Tips for Maximizing Time and Money

Tips for Maximizing Time and Money

Your finances and time, if managed well, can elevate your quality of life significantly. Finding ways to make the most of these two resources can enhance how secure and enjoyable your days are.

Read on to understand the time-money relationship and how to make it work as well as possible.

What Does ‘Time Is Money’ Actually Mean?

The phrase “time is money” means that a person can translate their available hours into money by getting paid to work. If you’re sitting around relaxing, for instance, you could instead be working and earning cash.

This saying can be further explained in terms of opportunity cost. Say a person has an hour to spend. That person can choose to work for that hour or they can choose to do something that does not yield any income, like reading a book. The person who reads the book loses the opportunity to earn income for that hour. If the person can earn $50 an hour, the opportunity cost of choosing to read a book is $50. Thus, time is money.

Of course, it’s every person’s decision about how much they want to work versus enjoy their free time as they see fit. Some people are driven to work 60 or more hours a week and are focused on how much they can deposit in their checking account. Others, craving work-life balance or, say, taking care of children, work much less (if at all). They have chosen a different path.

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What Is the Relationship Between Time and Money?

Balancing time and money can involve a trade-off. To make more money, some people spend more time on their careers and have less time for the other obligations and pleasures in life, whether that means spending time with family, relaxing, or pursuing hobbies and passion projects. Working long hours can mean less time to clean, shop, and otherwise handle chores. If one makes enough by working, they can perhaps delegate those duties and hire someone to handle them.

For example, a lawyer might be able to afford to pay a landscaper $50 an hour to do yard work while they earn $300 an hour working with a client. The lawyer nets $250 by doing so. If the lawyer does the yardwork and not the landscaper, the lawyer loses the $300 they could have earned doing legal work. Seen through a financial lens, it could be sensible to embrace strategies that maximize your earning power with the limited time you have. If, however, you are a person who earns less than a lawyer and/or you love to garden and care for your property, you might well decide to do the yard work yourself.

Recommended: What Is the Time Value of Money (TVM)?

Tips for Managing Time and Money

As you may see from the yard work example above, good time management is not just about working every waking hour. It’s about allocating time for tasks wisely and balancing work and personal lives. Otherwise, your health, mood, and personal relationships could suffer. Not every minute of your time should have a price tag on it.

Here are some time and money management tips to get you started.

Prioritizing Tasks

You only have so many hours in a day to get things done, so prioritizing is critical. Work, picking children up from school or daycare, grocery shopping, and preparing food are daily and weekly priorities. So too are things like exercise, meditation, seeing loved ones, and doing whatever feeds your spirit, from rafting to reading. Plan your priorities daily, but typically no more than three or you could feel overwhelmed.

Writing Down Your Schedule

Your daily schedule is critical, but planning your time weekly and monthly can also keep you on-task and organized. More than that, it can help you visualize your available time and consolidate tasks so you can make your life more manageable. For example, can you combine one task with another? Can you go to the grocery store while your child is on a playdate, saving you a trip? Can you fit in a workout during your lunch hour? Organizing your time and life can make you much more efficient and reduce stress.

There are many calendar-keeping tools available, from cool journals to apps. Using alerts on your mobile phone can also help you keep track of the “musts” on your daily schedule.

Putting Time Limits on Tasks

Spending more time on enjoyable tasks and putting off the less palatable ones is human nature. But it’s also procrastination that can leave you short on time and stressed about deadlines at work and at home.

One good solution: Set time limits for activities, and schedule them wisely. Tackle a difficult project when you have the most energy, such as first thing in the morning. Block off an hour or two. If you split up challenging tasks into manageable chunks, you won’t become overwhelmed. Just getting started and seeing some progress can motivate you to continue.

Focusing on One Task at a Time

Multitasking can be a fast track to inefficiency. Walking the dog and listening to a podcast is one thing, but trying to write a report while your child is doing homework (and asking for help), is another — and probably not efficient — one.

Given a quiet room and time to focus, you might knock out the report in an hour or two. Multitasking, on the other hand, can mean for many of us that nothing receives your full attention and is done well.

Removing Interruptions While Working

Social media, pop-up notifications, emails, phone calls, colleagues who want to chat on Slack, family members, and pets all can enrich and inspire your life, but when you are balancing time vs. money, face the facts. They pull you away from work and from being efficient. Find ways to eliminate interruptions, and you’ll likely accomplish more things, more quickly.

If you have an urgent task and work at home, consider going to a coffee shop or a library where you might have more peace. If colleagues at work are a problem, ask to use a conference room temporarily to get your work done or say you are on deadline and pull back from chat apps and email alerts. To avoid technology distractions, try putting your phone away in a drawer so that it is out of sight and out of mind while working.

Creating a Realistic Budget

When it comes to the financial aspect of money vs. time, budgeting can really optimize your efforts to wrangle your funds.

A budget helps you account for your income, expenses, and savings so there are fewer surprises and so you hit your goals. Many people, in fact, believe that being disciplined with money or more accountable for it is a major key to wealth.

