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The average homeowner with a mortgage ended 2023 with $299,000 in home equity, according to ICE Mortgage Monitor, which also estimates that the average funds homeowners could tap by borrowing against their home equity is $193,000.

Obviously, that number varies for each individual and depends on factors such as the original down payment, local property values, and the amount of time in the home. But if you have more than 20% equity in your home, using a home equity line of credit (HELOC) to build wealth is a strategy to consider.

Ways to Build Wealth With a HELOC

A home equity line of credit lets you borrow funds as needed (up to a prearranged limit) through a credit draw. This is different from a home equity loan, in which you would borrow a one-time sum of cash. Drawing on your home equity for certain expenses could help grow your wealth over time, if it financially makes sense. Here are some options to consider.

1. Home Improvements

A HELOC works well for larger home improvement projects and renovations because you can draw funds to pay for materials and contractors as needed. You accrue interest only on the outstanding balance, so it could be cheaper to opt for a HELOC vs. a home equity loan. And if you itemize your taxes, you could deduct HELOC interest payments when the money is used to improve the home.

Plus, a renovation project could build wealth by increasing the value of your home. Home improvement experts estimate that a kitchen refresh could deliver a 377% return on investment and refinishing hardwood floors could have a 348% ROI.

2. Debt Consolidation

You can’t deduct HELOC interest when you use the funds to consolidate debt, but you could still build your wealth. Paying off debt with a lower interest rate could save you a lot of money over the long run. Let’s look at an example.

Say you qualify for a HELOC with an 8% APR but you have a $10,000 credit card balance with a 22% APR. In order to pay off that card in five years, you’d pay $276.19 per month and pay $6,571.35 in interest.

With the HELOC, on the other hand, let’s say you made interest-only payments for one year, then spread out the principal and remaining interest over four years, for a total of five years. During the interest-only period, your payment would be $66.67, followed by $244.13 for the remaining four years. On top of that, you’d only pay a total of $2,518.19 in interest for the entire five years. That’s a potential savings of $4,053.16 in interest payments by consolidating to a lower rate!

3. Real Estate Investments

Using a HELOC to finance an investment property can help you start climbing the real estate ladder. Homeowners could use the funds to make a down payment, cover closing costs, and/or make some upgrades before renting out the property.

You’ll still need to qualify for the new property’s monthly mortgage loan payments, particularly if there isn’t a current rental income history for the lender to review. Assuming you’re eligible for the loan, the goal is to use the rental income to pay off the HELOC and make a profit. On top of that, the property itself could increase in value over time, building your overall wealth.

4. Education and Skills Development

Investing your home equity in your education or skills development could increase your earning power and, consequently, your wealth. Research shows that people with advanced degrees tend to earn more than those without them.

For instance, a study published in Demography revealed that women with bachelor’s degrees earn $630,000 more in a lifetime than those with a high school degree. For men, the increase in lifetime earnings is $900,000. The numbers are even more dramatic with graduate degrees. Women’s lifetime earnings are $1.1 million higher than their high school graduate counterparts, whereas men earn $1.5 million more. Clearly, investing in your professional skills can translate into greater wealth.

5. Start or Expand a Business

The majority of small business owners invest their personal funds in the growth of their companies. Research also shows that upfront funding correlates with greater revenue. So while there’s no way to know that home equity financing you use for your business will guarantee success, it could improve your odds to scale more quickly.

6. Investment Portfolio Growth

Growing a diversified investment portfolio is another option for using a HELOC to build wealth. Obviously, there is risk involved when funding investments. Focusing on long-term investments could help reduce the risk of short-term market volatility. Remember, though, that for investments made with money from a HELOC to truly pay off, you would have to earn more on the investment than you pay in interest for the HELOC.

7. Emergency Fund or Cash Reserve

Most financial experts recommend having three to six month’s worth of savings on hand in cash in case you lose a job or the ability to earn an income. However, the economic volatility that came during the pandemic has people rethinking that number and even recommending up to a year of expenses in savings. Using a type of home equity loan like a HELOC could give you the peace of mind of having a financial cushion to fall back on, while allowing you to carefully invest that six months of savings instead of keeping it in cash.

What to Consider Before Getting a HELOC

There are several factors to consider before you decide on a HELOC instead of some other type of financing, such as a cash-out refinance or unsecured personal line of credit.

