority for payoff when you sell a home. Any proceeds go to that loan first, before money is directed toward HELOC debt. If the sale proceeds aren’t enough to cover your first mortgage and HELOC, you end up in a negative equity scenario.

That means you’ll need to make up the difference in cash for the sale to go through. You may need to pull money from savings, liquidate some of your investments, or borrow from your retirement account to cover the gap. If you can’t or don’t want to do any of those things, you’ll have to look at other ways to deal with negative equity.

Options for Addressing Shortfalls

There are a few routes you might pursue to deal with a shortfall when selling a home with a HELOC. The possibilities include:

•   Delay the sale. You might decide to push the sale back to allow your home’s value to rise or to pay down some of the HELOC balance. Whether that’s feasible for you can depend on your reasons for selling. A HELOC repayment calculator can help you see how you will progress if you start making steady payments to chip away at what you owe.

•   Short sale. A short sale is an agreement between you and the lender to let you sell the house for less than what you owe. If you have a HELOC and a mortgage, both lenders would have to agree to a short sale.

•   Pay off the HELOC with another loan. While not ideal, you might consider getting a personal loan or line of credit to pay off your HELOC. This only moves debt around; it doesn’t reduce what you owe. But it can clear the lien on the home associated with the HELOC so the sale can go through.

Prepayment Penalties and Fees

Before you move to pay off a HELOC, whether to sell your home or for any other reason, read the fine print. Specifically, it’s important to check for prepayment penalties and other fees the lender might impose.

Early Termination Fees

When you get a HELOC, it comes with a set repayment term. For example, you might have five years in which to access your credit line and then 15 years after that to pay back what you borrowed.

Lenders may impose an early termination fee or prepayment penalty if you pay a HELOC off early. These fees are designed to help the lender recoup some of the interest they won’t get to collect as a result of you paying off your HELOC ahead of schedule.

If you owe a prepayment penalty, that money will be deducted from the sale proceeds when your HELOC is paid off. Understanding when this fee applies, if your lender charges one, and how much you’ll pay can help you calculate your net profit from the sale.

Reviewing HELOC Terms

Ideally, you scrutinized the terms of your HELOC agreement before you ever signed on the dotted line. But if you didn’t read through it that closely, or you did but now you’ve forgotten what it says, it’s time for a thorough review.

•   Go through your HELOC terms line by line to understand:

•   How long the repayment term lasts

•   If and when a prepayment penalty or early termination fee applies

•   How the fee is calculated, if applicable

•   When the fee is avoidable

•   Any other fees you might pay to close out a HELOC early

If there’s something in your agreement you don’t understand, don’t hesitate to ask the lender for clarification. The home selling process is hectic enough, and the last thing you need is to be blindsided by surprise fees.

Recommended: What Is a Home Equity Loan?

Steps to Manage Your HELOC Before Selling

If you’re ready to sell your home, it’s important to include HELOC planning on your to-do list. There are two critical steps to tackle before you head to the closing table.

Obtaining a Payoff Statement

A payoff statement offers a detailed breakdown of how much you’ll need to pay to close out a HELOC, including the principal, interest, and fees. You can request a payoff statement from your HELOC lender, though keep in mind the numbers may change slightly as your closing date approaches.

You can use the amount on your payoff statement to estimate how much will be left from the sale proceeds after your first mortgage and HELOC debt are paid. If you have an online account that you use to manage your HELOC, you may be able to log in and request an accurate payoff amount. Otherwise, you’ll need to reach out to the lender directly.

Planning for Closing Costs

Both sellers and buyers have closing costs they’re responsible for paying. The amount you have to pay can depend on the details of the transaction and where you live. Typical seller closing costs can range from 8% to 10% of the home’s sale price.

These costs are most often paid from the sale proceeds. So you’ll need to factor that into your calculations when estimating your profit.

Going back to the previous example of a $500,000 home sale, your closing costs could add up to between $40,000 and $50,000. If you deduct that from your estimated $200,000 in profit, you’d actually walk away with $150,000 to $160,000 instead.