Making a budget typically involves looking at your monthly after-tax income, including keeping track of money from side hustles and the like. Then, you will subtract the cost of your monthly necessities (housing, food, medical care), as well as debt, and then allocate what’s left to spending and saving. This process should reveal if you are living within your means, or are you spending more than you earn?

If your expenses exceed your income, look for ways to cut back on spending, such as eating out less, biking to work instead of driving or calling an Uber, or perhaps consolidating high-interest credit card debt with a lower-interest personal loan. The ultimate goal is to create a budget that you can live with and with room to save for long-term goals, like the down payment for a house or for retirement.

Finding Ways to Invest Your Money

A reasonable goal for long-term financial planning is to set aside 10% of your income and invest it. You can educate yourself with books, podcasts, websites, and apps to, say, learn the pros and cons of stocks vs. bonds. A professional financial advisor can also help you to find the best vehicles to build wealth. For example, a 401(k), a diversified portfolio of stocks and mutual funds, or a passion like watch investing or whiskey investing can all play a role in your investing.

Remember, however, the golden rule for investments, though, since they are not covered by the FDIC, or Federal Deposit Insurance Corporation: Only invest what you can afford to lose.

Using Time for Yourself Wisely

Work-life balance is increasingly a goal for Americans, and a number of companies are experimenting with four-day workweeks as one path to achieving this.

Overwork and burnout are real dangers for those who Incessantly strive to capitalize financially. It’s definitely wise to schedule time for yourself. It can be as simple as meditating, spending time with family, working out, volunteering, or pursuing a hobby. Spending time on things that bring you joy can spur you to be your best when you are working, too.

Automating Your Bills and Payments

Automating your monthly bills can be a win-win. Paying bills on time is the biggest single contributor (at 35%) to your credit score, and taking care of those charges before they accrue late fees also makes good money sense.

What’s more, in terms of the time vs. money equation, setting up automated bill payments will also free up some space in your schedule. Your bills will be paid on time each month, without you having to click around websites or write checks and buy stamps to mail them. It will take a few minutes of work up front, but the task is then much easier.

Watching Your Spending

Remember that budget you diligently prepared? Stick to it by following the 30-day spending rule. Wait 30 days before purchasing an item to avoid overspending and racking up debt. If you do spend too much, you’ll pay unnecessary fees on overdrafts or credit card interest payments.

The Takeaway

There’s little doubt that time and money are two valuable but limited resources. Making the most of each requires some smart strategies, such as budgeting, scheduling, reducing overspending, and finding work-life balance. But by respecting the value of time and money — and managing them well, you’ll likely enjoy a better quality of life, today and in the future.

Want to have more time and watch your money grow faster?

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FAQ

Is time worth more than money?

The answer to this question is subjective. To a person who is terminally ill, time is clearly the most precious commodity; they might rather have less money and more time. In another scenario, someone might say money matters more. They might be willing to work every free minute for years to ensure they have a high-paying career, even if they don’t have much free time to enjoy the luxurious life they lead.

Is it worse to waste my time or money?

Neither wasting time nor money is a great idea, though many of us of course do so from time to time. A better approach can be to minimize the waste and balance your life so you have both enough time and money. This often requires prioritizing, planning, and budgeting.

What are the benefits of managing time and money wisely?

A key benefit of managing time and money wisely is better quality of life. Effective time and money management will make all aspects of your life easier because you gain peace of mind and may stress less about your money and your schedule. You can take control of two very important variables.


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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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


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

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What to Know about Credit Card Cash Advances

What to Know about Credit Card Cash Advances

Sooner or later, most of us hit that moment where we need some cash — and fast. Maybe a major car repair or medical bill arrives, you get laid off, or you simply overspend for a period of time: All are ways that you can unfortunately find yourself in a hole financially.

A particularly expensive (or unlucky) month might make a credit card cash advance seem appealing. But before you go ahead and get a bundle of bills from your credit card issuer, read up on the consequences of doing so.

Can You Get Cash Back from a Credit Card?

Yes, it’s possible to get a cash advance on a credit card. But just because you can do something doesn’t always mean you should.

A credit card cash advance is a stopgap for a financial emergency that can come with high costs to a person’s immediate financial situation. Furthermore, if not paid back quickly, it may also affect their credit history in the long term.

While a cash advance is certainly easy (it’s similar to making an ATM withdrawal from your checking account), there are typically better and more affordable options for most financial needs.

A credit card cash advance is used to get actual cash against a credit card account’s cash limit, which might be different from the credit limit. It’s essentially a loan from the credit card issuer. Here’s how it usually works:

•   You put your credit card into an ATM, enter the card’s PIN, and choose an amount to withdraw. The cash is then dispensed for you to use as you see fit.

•   If you don’t know the card’s PIN, a cash advance can be completed by going into a bank or credit union with the credit card and a government-issued photo identification.

•   A cash advance check directly from the credit card company — sometimes included with mailed monthly billing statements — can also be used to get a cash advance.

Why Do People Use Cash Advances?

Why use a cash advance from a credit card? The bottom line: convenience and speed. ATMs are plentiful in most towns, and it takes just a few minutes to complete the process of getting a cash advance at an ATM. There’s no approval process required either.