•   Your home is used as collateral: In other words, if you default on your HELOC payments, you could lose your house.

•   You must maintain 10% to 20% equity in your home: You can’t tap into your entire equity amount; lenders require you to keep some, which means you may not be able to borrow as much as you originally thought.

•   Rates are usually variable: Your interest won’t stay the same and could increase if rates rise. That could mean a bigger balance and bigger payments down the road.

•   HELOCs have two stages: The first is the draw period, in which you only have to make interest payments. After the draw period, you’ll make payments on both principal and interest.

Pros and Cons of Taking Equity Out of Your Home

It’s certainly possible to build wealth using a HELOC, but there are advantages and disadvantages to think about.

Pros:

•   Low interest rate compared to other financing

•   Interest accrues only on the balance, not available credit

•   Borrow again when you replenish the credit line

•   No restrictions on how you use the money you borrow

Cons:

•   Home is used as collateral, putting it at risk

•   Payment amount increases after draw period is over

•   May come with closing costs and maintenance fees

The Takeaway

Tapping into your home equity using a HELOC is one way to potentially build wealth, especially because rates tend to be low when compared to other forms of borrowing. It’s always worth weighing the pros and cons, since defaulting on payments could result in losing your house. But if you have the financial confidence to move forward, there are several ways that your home equity could help you build wealth.

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

FAQ

Is it smart to use a HELOC for investment property?

Using a HELOC for an investment property could help you fund the transaction sooner than if you used other types of financing. You may be able to make a bigger down payment or even make an all-cash offer. Just be sure that you feel confident in your real estate market research and your ability to make payments even if a worst-case scenario occurs.

What should you not use a HELOC for?

A HELOC should not be used for depreciating assets, especially when your goal is to build wealth. Things like vacations and car purchases aren’t usually recommended since they don’t hold their financial value.

What are the pitfalls of a HELOC?

The biggest pitfall is that your home is used as collateral to secure a HELOC and can go into foreclosure if you miss payments. On top of that, variable interest rates result in the potential for larger-than-expected payments if rates increase over time.

Photo credit: iStock/nortonrsx

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.

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.

^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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When you take out a mortgage, you can deduct the amount of money you pay on mortgage interest from your taxable income. But is home equity line of credit (HELOC) interest tax deductible, too? Put simply, it depends on when you took out the HELOC and how much mortgage debt you have.

Here’s what you need to know about HELOC tax deductions, including the requirements and limitations on HELOC tax-deductible expenses, plus how to calculate your deduction.

What Is a HELOC?

Whether to cover renovation costs or consolidate debt, homeowners can borrow against the value of their home to secure the necessary funding. There are two main types of home equity loans: a conventional home equity loan and a home equity line of credit, also known as a HELOC. A HELOC functions as a revolving line of credit that uses home equity — the home’s value minus the amount you still owe on the primary mortgage — as collateral.

How much you can borrow typically ranges from 75% to 90% of your home equity. Generally, lenders require a minimum of 15% to 20% equity in your home to be eligible for a HELOC.

When comparing a HELOC vs a home equity loan, a key difference is that a HELOC allows you to draw funds as you need them, up to a maximum limit, over a draw period (often 10 years). By contrast, home equity loans disburse funds all at once.

With HELOC loans, you pay interest only on the amount you withdraw. Once the draw period ends, any remaining borrowed funds and interest are repaid over a repayment period, which can vary but typically spans 10 years.

Dive deeper: What Is a Home Equity Line of Credit?

How Does a HELOC Affect Your Taxes?

The interest paid on a HELOC could qualify as a tax deduction to lower your taxable income. If you own a home and are planning to claim a HELOC tax deduction, there are some requirements and limitations to keep in mind.

Requirements for the HELOC Interest Tax Deduction

To answer “is interest on a HELOC tax deductible,” it’s essential to check that you meet certain requirements set by the Internal Revenue Service (IRS).

Since the Tax Cuts and Jobs Act of 2017, there are stricter requirements for how funds are spent to be eligible for a HELOC tax deduction. Specifically, funds from a HELOC must be used to buy, build, or improve a qualifying home — either a primary or second home. Eligible expenses can range from rewiring a house to replacing a roof or remodeling a kitchen. Note that funds must be spent on the same property used to secure the HELOC.