The Takeaway

Understanding what happens to a HELOC when you sell your house can help you navigate the process with as few headaches as possible. And if you own a home but haven’t tapped into your equity yet, knowing what to expect can help you understand whether the time is right for a HELOC based on when you might want to sell.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Will I owe money if my home sells for less than the HELOC balance?

If you’re upside down on your home when you sell with a HELOC, you’ll have to make up the difference to pay the line of credit off. If you can’t do that, you may need to delay the sale, arrange a short sale with the lender, or get a personal loan to pay the HELOC in full.

Are there fees associated with closing a HELOC when selling my house?

HELOC lenders may charge early termination fees or prepayment penalties if you pay your line of credit off ahead of schedule. If you owe this fee, it’s deducted from the sale proceeds, along with the amount needed to pay off the HELOC.

How does selling my home affect my credit score if I have a HELOC?

A paid-off HELOC can help your credit score since it shows you can handle debt responsibly. That impact, however, may be counterbalanced by the effects of applying for a new mortgage loan if you’re buying another home.

Can I transfer my HELOC to a new property after selling?

HELOCs are secured by your home so if you’re selling, the line of credit doesn’t transfer with you. If you’re interested in getting another HELOC, you’ll have to apply for a new one once you buy another home.

What happens if I don’t pay off my HELOC before selling my house?

If you don’t pay your HELOC off yourself before selling, then the HELOC balance is deducted from your sale proceeds. The title company handles repayment of HELOC debt for you from your sale proceeds, then passes on the remaining funds from the sale to you at closing.

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Photo credit: iStock/Ridofranz

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.

^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.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q125-053

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Buying your first house is a major move, even if the home itself is tiny. Becoming a homeowner can be a great way to start putting down some roots and building equity. And just because it’s called a “starter home” doesn’t necessarily mean you’re twenty-something when you go shopping for one. For many people, the purchase of a first, maybe-not-forever house can come years or decades later.

What exactly makes a good starter home? How do you know when to jump into the housing market? There are many variables to factor in, such as price, location, type of home, the sort of mortgage you’ll get, your personal finances, and more.

Read on to learn answers to such questions as:

•   Why should you buy a starter home?

•   Should you buy a starter home or wait?

•   How do you buy a starter home?

What Is a Starter Home?

The first step in deciding “Should I buy a starter home?” is understanding what exactly that “starter home” term means. A starter home is loosely defined as a smaller property — usually under 1,500 square feet — that a first-time buyer expects to live in for just a few years.

The home could be a condo, townhouse, or single-family home. But generally, when you purchase a starter home, you anticipate outgrowing it — maybe when you get married or have a couple of kids, or because you want more space, a bigger yard, or additional amenities.

A starter house could be brand-new, a fixer-upper, or somewhere in between, but it’s usually priced right for a buyer with a relatively modest budget.

That modest budget, though, may need to be loftier than in years past. From 2019 to 2024, starter home values increased 54.1%, according to USA Today. In more than 200 U.S. cities, the typical starter home on the market is now worth $1 million or more.

That might sound a little intimidating, but remember, that’s the mid-range price. Depending on where you live, there may be entry-level homes selling at significantly lower price points.

Recommended: What Is Housing Discrimination?

How Long Should You Stay in a Starter Home?

Unless you’re a big fan of packing and moving — not to mention the often-stressful process of selling one home and then buying another, or buying and selling a house at the same time — you may want to stay in your starter home for at least two to five years.

There can be significant financial reasons to stick around for a while:

•   Home sellers are typically responsible for paying real estate agents’ commissions and many other costs. If you haven’t had some time to build equity in the home, you might only break even or even lose money on the sale.

•   You could owe capital gains taxes if you’ve owned the home for less than two years and you sell it for more than you paid.

Of course, if there’s a major change in your personal or professional life — you’re asked to relocate for work, you grow your family, or you win the lottery (woo-hoo!) — you may need or want to sell sooner.

What Is a Forever Home?

A forever home is one that you expect to tick all the boxes for many years — maybe even the rest of your life. It’s a place where you plan to put down roots.