Some people may assume they don’t have enough time to access other kinds of credit. This isn’t always true, however. For instance, funds obtained through an unsecured personal loan are sometimes available in just one to five days after approval of the loan.

As fast and simple as a credit card cash advance may seem, however, there are significant costs involved. Realizing the financial impact of these withdrawals may encourage a person to look elsewhere for funds.

Recommended: 39 Passive Income Ideas to Build Wealth

Cost of Withdrawing Cash from a Credit Card

A cash advance is an expensive way to borrow money. To put it in perspective, they’re just a step up from payday loans (which typically have much higher interest rates than credit card cash advances, extra fees, and short repayment terms). Here’s a closer look at how these expenses can pile up.

Cash Advance Fee

It’s typical for credit cards to have a fee specifically for cash advances. This fee can be anywhere from 3% to 5% of the total amount of the cash advance. This fee is added to the account balance immediately — there is no grace period.

Higher APR

The average APR, or annual percentage rate, a credit card issuer typically charges for a cash advance is quite a bit higher than normal purchase charges. Currently, the average credit card interest rate on purchases is almost 25%. But what is the APR for a cash advance? The rate is likely to be between 25% and a whopping 30% or more, according to recent research.

What’s more, unlike interest charged on regular purchases, there is no grace period for the interest to start accruing on a cash advance. It starts accumulating immediately and increases the account balance daily.

ATM Fee

Getting a credit card cash advance from an ATM may also mean incurring an extra fee charged by the ATM owner, if that’s not the financial institution that issued your credit card. These fees currently average $4.73 or so per transaction. As you see, the ATM fee can increase the charges for a cash advance, which often add up quickly.

Payment Allocation Rules

If you’re thinking that a cash advance can be paid off first and then the interest rate will revert to the lower rate charged on regular purchases, guess again. While federal law dictates that any amount more than the minimum payment made must go toward the highest interest rate debt, the minimum payment amount is typically applied at the credit card issuer’s discretion. This might well work in the card issuer’s favor, not yours.

Recommended: How to Increase Your Credit Limit

A Hypothetical Scenario

You might be wondering just what a cash advance looks like in actual dollars and sense, so let’s consider this scenario.

Say a person is carrying a credit card balance of $1,000 with an APR of 25%. Perhaps they are trying to financially survive a layoff and need funds, so they find out how to get a cash advance on their credit card and take out $1,000 with a 30% APR. When they receive the billing statement, they pay $1,000 toward their credit card balance.

The minimum payment due amount of $35 is applied to the regular purchases that are accruing interest at a rate of 25%. The remainder, $965, is applied to the cash advance balance that’s getting charged a 30% interest rate.

In order to completely get rid of that 30% APR, the account holder would have to pay the full $2,000 balance.

The cash advance will only be paid off when the entire credit card balance is paid in full, which means they could be setting themselves up with higher interest charges for a long time to come.

Waiting until the next monthly statement is available will just increase the amount due. Every day the cash advance accrues interest, it costs the cardholder more money. The faster the balance is paid off, the less interest will accrue.

Using a credit card interest calculator can be enlightening when figuring out how much purchases or cash advances will really cost with interest applied and how much time it might take to pay them off.

Personal Loans vs Cash Advances

Now you understand how to get a cash advance from a credit card and the expenses involved. So what are the alternatives to this kind of a cash advance? Ask friends or family for a loan? Find ways to make money from home?

While those options are certainly acceptable, an unsecured personal loan might also be an option for some people. These loans can allow you to get funds at a lower interest rate that you can use to pay off your high-interest debt. Here’s how they usually work:

•   An application for a personal loan online can typically be completed in minutes and, if approved, the borrower may possibly get the funds within a couple of days. Personal loans can be used for a variety of reasons.

•   Some common uses for personal loan funds are debt consolidation, wedding expenses, unexpected medical expenses, and moving expenses, to name a few. It’s even possible to use a personal loan to pay off that credit card cash advance, which may cost you a lot less in the long run.

There are several benefits to personal loans that are worth knowing about:

•   Personal loans are likely to offer a more manageable interest rate on the money borrowed than the typical interest rate on a credit card cash advance. Of course, the personal loan’s interest rate will depend on the borrower’s creditworthiness, but it’s likely to be lower than the one tied to a credit card cash advance.

•   When personal loans are used to pay off a cash advance, they can simplify a person’s debt. With a single personal loan, there is only one interest rate to keep track of, as opposed to juggling two high interest rates: one for the cash advance and one for regular purchases charged to the credit card.

•   Credit card debt is revolving debt, which means that the borrower’s credit limit can be used, repaid, then used again, as long as the borrower is in good standing with the lender. A personal loan, however, is installment debt, and has fixed payments and a fixed end date. Unlike the revolving debt of a credit card, the funds from a personal loan can only be used once, and then they have to be repaid.

Personal Loans and Credit Scores

Another upside of choosing a personal loan over a credit card cash advance is that responsibly managing a personal loan might positively impact the borrower’s credit score.

One factor that goes into calculating a FICO® Score is the percentage of available credit being used, the credit utilization ratio, and it accounts for 30% of a person’s total score.