It’s also required that you have positive equity in the home used to secure the HELOC. If you have an underwater mortgage, meaning you owe more on the home than its value, you are not eligible for a HELOC tax deduction.

These requirements are in place for tax years 2018 through 2025. Prior to the rule change, a HELOC tax deduction could be made for interest paid on debt used for any type of personal expenses, not just home improvements.

Recommended: Cash Refinance vs. Home Equity

HELOC Tax Deduction Purchase Limits

HELOC tax deductions are not unlimited. So, up to what amount are HELOC loans tax deductible?

The IRS allows you to deduct interest on a maximum of $750,000 in residential loan debt (or $375,000 if married filing separately), including the primary mortgage and a HELOC. For instance, if you had $700,000 left on a home mortgage loan and $150,000 in HELOC debt, you could only deduct interest on the first $750,000 of debt.

If your primary mortgage or HELOC was approved before the 2018 tax year, you may be eligible to claim interest up to the previous limit of $1 million (or $500,000 if married filing separately). Borrowers who took out a HELOC in 2017 or earlier should note that the rule change did away with the $100,000 limit (or $50,000 if married filing separately) on home equity debt for tax deductions.

Tax Deduction Limits on Primary Mortgages

The tax deduction limits on primary mortgages are based on when the mortgage loan was taken out.
If you took out a mortgage before October 13th, 1987, there is no cap on mortgage interest tax deductions. Homebuyers who got a mortgage between October 13, 1987 and December 16, 2017, can deduct interest on up to $1 million in total mortgage debt for married couples filing jointly and single filers. The limit is $500,000 for married couples filing separately.

If you took your mortgage out after December 16, 2017, you can deduct up to $750,000 (or $375,000 if married filing separately).

These limits applied to all combined mortgage debt, including first homes, second homes, and HELOC loans.

Is Home Equity Loan Interest Tax Deductible?

The tax deduction rules for home equity loan interest is the same as a home equity line of credit. As long as you’re using funds to buy, build, or improve a home, you can claim a tax deduction on mortgage debt up to $750,000.

Recommended: What Is a Home Equity Loan?

How to Calculate a HELOC Interest Tax Deduction

Prior to filing taxes, you should receive IRS Form 1098 from your HELOC and mortgage lenders. This form indicates the interest you paid on your HELOC, primary mortgage, or home equity loan in the previous year.

If you used any HELOC funding for ineligible uses, such as personal expenses or debt consolidation, you’ll need to subtract that portion to get the deductible interest.

Besides the interest you paid on your primary mortgage and HELOC loan, total up other deductions like property taxes, mortgage points, and student loan interest. Since you can only deduct mortgage and HELOC interest payments with an itemized deduction, it’s important to check that the total of your deductions exceeds the standard deduction amount.

Here are the standard deduction amounts for tax year 2024:

•   Single or Married Filing Separately: $14,600.

•   Married Filing Jointly or Qualifying Surviving Spouse: $29,200.

•   Head of Household: $21,900.

If the mortgage and HELOC interest, plus other tax deductions you’re eligible for, exceed the above amounts, then it’s worth considering itemizing.

Recommended: Personal Line of Credit vs. HELOC

How to Deduct Home Equity Loan Interest

To deduct home equity loan interest, you’ll need to gather any receipts or invoices documenting how the money was spent. Be sure to keep records of transactions for eligible home renovations and improvements to verify your deductions in case you are audited by the IRS.

Once you’ve compiled all the necessary documentation, you’ll itemize your deductions using Schedule A of IRS Form 1040.

Does a HELOC Affect Property Taxes?

While the amount you take out through a HELOC won’t affect your property taxes, the improvements you make to your home could potentially increase the value of your home. If your renovation is substantial and involves a permit, it could be more likely to change the appraised value and potentially increase your property taxes.

The Takeaway

You can deduct the interest paid on your HELOC if the funds are used to buy, build, or improve your home. HELOC tax deductions must be itemized, and they are only allowable for the first $750,000 in mortgage debt on qualifying primary and secondary residences.

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

FAQ

Do you report a HELOC on your taxes?