A forever home can come in any size or style and at any cost you can manage. It might be new, with all the bells and whistles, or it could be a 100-year-old wreck that you plan to renovate to fit your home decorating style and vision.

Your forever home might be in your preferred school district. It might be close to friends and family — or the golf club you want to join. It’s all about getting the items on your home-buying wish list that you’ve daydreamed about and worked hard for.

At What Age Should You Buy Your Forever Home?

There’s no predetermined age for finding and moving into a forever home. Some buyers plan to settle in for life when they’re 25 or 30, and some never really put down roots.

But according to data from the 2024 Home Buyers and Sellers Generational Trends Report from the National Association of Realtors® Research Group, buyers in the 59 to 68 age range, referred to as younger baby boomers, said they expected to live in their newly purchased home longer than buyers from other age groups, with an expectation of 20 years of residence.

Younger Millennials (ages 25 to 33) and Gen Z buyers (18 to 24) bought the oldest homes, typically referred to as “fixer-uppers.” Both groups said they expected to stay in the starter home for around 10 years.

The median expectation for buyers of all ages was 15 years.

Recommended: First-Time Homebuyer’s Guide

Benefits of Buying a Starter Home

Are you contemplating “Should I buy a starter home?” Here are some of the main advantages of buying a starter home:

•   Becoming a homeowner can bring stability to life. A starter home comes with a feeling of “good enough for now” that, for some buyers, is just the right amount of commitment without feeling stuck in the long term.

•   Buying a starter home is also a great way to try on aspects of homeownership that renters take for granted, like making your own repairs and mowing your own yard. The larger the house, the more work it usually brings. With a starter home, you can start small.

•   Buying a starter home is also an investment that could see good returns down the road, if you can find a relative deal when you buy. While you live in the home, you’ll be putting monthly payments toward your own investment instead of your landlord’s. Depending on market conditions, you could make some money when you decide to trade up, either through the equity you’ve gained when you sell or recurring income if you choose to turn it into a rental property.

•   Homeowners who itemize deductions on their taxes may take the mortgage interest deduction. Most people take the standard deduction, which for tax year 2022 (filing by Tax Day 2023) is:

◦   your home mortgage interest on the first $750,000 of indebtedness if you are a couple filing jointly

◦   your home mortgage interest on the first $375,000 of indebtedness if you are a single taxpayer or a married individual filing separately

•   Some homeowners who itemize may be able to do better than these percentages. For instance, in some states, a homestead exemption gives homeowners a fixed discount on property taxes. In Florida, for example, the exemption lowers the assessed value of a property by $50,000 for tax purposes.

Downsides of Starter Homes

Next, consider the potential disadvantages of snagging a starter home:

•   While the idea of buying a home just big enough for one or two is a romantic one, the reality of finding a starter home that’s affordable has gotten tougher.

   The outlook has been so bleak, especially in some larger cities, that some Millennials are opting out of the starter-home market altogether, choosing instead to rent longer or live with their parents and save money.

   Who can blame Millennials for taking a different approach to homeownership than their parents? The older members of this generation came of age during the financial crisis of 2008-09, which included a bursting housing bubble that put many of their parents — and even some of them — underwater on a mortgage they may not have been able to afford in the first place.

•   When thinking about whether you should buy a starter home, know that it may require a lot of sweat equity and cash. If you buy a bargain-priced first home, you may be on the hook for spending much of your free time and cash to restore it.

•   Another con of buying a starter home is the prospect of having to go through the entire home-buying process again, possibly while trying to sell your starter home, too. Keeping your house show-ready, paying closing costs, going through the underwriting process, packing, moving, and trying to time it all so you avoid living in temporary lodging is a big endeavor that, when compared with the relative ease of moving between apartments, can be seen as not worth the effort.

•   In some circumstances, you may have to pay capital gains taxes on the sale of your starter home when you move up.

If you aren’t ready to jump into a starter home, an alternative could be a rent-to-own home.

How to Find Starter Homes for Sale

Are you ready to start the hunt? Here are some tips for finding a starter home:

•   Work with an experienced real estate agent who knows your market and spends their days finding homes in your price range.