In the hypothetical scenario above, if the borrower had a $3,000 credit limit on their credit card, by using $2,000 of their total available credit, their credit utilization rate would be a whopping 66% (if that one credit card was the only account appearing on their credit report).

It’s fairly typical that credit card users continue to make charges on their accounts, which is likely to keep their credit utilization ratio high.

Installment debt, such as a personal loan, is looked at in a slightly different way in credit score calculations. Making regular payments on an installment loan may carry slightly greater weight than might someone’s credit utilization rate in calculating their credit score. Thus, making regular payments on a personal loan is likely to demonstrate responsible borrowing as the balance is paid down.

As you’ve now learned, considering a variety of funding sources when you need money fast is a smart money move. When you do so, a credit card cash advance may well be seen as a last-resort maneuver.

The Takeaway

Life can certainly deliver some unexpected financial challenges now and then — moments when you need cash quickly, for instance, but don’t have any available. While a cash advance from your credit card may seem like a fast, simple solution, tread carefully. There are significant costs associated with this withdrawal which could leave you with more long-term debt than you’d like. It’s probably wise to explore your options first.

While money management can be tricky at times, partnering with the right financial institution can help improve your financial life.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.


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

FAQ

What is a credit card cash advance?

A credit card cash advance is a quick, convenient way to access cash using your credit card. You insert it into an ATM or visit a bank branch to obtain the cash. However, this will likely involve your owing significant fees and being assessed a considerable interest rate on the money you have borrowed.

What are the costs of a credit card cash advance?

A credit card cash advance will involve a fee that’s typically 3% to 5% of the total loan amount. In addition, there may be an ATM fee of several dollars. The money that you are advanced begins to accrue interest right away, and this usually is at a higher rate than your rate on purchases. What is a cash advance APR usually? Between 25% and 30%.

What is the difference between a credit card cash advance and checking account withdrawals?

A credit card advance is significantly different from a checking account withdrawal. With a credit card advance, you are quickly getting access to cash from your credit card issuer. It is a form of a loan, and your interest rate will likely be between 25% and 30% until it’s fully repaid. With a checking account withdrawal, you are accessing your own money, so there’s no interest fee involved, though you might be charged a several dollars if you use an out-of-network ATM for the transaction.


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*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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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How Much Income Is Needed for a $275,000 Mortgage

It’s tough to afford a home these days. If you’re looking at a $275,000 mortgage, you’ll have a monthly payment of around $2,400 with today’s interest rates at 7% on a 30-year loan. You’ll need an income of about $80,000 per year to afford this mortgage.

This can change if you have a significant amount of debt, a low down payment amount, or a less-than-perfect credit history. We’ll run through a few scenarios to show you how much income is needed for a $275K mortgage.

Income Needed for a $275,000 Mortgage


The income needed for a $275K mortgage is around $80,000. If you have more debt, the lender will need to factor that in before calculating how much income you’ll need to afford the $275,000 mortgage. For example, if you have $400 in debt payments each month, you’ll need to earn more money each month to be able to afford the $275K mortgage and still stay within the 36% debt-to-income ceiling most lenders prefer. A closer look:

$2,402 (mortgage) + $400 (other debt payments) = $2,802 total debt payments per month

For $2,802 to be 36% of your monthly income, you would need to make $7,783 each month, or $93,400 per year to qualify for the $275,000 mortgage. This estimate is based on a mortgage calculator with taxes and insurance. If you would like to see what a lender can do for you, explore getting prequalified for a home mortgage loan.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


How Much Do You Need to Make to Get a $275K Mortgage?


How much income you need for a $275K mortgage also depends on your debt-to-income (DTI) ratio, down payment, loan type, lender, and credit score. Let’s take a look at these each in detail.

What Is a Good Debt-to-Income Ratio?


The gold standard for debt-to-income ratios is <36%. However, there are lenders who are able to originate loans for borrowers with a DTI ratio up to 45%. Lenders who fall outside the norm in DTI and credit score requirements will influence how much you need for a $275K mortgage.

What Determines How Much House You Can Afford?


Home affordability isn’t a simple equation. There are a number of factors that go into a lender’s decision about your loan.

Income

Reliable income is the largest determinant in loan approval. The more you make, the more you have to work with each month. However, your income and home affordability are affected by how much debt you have.

Debt

Your lender will take into account any monthly debt obligations you have. These will be added to the maximum DTI. If you have debt, your monthly mortgage will need to be lower.

Down Payment

A larger down payment can afford you a larger mortgage. If you’re able to put down 20%, you won’t need to pay for private mortgage insurance (PMI), which saves you money every month. However, 20% could be a big chunk of change to come up with, and most loans accept lower than a 20% down payment to start. See this mortgage calculator for examples.

Loan Type

Home affordability is also affected by the different types of mortgage loans. Fixed-rate loans will have a different monthly payment than adjustable-rate loans, for example. Likewise, the monthly payment on a 15-year mortgage is far different from the payment on a 30-year mortgage.

Lender and Interest Rate

Interest rates will vary from lender to lender. You may also see a different acceptable DTI ratio from lender to lender. When a lender is able to offer a lower interest rate, you’ll see your home affordability improve. When a lender has a higher acceptable DTI ratio, you may be able to qualify for a higher mortgage amount.