You report your HELOC interest on your taxes if you’re claiming an itemized deduction and you used your HELOC to build or improve your home.

Will a HELOC appraisal raise my taxes?

No, a HELOC appraisal will not raise your taxes. Property taxes are based on the appraised value of your home by your local government.

Does HELOC affect capital gains tax?

No, a HELOC does not affect capital gains tax on a home sale.

Photo credit: iStock/damircudic

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.

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.

^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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Obtaining a mortgage with a reduced interest rate is a crucial objective for many prospective homeowners. Getting a good interest rate can save borrowers thousands of dollars over the course of a loan and have a big impact on your financial health.

It takes research and preparation to navigate the complicated world of mortgage rates, but making the effort can pay off with lower monthly payments and significant long-term savings.

What Is the Best Way to Get a Lower Mortgage Rate?

Although there’s no one-size-fits-all approach that will help homebuyers qualify for a mortgage at a reduced mortgage rate, there are a few crucial steps one can take. These include carefully tending your credit score and diligently comparing lenders and financing choices.

This may be especially daunting to first-time homebuyers, but borrowers who learn how to lower their mortgage interest rate can better their chances of long-term financial stability and successful homeownership.

💡 Quick Tip: SoFi’s award-winning mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $7.5 billion in home loans so we know a thing or two about what makes homebuyers happy.‡

Pros and Cons of a Lower Mortgage Rate as a Home Buyer

As a prospective homeowner, getting a reduced mortgage rate could offer many benefits, though there are a few potential challenges as well.

Pros:

•   Decreased monthly payments: A lower interest rate usually results in a lower monthly mortgage payment, giving you more money for investments or other expenses.

•   Long-term savings: Depending on the loan amount and term, even a small interest rate reduction can save a significant amount of money over the course of the loan — possibly tens of thousands of dollars. Experiment with a mortgage calculator to see how the interest rate and loan term impact the total interest paid over the life of the loan.

•   Building equity faster: As a result of lower interest rates, a larger portion of your monthly payment is applied toward paying off the loan, hastening the process of building equity in your house.

Cons:

•   Qualification requirements: Borrowers with a strong credit rating, steady income, and a sizable down payment are frequently eligible for the lowest rates offered by lenders. Achieving these requirements may prove difficult for some buyers.

•   Higher upfront costs: Securing a lower interest rate may require paying higher upfront costs, such as points or a big down payment.

•   Limited availability: Some purchasers may find that the lowest advertised rates are only accessible to customers who qualify for certain loan types under particular circumstances.

•   Market volatility: Interest rates can change over time for an array of economic reasons. An adjustable-rate mortgage may offer a borrower a low initial interest rate, but savings could be outweighed by rate hikes in the future.

Recommended: The Best Affordable Places to Live in the U.S.

Ways to Get a Lower Mortgage Rate

If you’re wondering how to get a lower interest rate on a mortgage, here are tactics you’ll want to take a look at:

Shop for Mortgage Rates

Finding the best loan terms for a house purchase requires doing your research on mortgage interest rates. Get quotes first from a variety of lenders, such as banks, credit unions, and online lenders. Consider whether you are eligible for a loan guaranteed by the government, such as a VA loan (from the U.S. Department of Veterans Affairs) or an FHA loan, backed by the Federal Housing Administration. Don’t accept the first mortgage deal you run across; shop around and compare rates offered by different lenders.

To evaluate rates, fees, and terms side by side, make use of online comparison tools. Never be afraid to ask a lender if they can match a competitor’s rate or give better conditions. Other considerations, like closing expenses and the caliber of the customer service, may influence your choice of mortgage, and the lowest rate that is advertised may not always be the best one. Make sure you have researched your selection and that it is in line with your long-term financial objectives.

Nurture Your Credit Score

Borrowers with better credit scores usually receive reduced rates from lenders. A better rate might result from paying your bills on time, cutting overall debt, fixing any inaccuracies on your credit report — or all three. Get a copy of your credit report from each of the big credit reporting agencies, check it for accuracy, and quickly request fixes for any inaccuracies. Next, focus on paying off current debts on time, maintaining modest credit card balances, and refraining from creating new credit lines unnecessarily.