•   Rethink your house criteria. If you are buying a starter home and figured you’d shop for a three-bedroom, you may find more options and less heated competition if you go for a two-bedroom house.

•   Take a big-picture view. If you’re a young couple with no kids yet, maybe you don’t need to purchase in the tip-top school district. After all, you are at least several years away from sending a little one to their first day of school Or, if prices are super-high for single-family houses, could buying a condo or a townhome work well for a number of years?

   You might also look into purchasing a duplex or other type of property.

Average U.S. Cost of a Starter Home

The typical value of a starter home in the U.S. was $196,611 in late 2024. Keep in mind, however, that there is a huge variation in costs. A rural home may be much less expensive than shopping for a starter home that’s within short commuting distance of a major city, like New York or San Francisco.

Is Buying a Starter Home Worth It?

Deciding whether a starter home is worth it is a very personal decision. One person might be eager to stop living with their parents and be ready to plunk down their savings for a home. Another person might have a comfortable rental in a great town and be reluctant to take on a home mortgage loan as they continue to pay down their student loan debt.

When you consider the pros and cons of starter homes listed above, you can likely decide whether buying a starter home is worth it at this moment of your life.

Tips on Buying a Starter Home

If you’re tired of renting or living with your parents but don’t have the cash flow necessary for anything more than a humble abode, a starter home could be a great way to get into real estate without breaking the bank. Some pointers on how to buy a starter home:

•   Before you buy any home — starter or otherwise — it’s important to sit down and crunch the numbers to see how much home you can realistically afford. Lenders look at your debt when considering your debt-to-income ratio (DTI), but they aren’t privy to other regular monthly expenses, such as child care or kids’ activity fees. Be sure to factor those in.

•   You also may want to look at how much you can afford for a down payment. While a 20% down payment isn’t required to purchase a home, most non-government home loan programs do require some down payment.

   It’s possible to buy a home with a small down payment: The average first-time homebuyer puts down about 6% of a home’s price as a down payment, according to the latest data from the National Association of Realtors (NAR).

   In addition, putting down less than 20% means you may have to pay private mortgage insurance (PMI).

•   You’ll want to explore different mortgage loan products as well, possibly with a mortgage broker. You’ll have to decide between adjustable and fixed rate offerings, 20-year vs. 30-year mortgages, and different rates. You may also be in a position to buy down your rate with points. Getting a few offers can help you see how much house you can afford, as can using an online mortgage calculator.

•   The decision to purchase a starter home is about more than just money, though. You may also want to consider your future plans and how quickly you might grow out of the house, whether you’re willing to live where the affordable houses are, and if you’ll be happy living without the amenities you’ll find in a larger house.

•   Other factors to consider are your current state of financial health and your mental readiness for a DIY lifestyle (which includes your willingness to fix your own leaky toilet or pay a plumber.)

•   If you’re ready to make the leap, there are plenty of home ownership resources available to help you get started on the path to buying your starter home. Your first step might be to check out a few open houses and to research mortgage loans online.

The Takeaway

Buying a starter home can be a good way to get your foot in the door of homeownership, but it’s important to consider your financial situation and your plans for the next two to five years or more before buying a starter house.

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

How much money should you have saved to buy a starter home?

The average down payment is about 6% of the home purchase price. That number can help you see how much you want to have in the bank, though mortgage loans may be available with as little as 3% down or even zero down if you are shopping for a government-backed mortgage. Worth noting: If your down payment is under 20%, you may have to pay private mortgage insurance.

What is considered a good starter home?

A good starter home will likely check off some of the items on your wish list (square footage, location, amenities, etc.) and will not stretch your budget too much. You want to be able to keep current with other forms of debt you may have as well as pay your monthly bills (which will likely include mortgage, property tax, home maintenance, and more). That financial equation may help you decide whether to buy a starter home or wait.

How much do people spend on a starter home?

As of Summer 2024, the typical starter home was worth $196,611. However, prices will vary greatly depending on location, size, style, and condition.

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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.

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.

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 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 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.