Recommended: Cost of Living by State

What Mortgage Lenders Look For


Worried about qualifying for a $275K mortgage? Here’s what your lender will look for during the mortgage preapproval process. These are right in line with home affordability requirements.

•   Income Your income needs to be reliable and sufficient to qualify for the loan you want.

•   Credit score A good credit score helps with approval and lower interest rates.

•   Debt-to-income ratio Too much debt could prevent you from securing the loan you want. Before you apply for a loan, work on paying off debt as best you can.

•   Down payment A higher down payment can help you qualify for a larger purchase price on a home. A down payment over 20% can help you avoid the monthly mortgage insurance payment as well.

•   Loan-to-value ratio Lenders also want to be sure the property you’re buying qualifies for a loan. They don’t want to loan more on the property than it’s worth.

$275,000 Mortgage Breakdown Examples


Your individual situation will influence the income needed for the mortgage you want. Here are a few examples created with a home affordability calculator to show you how this works. In each case, the interest rate is 7% on a 30-year mortgage.

With no debt

•   Principal and interest: $1,830

•   Taxes and insurance: $573

•   Total monthly payment: $2,403

Income needed to afford the monthly payment: $6,672 per month, or $80,064 per year.

Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.

With $1,000 per month in debt

•   Principal and interest: $1,830

•   Taxes and insurance: $573

•   Total monthly payment: $2,403

Add monthly debt obligations to the monthly mortgage payment. $2,402 + $1,000 = $3,402 monthly debts.

Income needed to afford the monthly payment: $9,450 per month, or $113,400 per year.

Assumptions: 20% down payment. The original purchase price would be $343,750 to get a $275,000 mortgage with a 20% down payment.

With no down payment and $600 in monthly debt payments

•   Principal and interest: $1,830

•   Taxes and insurance: $458

•   PMI: $252

•   Total monthly payment: $2,540

Add monthly debt obligations to the monthly mortgage payment. $2,540 + $600 = $3,140

Income needed to afford the monthly payment: $8,722 per month, or $104,664 per year.

Assumptions: No down payment. The original purchase price would be $275,000.

Pros and Cons of a $275,000 Mortgage


Pros

•   Lower mortgage payment than for the median home price in the U.S.

•   Lower income requirement than a higher-priced mortgage

Cons

•   Few homes can be found for $275,000

•   May still be unaffordable for many families

How Much Will You Need for a Down Payment?


If you’re deciding how much of your hard-earned money to put down for a down payment on a property that you plan to buy with a mortgage of $275,000, here’s how it breaks down by loan program.

Program

Minimum down payment percentage

Amount for $275,000

VA, USDA 0% $0
Conventional 3% or more $8,250 or more
FHA 3.5% or more $9,625 or more

Keep in mind, when you make a payment lower than 20%, you’ll need to pay PMI each month. For some loans, like the Federal Housing Administration (FHA) mortgage, you’ll need a mortgage refinance to get rid of PMI.

Can You Buy a $275K Home With No Money Down?


Yes, you can buy a $275K home for no money down. The two main programs that don’t require a down payment include:

•   VA (U.S. Department of Veterans Affairs) mortgages

•   USDA (U.S. Department of Agriculture) mortgages

Beyond these two programs, you may also find local housing programs that offer down payment assistance that may be able to help get you into a home with no money down (or close to it).

Can You Buy a $275K Home With a Small Down Payment?


Since a $275K mortgage loan falls under the conforming loan limits, it qualifies for loan programs with lower down payment requirements. These include conventional financing with a minimum 3% down payment for qualified first-time buyers, FHA with a 3.5% minimum down payment, as well as VA and USDA loans which have no down payment requirement.

Recommended: Best Affordable Places to Live

Is a $275K Mortgage with No Down Payment a Good Idea


It’s possible to get a $275K mortgage with no down payment. It also may help you get into a home that you otherwise wouldn’t be able to.

If you’ve run your numbers through a mortgage calculator and have worked closely with a lender to determine if the monthly payment is affordable for you, you shouldn’t hesitate to get a mortgage with no down payment.

The major downside to getting a mortgage with no down payment is the amount of mortgage insurance you’ll pay every month. That will need to be factored in when the lender determines how much mortgage you’ll be able to afford.

Can’t Afford a $275K Mortgage With No Down Payment?


If you still have a little work to get qualified for a $275K mortgage, especially if the cost of living in your state is high, there are some smart moves you can make to help your odds of approval.

Pay Off Debt


You may qualify for more house by paying down debt. Let’s take a look at our previous examples:

With no debt, a $275K mortgage will cost $2,402 per month, and you’ll need to earn $6,672 per month, or $80,064 per year.

With $1,000 monthly debt obligations, a $275K mortgage will have a total of $3,402 monthly debts and you’ll need $9,450 per month, or $113,400 per year to afford a $275K mortgage.

With a reduced debt load of $600 instead of $1,000, and a $275K mortgage, you’ll have a total debt load of $3,002. You’ll need $8,339 in income per month, or $100,067 per year to afford your debt load. This is much less than the previous example where the debt load was $1,000 per month.