Choose Your Loan Term Carefully

Investigate different types of mortgage loans, including fixed-rate and adjustable-rate mortgages (ARMs). Each type has a different interest rate structure and set of requirements. Shorter loan terms of 15 or 20 years usually have cheaper interest rates than 30-year mortgages, which results in significant savings over the course of the loan. They also typically have larger monthly payments.

Longer loans spread out payments over an extended period of time, which lowers the monthly payment but comes with higher overall interest charges. When choosing a loan term, take your cash flow, long-term objectives, and financial status into account. While a longer term could offer more flexibility with lower monthly payments, choosing a shorter term can help save money and allow you to pay off the mortgage sooner.

Make a Larger Down Payment

Increasing your down payment is one of the best ways to get a lower mortgage rate. For borrowers who are able to make a substantial down payment — typically 20% or more of the purchase price of the home — lenders frequently offer lower interest rates. A higher down payment shows financial responsibility and lowers the lender’s risk, which makes for a more desirable borrower. Borrowers can also eliminate private mortgage insurance (PMI) with a sizable down payment, which further reduces your monthly payment. Although stowing away a down payment takes time and discipline, there could be significant interest savings over the course of the loan.

Buy Mortgage Points

Purchasing discount points, sometimes referred to as mortgage points, can be a calculated move to obtain a cheaper mortgage rate. Each point costs 1% of the total loan amount and lowers the interest rate by a specific amount, usually 0.25% per point. Although purchasing points necessitates a one-time payment, it might provide substantial savings during the loan term. Before you purchase points, make sure you set aside cash reserves for emergencies. And ask yourself if you plan to stay in the house past the breakeven point (the point at which the monthly savings from a lower payment equal the initial cost of purchasing points).

Lock in Your Mortgage Rate

Once you’ve found a good rate and gone through the mortgage preapproval process, locking in your rate is a crucial step in protecting against potential rate increases during the closing process. When a rate is locked in, the lender agrees to guarantee the agreed-upon interest rate for a predetermined amount of time — usually 30 to 60 days — while the loan application is being processed. This guarantees that the rate won’t change during this time, even if market rates rise. If rates drop, though, one might not be able to benefit from the lower rates unless the lender has a float-down option.

Refinance Your Mortgage

If mortgage rates drop significantly (or your financial profile improves markedly) after you purchase your home, refinancing your mortgage can cut monthly payments and total loan costs. But it’s crucial to take into account refinancing charges, like appraisal and closing costs, and balance these against the possible savings from a lower rate. Homebuyers should think about long-term financial objectives and how refinancing fits within their total budget. Working with a reliable lender and thoroughly weighing options can help one decide if refinancing is the best course of action.

💡 Quick Tip: Have you improved your credit score since you made your home purchase? Home loan refinancing with SoFi could get you a competitive interest rate with lower payments.

Searching for Mortgage Rate Tips

Start by keeping an eye on market developments and learning how the economy affects mortgage rates. To be eligible for reduced rates, carefully manage your credit score. You can also get reasonable rates and better conditions by shopping around and comparing offers from different lenders. To optimize savings, think about the advantages of increasing your down payment, buying discount points, and selecting the ideal loan term. Lock in a cheaper rate while the market is favorable.

Recommended: Home Loan Help Center

The Takeaway

Prospective homeowners can improve their chances of obtaining a favorable rate and ultimately save a large amount of money over the course of their loan by raising their credit score, shopping around for the best rates, and negotiating with lenders. Market conditions, lender competition, and your individual financial situation will factor into your mortgage terms. Greater financial stability can be achieved from taking proactive measures to achieve a cheaper mortgage rate, whether through buying discount points or increasing the down payment.

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.

FAQ

Can you ask your mortgage company to lower your interest rate?

Yes, you can negotiate with your mortgage company to potentially lower your interest rate before you sign on for a loan. After you have a mortgage, you could ask your lender about a mortgage recast or a refinance.

What makes mortgage interest rates go down?

Mortgage interest rates can decrease due to factors such as economic downturns, changes in federal monetary policy, and market competition among lenders.

Can you negotiate a lower interest rate on a mortgage?

Yes, you can use variables like your creditworthiness, the state of the market, and lender competition to negotiate a lower interest rate on a mortgage.

Photo credit: iStock/Delmaine Donson
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.

^‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.​​
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.
^†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.
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