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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For those of us seeking the appeal of a minimalist life on the water, the cost to build a houseboat will depend as much on how much elbow grease we’re willing to dedicate to the project as it does on the type of materials we decide to use for the job.

A houseboat is a self-propelled vessel with a cabin. There are many styles, giving people wide discretion on how they choose to build their own houseboat.

Let’s break down factors and average costs associated with building a houseboat.

Average Cost of Building a Houseboat

How much does it cost to build a houseboat? Just like the cost to build a house, it depends on size, materials, whether it’s a total DIY job, and more.

The cost of building a single-story 50-foot houseboat is at least $20,000 and perhaps closer to $50,000, some sources say. To be clear, that low estimate means doing all the work yourself or with the help of friends.

Labor costs for professionals like electricians or plumbers will increase your expenses substantially. So understand that you’ll be trading time and know-how for savings.

There are also houseboat kits and plans for sale. Charmingly, some are advertised as DIY pontoon tiny houses.

By contrast, you can choose to purchase a serviceable preowned houseboat that needs some renovations. Used houseboats can go for anywhere from around $20,000 to way over $1 million (or multi-millions) for luxury craft that border on liveaboard yachts. A houseboat in good condition is generally going to cost you around $60,000 to buy used. Shiver me timbers!

Here’s a rough estimate of the cost of building a houseboat vs. buying a used one.

Building From Scratch Cost	Preowned Houseboat Cost
$20,000 and up for 50 feet	$60,000 and up

Regardless of whether you’re planning to handle the build yourself or you intend to refurbish a used houseboat, you may need financing. How to pay for it? Not with a traditional mortgage. Options include a boat loan and a personal loan.

Homeowners with sufficient home equity may be able to launch their houseboat plans with a home equity line of credit (HELOC), home equity loan, or cash-out refinance.

Recommended: How to Find a Contractor

Factors That Affect the Cost of a Houseboat

Houseboat living has caught on with some retirees, who want to downsize home-wise.

It also could be a choice for minimalists and millennial homebuyers who think outside the box.

Not everyone, of course, will want to be a full-time liveaboard. Some water lovers will be OK with a basic houseboat for cruising and recreation, one that is maybe trailerable. Those are factors that will affect the cost of your preferred houseboat.

Here are factors to consider.

Size

The size of your houseboat will have a major impact on the cost of materials you’ll need. Are you planning to build a single-story or double-decker houseboat? Will this be something that would fit on a standard 50-foot pontoon base, or will you need something more robust to keep it afloat?

Consider the cost of $50,000 to build a basic 50-foot houseboat that will probably end up offering 450-500 square feet of space. That comes out to at least $110 per square foot, assuming you don’t hire anyone to help with construction. Your houseboat project could very well end up costing more than $200 per square foot.

Bear in mind that these figures are a very rough estimate that was calculated across a broad average of houseboats.

Design

The design of your houseboat will have a large effect on your options when it comes to layout, maneuverability, and aesthetics.

Before you begin construction, you’ll need to decide on what type of hull best suits your houseboat. Aluminum pontoons are popular.

Catamaran cruisers are maneuverable and may be cheaper to build, but they often compromise on space. These designs are easily outfitted with motors and may be best suited for owners who intend to take them out occasionally.

Those looking for larger accommodations may prefer a type of house called a floating home, which is actually different from a houseboat. It often has a concrete hull and is meant to stay in one place, permanently attached to utilities. The price, though, will usually be much higher than that of a houseboat.

A few sailors may opt to build a yacht, which offers the ideal combination of maneuverability and living space. You’ll have to have a hefty check at the ready or prepare to borrow a boatload if you’re considering this option.

Materials

The most common materials used to build boats intended for habitation are aluminum and fiberglass, but in some cases steel and wood can be construction materials of choice.

A standard pontoon base can cost between $3,000 and $10,000.

The cost of interior finishes largely depends on your personal tastes. They can be affordable if you’re fine with a no-frills setup but can tack skyward for more luxurious tastes and larger vessels. Stainless steel appliances and granite countertops cost money, regardless of whether they go in a house or a houseboat.