Look into First-Time Homebuyer Programs


Most states and local housing programs have some type of first-time homebuyer program. It may be a down payment assistance program or a forgivable second mortgage that helps cover closing costs.

Build Up Credit


There’s nothing you can do about the current interest rates, but you can work on your credit to get the best rate you can. A better credit score translates into a better interest rate almost every time, which helps immensely with affording a $275K mortgage.

Start Budgeting


Good old-fashioned budgeting can help you zero in on your goals and save a large enough down payment to afford a $275K home. It helps to think of budgeting as a tool for achieving goals, rather than a punishment or restrictive way of life.

Alternatives to Conventional Mortgage Loans


If you’re not able to qualify for one of the different types of mortgage loans just yet, you might want to look into the following alternative financing methods:

Seller financing Seller financing is where the seller agrees to carry the mortgage and acts as lender. Usually, it’s a short-term agreement and the seller may charge a higher interest rate than what a traditional lender would. The details of the arrangements are made between buyer and seller, and can be quite complex. But it also avoids many closing costs and can be a faster transaction than a traditional sale.

Private lending A private lender is any lender not associated with a bank or lending institution. They may be more flexible with qualification and offer a wider range of lending tools, such as bridge loans to help you get from one house to another.

Recommended: Home Loan Help Center

Mortgage Tips


Getting a mortgage is intimidating at first. Once you’re done reading tips to qualify for a mortgage, you’ll want to start talking to lenders. Here’s what you’ll do to find the best rate.

1.    Shop around for a loan. Shopping around for a loan within a 45-day window only counts as a single credit inquiry on your credit report, so you can check out as many mortgage lenders as you want. This can help you find one with a great deal and terms that work for you.

2.    Compare loan estimates. A loan estimate is a document that outlines the different loan costs the lender charges. You’ll be able to compare origination fees, underwriting fees, and other closing costs in determining which loan will work best for you.

3.    Don’t get caught up in analysis paralysis. After you’ve looked at a handful of lenders, it’s time to pick one. Make a decision and go forward with excitement about moving into your home.

The Takeaway


Affording a home in today’s economy seems hard, and the amount of income needed for a $275K mortgage may feel like a heavy lift. But it’s not impossible to qualify for the mortgage you want. Even after you’ve worked out all the numbers online, you’ll still want to talk to a lender. They may have more options than you’d expect, and it’s worthwhile to start the process sooner rather than later.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can I afford a $275K house on a $60K salary?

If you have a large enough down payment, you may be able to afford a $275,000 house on a $60,000 salary. For a $5,000 monthly income, you’ll need your mortgage amount to be around $1,800. To get to that payment, you’ll need a 20% down payment ($55,000) and a 6% interest rate (if rates don’t drop to that level, you can buy down your rate by paying mortgage points to your lender).

How much does a $275K mortgage cost over 10 years?

With an interest rate of 7%, a $275,000 mortgage will cost $383,158 over 10 years. So your total interest paid on this loan will top $108,000.

What credit score is needed to buy a $275K house?

Your credit score is only one factor in determining whether or not you can afford to buy a $275K house. FHA loans, for example, allow borrowers with credit scores as low as 500 (with a 10% down payment) and 580 (with a 3.5% down payment) to apply. Lenders also look at your debt-to-income ratio, income, employment history, and loan-to-value ratio.


Photo credit: iStock/FG Trade Latin

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.

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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Are High-Yield Checking Accounts Worth It?

Checking accounts generally aren’t known for their high interest rates. But the days of earning nothing (or practically nothing) on the money sitting in checking may be coming to an end. While the average annual percentage yield (APY) on checking is still a measly 0.08%, many banks and credit unions now offer significantly higher rates for their checking accounts. So-called “high-yield checking accounts,” these accounts often pay more than many savings accounts. Some even rival high-yield savings accounts.

But there is a catch: You generally need to follow certain strict rules to earn the high rate. If you don’t, you may learn little or no interest for the month. Are high-yield checking accounts worth it? Maybe. Here’s what you need to know.

What Are High-Yield Checking Accounts?

High-yield checking accounts (also known as high-interest checking accounts) are checking accounts that offer higher interest rates than standard checking accounts. Like any other checking account, you can use a high-yield checking account for everyday transactions, like paying bills online, receiving your paycheck, writing checks, and making purchases using a debit card.

The key difference between a traditional checking account and a high-yield checking account is that the latter offers a higher interest rate. Although rates vary, you can currently find high-yield checking accounts with a 3.00% APY, and sometimes higher.

Some high-yield checking accounts offer the same APY on all balances, while others offer a tiered rate with higher APYs for higher balances. You may also have to meet certain requirements to access the advertised rate, such as making a certain number of transactions each month, signing up for direct deposit of your paycheck, and enrolling in electronic statements.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 3.80% APY on savings balances.

Up to 2-day-early paycheck.

Up to $3M of additional
FDIC insurance.


How High-Yield Checking Accounts Work

You can use a high-yield checking account as you would a standard checking account. That means you can deposit and withdraw funds, pay bills, transfer money to and from linked bank accounts, use a debit card for purchases and cash withdrawals at ATMs, and more.

At the same time, your checking account balance earns interest each statement period. To earn the highest APY or waive a monthly account maintenance fee, however, you may need to meet certain requirements. For example, you may have to:

•   Use your debit card for a certain number of transactions each month

•   Maintain a minimum balance for the statement period

•   Have a minimum amount in direct deposits each month

•   Use bill pay a minimum number of times each month

•   Enroll in online banking and electronic statements

•   Have other accounts at the same financial institution, such as a savings account or investment account

If you can’t meet your financial institution’s requirements, you likely won’t be able to earn a competitive interest rate or you might get hit with a fee that can outweigh the benefits of a high interest rate.

Pros of High-Yield Checking Accounts

Deciding whether high-yield checking accounts are worth it means considering both the benefits and drawbacks of these accounts. Here’s a look at two key advantages.

Extra Interest

A high-yield checking account allows you to earn significantly more interest than you could in a regular checking account. The best high-yield checking accounts pay rates that may be competitive with high-yield savings accounts or certificate of deposit (CD) rates.

While you likely have money moving and out of your checking account, it may be worth earning as much as you can on the money that sits in the account. This is especially true if you tend to keep a large balance in checking and can easily meet the bank’s requirements to earn the high rate.

Liquidity

High-yield checking accounts offer the interest often associated with savings accounts combined with accessibility of a checking account. Though the Federal Reserve no longer requires banks to limit savings account transactions to six per month, many banks have continued to impose the rule and will charge you a fee if you exceed the limit. Checking accounts don’t impose these limitations, however. You can write checks, use a debit card, and make withdrawals as needed.

Recommended: Checking vs Savings Accounts: A Detailed Comparison

Cons of High-Yield Checking Accounts

Although you have the potential to earn a competitive interest rate with a high-yield checking account, these accounts also come with a few drawbacks. Here are some cons to consider.

Transactional Requirements

To earn the high interest rate, high-yield checking accounts typically require you to meet specific transactional requirements. These may include making a certain number of debit card purchases per month, having direct deposits, or logging into online banking regularly. The requirements may be complex, and if you’re unable to meet them at any time, you may risk not earning any interest or earning a much lower rate than you anticipated.

Rate Caps

Many high-yield checking accounts cap the balance eligible for the high interest rate. For example, the high rate might only apply to balances up to $10,000, with any amount above that earning a significantly lower rate or no interest at all. This can limit the overall interest you can earn in the account, especially if you maintain a higher balance.

Who Benefits Most From These Accounts?

Those who benefit most from a high-yield checking account are individuals who can meet the requirements to earn the highest interest rate without difficulty.

For example, if you frequently make debit card purchases or get your paycheck from your employer through direct deposit, you may already be meeting the requirements for top rate and don’t have to put in any extra effort. In this case, a high-yield checking account earns interest on money that would otherwise sit earning little to nothing.

However, a high-yield checking account probably doesn’t make sense if you’ll struggle to meet the bank’s criteria to earn a high rate or avoid fees. In that case, you might be better off with a regular checking account and a high-yield savings account, which can pay as much as many high-yield checking accounts but with less hassle.

Comparing High-Yield vs Regular Checking

High-yield checking accounts serve the same basic purpose as regular checking accounts but have different benefits and requirements. Here’s a look at how they compare.

Interest Earnings Examples

High-yield checking: If you have a $10,000 balance earning the 3.00% APY in a high-yield checking account, you could earn $300 in one year.

Regular checking: If you have a $10,000 balance earning the national average rate for checking accounts, which is 0.08% APY, you could earn $80 in one year.

Total difference: The high-yield checking account would provide $220 more in interest over the course of a year.

Other Considerations

Fees: Regular checking accounts may have fewer or lower bank fees compared to high-yield accounts.

Accessibility: Both types of accounts offer similar access to funds through checks, debit cards, and ATMs.

Requirements: High-yield checking accounts often have stricter usage requirements to qualify for the higher interest rate.

Alternatives To Consider

High-yield checking accounts are a useful financial tool, but they aren’t the answer for everyone. If you’re interested in a bank account that pays a higher-than average APY, here are some alternatives to consider.

•   High-yield savings accounts: The interest rate you can earn in a high-yield savings account can be the same or higher than a high-yield checking account, but without the stringent requirements. While you generally can’t pay bills and make purchases directly from a savings account, you can easily transfer the funds to your checking account when you need to make payments.

•   Money market accounts: Money market accounts (MMAs) typically offer higher APYs than traditional savings accounts, while providing some of the conveniences of a checking account, like a debit card and checks. These hybrid accounts may have certain requirements, however. For example, some institutions require high minimum balances to open an account or avoid fees. Also MMAs can be subject to transaction limits, so they aren’t a perfect substitute for a checking account.

•   Certificates of deposit (CD): CDs offer a fixed APY that’s usually higher than regular savings accounts. In exchange, you agree to leave the money untouched for a set term, which can range from a few months to several years. If you have a large chunk of cash you won’t need for several months or more but want a guaranteed rate of return, a CD may be worth considering.