Will you want a staircase and flybridge? Budget accordingly.

Location and Water Depth

The environment you intend to keep your houseboat in will affect how much you’ll have to pay to make it seaworthy.

The price of an inboard motor may start around $8,000 and go up to $25,000. An outboard could start at $1,000 and go up to around $15,000. Depending on how large your vessel is, you may need to pay for a larger motor with more horsepower.

Federal regulations governing recreational craft prohibit the majority of houseboats from sailing in deep ocean waters. However, cruises along the shoreline, or in a lake or river, are acceptable options for capable houseboats.

Weather

Whether you decide to launch or keep your houseboat in freshwater or saltwater and local weather patterns will affect houseboat maintenance.

Saltwater is a tougher environment but has a lower freezing temperature than freshwater, which means that you likely won’t have to worry about ice forming in the water.

By contrast, if your houseboat will primarily be in freshwater, you may have to deal with ice. As water freezes into ice, it expands, which can damage your hull or rudder.

Permits and Regulations

Any recreational vessel must meet federal safety requirements and possibly abide by state regulations.

Average Cost of Living on a Houseboat Year-Round

The average cost of living on a houseboat is $30,000 per year, including a boat or personal loan payment, some sources say. This breaks down to around $2,500 per month. Some frugal houseboat enthusiasts report living on as little as $6,000 per year.

Most of these costs encompass mooring fees, utilities, and insurance, but you’ll also need to budget for repairs and applicable local fees. Some houseboat communities have a homeowners association that allows all residents to distribute community expenses like maintenance of the docks.

Does a houseboat cost less than a home sitting on terra firma? Generally, yes. You can build a houseboat for far less than a comparably sized single-family home. As a future liveaboard, though, you might want to compare moorage and other fees to the costs of maintaining a traditional home.

The IRS says a boat with cooking, sleeping, and toilet facilities can be a main or second home, so interest paid on a loan for your houseboat could be included in the mortgage interest deduction if you itemize.

The Takeaway

How much does it cost to build a houseboat? The cost could start at $20,000 for a DIY build and depends largely on size and materials. Hiring skilled labor will add to that substantially. An alternative to building a houseboat is buying a used one and making it your own. How to pay for these nautical visions? One way, for qualified homeowners, is a HELOC brokered by SoFi.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

How large can a houseboat be?

In most cases, 40 to 50 feet is the average length and 8 to 20 feet the range of width for a houseboat that will be comfortable as a long-term dwelling.

How long does it take to build a houseboat?

A DIY houseboat project could easily take 18 months to complete, but the time frame will depend on whether you’re able to work on the houseboat project full time and whether you enlist any help. Remember to factor in time to obtain necessary permits or inspections for your area.

Where can I get financing to build a houseboat?

You may be able to finance your houseboat build through lenders that focus on marine and RV lending. Other options are a personal loan, a HELOC, a home equity loan, and a cash-out refinance.

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Photo credit: iStock/MarkHatfield

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 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 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.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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As you’re starting your home-buying journey, you may come across a style referred to as a split-level house. Popular in the 1950s through the 1970s, split-level homes appear to be making a comeback.

What is a split-level house? Keep reading for the answer and whether it’s the right style for you.

Characteristics of a Split-Level House

Often seen as a starter home, a split-level house differs from other traditional homes due to its layout. A cousin of the ranch home, also a popular midcentury style, this type of house commonly has two or three levels that are connected by half-flights of stairs.

The most prominent designs feature the living room, kitchen, and dining room on the main level. A half-stairway may lead up to the bedrooms, and a second half-stairway leads down to a den, basement, and sometimes garage. The garage may be at grade level, with the bedrooms above it.

A split-level home with three floors can be referred to as a trilevel home, though this style can also have a fourth or fifth floor. A split-level home may have a low-pitched roof, a large picture window, overhanging eaves, and an asymmetrical facade.

Recommended: Do You Qualify as a First-Time Homebuyer?

Pros and Cons of a Split-Level House

Consider the following advantages and drawbacks of a split-level home.

Pros

•   May be more affordable: Split-level homes are generally more outdated — or just feel that way — so you could find these homes at a bargain. (Try this mortgage calculator to get a feel for the numbers.)

•   Nostalgia is in: Sometimes it’s hip to be square. Young buyers may be drawn to the old-school feel of a split-level house.

•   Ability to qualify for home financing: If you can find a home at an affordable price, it might be easier to qualify for a mortgage.

•   More privacy: Split-level homes tend to offer more privacy because of the staggered levels. Upstairs or down, you might be able to set up a quiet home office.

•   May feel bigger: Split-level homes offer more square footage than many ranch-style homes, and they keep the rooms you use most frequently together.

Cons

•   Those stairs: People who aren’t very mobile or are afraid of climbing stairs as they get older may not be the best fit for split-level homes. Homeowners will need to use the stairs frequently, although they’re half-flights.

•   Could be hard to sell: When homebuyers are looking at the different types of houses, they may view split-level homes as awkward-looking or dated, so it could be hard to sell if you’re ready to move.

•   Remodeling can be challenging: The layout isn’t conducive to making any dramatic changes. Each level is meant to have a distinct purpose.

•   Subterranean space may not be valued: Thanks to the basement, a split-level home may not appraise as high as a one-level home.

Recommended: Understanding Mortgage Basics

Difference Between a Split-Level House and a Raised Ranch

Although some people use the term split-level to describe a raised ranch style, a true raised ranch has two levels, while a split-level home has three or more.

A raised ranch house is basically a ranch house that sits atop a basement or a first floor that contains a finished room and a garage. The story underneath the main floor of the home is meant to provide additional living space.

The building materials may be different: In most cases the basement or first floor is made of brick, with the upper level using aluminum or wood siding. There may also be more decorative details such as nonfunctional shutters.

Finding a Split-Level House

You’ll find split-level homes all across the U.S., often in suburban areas outside of cities. They are very common in the Midwest.

Since these types of homes have basements, you’ll need to live in an area where that’s typical. Some parts of the country near the ocean or large bodies or water have poor soil types and won’t usually have homes with basements.

You might find a, well, staggering deal on a split-level home in one of the 50 most popular suburbs in the U.S.

Who Should Get a Split-Level House?

Those who are the best fit for a split-level house are buyers who are willing to climb stairs daily, families that value privacy, and those who see the value of maximum living space on a smaller lot.

Some people will find a one-level house, condo, or townhouse more their style. This home loan help center can be of use if you’re shopping for a home and a mortgage.

The Takeaway

If you value privacy and space and don’t mind stairs and a boomer aura, a split-level house could be just the ticket. Split-level homes can be a good value.

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

Are split-level homes hard to resell?

Split-level homes may not be for all homebuyers, though that doesn’t necessarily mean you can’t sell this kind of home. The key to encouraging buyers to make an offer is to shine a positive light on the home. That could mean staging it, adding curb appeal, and making upgrades as small as paint and new fixtures.

Can you build up on a split-level house?

Yes. You may be able to add a level to the top, or put an addition on the side or back.

Are split-level houses expensive to build?

Because the home can be built on a smaller lot, it may be more affordable than other designs. The cost to build any home depends on the locale, materials, size, and contractor. If you’re considering building your own, shop multiple builders to see what you can get.

Can you get a loan to build a split-level house?

You may be able to get a construction loan to build a split-level house. It’s typically harder to get a construction loan than a mortgage, and construction loan rates tend to be higher than conventional mortgage rates.

Why are split-level homes cheaper?

Split-level homes tend to cost less than other types of comparable homes because of when they were built. Many homebuyers find the style unfashionable.

What are the disadvantages of split-level houses?

The main disadvantage of split-level homes is that they require homeowners to walk up and down stairs often to access different areas of the home. While it may not be a dealbreaker to some, those who are less mobile or are afraid of how they’ll age in the home may not find split-levels a good fit.

Are split-level homes a good investment?

Maybe. An investor who updates a split-level home while keeping some of its retro charm is likely to find takers.

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Photo credit: iStock/davelogan

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 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 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.

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.

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.

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