The Takeaway

If you want the features of a checking account, such as a debit card and frequent access, while growing your money, a high-yield checking account may be worth looking into. However, you’ll want to make sure that you can meet the requirements of the account. If you can’t, you could end up earning little or no interest and/or getting hit with fees. In that case, you may be better off with a regular checking account and a savings account that pays a competitive APY.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What is a good high-yield checking rate?

A good high-yield checking account rate typically is 3.00% APY or higher. This is significantly higher than the current average APY for checking accounts, which is 0.08% APY.

Keep in mind, though, that in order to earn the advertised rate on a high-yield checking account you may need to meet certain conditions, such as a minimum number of debit card transactions, a minimum amount in monthly direct deposits, or maintaining a certain balance.

Do these types of checking accounts have debit cards?

Yes, high-yield checking accounts typically come with debit cards, just like regular checking accounts. The debit card allows you to make purchases, withdraw cash from ATMs, and manage your daily transactions.

In fact, using the debit card is often a requirement to qualify for the high interest rates offered by these accounts. A bank or credit union may specify a minimum number of debit card transactions per month as part of the account’s conditions to earn the advertised high yield.

What are the disadvantages of using a high-yield checking account?

High-yield checking accounts have some disadvantages, including stringent requirements to earn the high interest rates. For example, you may need to maintain a high balance or make a minimum number of debit card transactions and direct deposits per month to earn the advertised rate. If you don’t meet the requirements, you may earn very low (or no) interest for that month or get charged a fee.

In addition, some of these accounts have rate caps, which means that the high interest rate only applies to a specific balance limit, with amounts above that earning lower or no interest.


Photo credit: iStock/Dilok Klaisataporn

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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How Much Equity Do You Have in Your Home?

Making monthly mortgage payments can feel like chipping away at an iceberg, especially in the beginning. Savvy homeowners take heart that each payment earns them a little more ownership in their property. But do you know exactly how much ownership, commonly called “equity,” you currently have? Knowing how to calculate home equity can help you feel a growing sense of satisfaction as you make those mortgage payments.

Simply put, home equity is the difference between the value of a property and the outstanding balance of all mortgages, liens, and other debt on the property. Read on to determine how much of your home you really own, what you can do to increase your equity, and how you can leverage that equity to make it work harder for you.

Key Points

•   Home equity represents the difference between a property’s current market value and the outstanding mortgage balance, calculated using the formula: Home Equity = Home Value – Home Debt.

•   To accurately determine home value, homeowners can use online property tools or request a professional appraisal from their mortgage lender.

•   The loan-to-value ratio (LTV) helps represent home equity, indicating the percentage of a home’s value that is borrowed, with lenders typically allowing a maximum LTV of 80%.

•   Increasing home equity can be achieved through larger down payments, making extra mortgage payments, or refinancing to shorter-term loans, alongside strategic home improvements.

•   Homeowners can usually borrow 80%-85% of their home equity, and options like Home Equity Lines of Credit (HELOCs) allow for flexible borrowing against property value over time.

How to Calculate Your Home Equity

As noted above, home equity is the difference between your home’s current value and the outstanding balance of your mortgage and other debt on the property. It’s a simple equation:

Home Equity = Home Value – Home Debt

How to Find Your Home’s Value

To estimate your home value, you can use the purchase price of your home, but that doesn’t account for any appreciation in value. For a precise calculation of your home equity, you’ll need to know your home’s current value with appreciation. You can get an estimate of your home’s value with an online property tracking tool. These calculators approximate the appreciation of your home by comparing it with similar properties in the area. While helpful, these tools can’t provide an exact measure.

To determine your real-time home value, you’ll need to contact your mortgage lender and request an official appraisal. Your lender will conduct an inspection and evaluation of what your home is worth in the current market. The appraiser may ask you for documentation of any work you’ve done on your home to come to a more exact figure.

How Much Is Left on Your Mortgage?

Calculating home equity also involves knowing what you owe on your current home mortgage loan. You can find your mortgage payoff amount (which is different from your balance) on your lender’s online portal. Add to that the outstanding amount you owe on any second mortgages, liens (for unpaid taxes or child support, for example), home equity lines of credit, and any other loans that use your home for collateral. The sum of these items is your home debt, the last figure in the equity equation.

Using the Loan-to-Value Ratio to Represent Home Equity

The loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed — it’s like the opposite of equity. Lenders set maximum LTVs, typically 80%, for home equity loans. This means homeowners cannot borrow more than 80% of their home’s value.

You can calculate your LTV by dividing your outstanding home debt, discussed above, by your home’s appraised value:

LTV = Home Debt ÷ Home Value

For example, if your home is worth $375,000, and you still owe $200,000, your LTV is 53%. (200,000 ÷ 375,000 = .53) This means you still owe 53% of the equity in your home. Subtract 53 from 100 to see how much equity you have built in your home: Your available equity is 47%.

Examples of Home Equity Calculations After 1, 3, 5, 10 Years

The table below shows how much equity a fictional homeowner accumulates over the first 10 years of their mortgage. This assumes an initial home value of $300,000, with annual appreciation of 10%, a mortgage APR of 7.5%, and a monthly payment of $1678.11. The LTV is rounded to the nearest whole percentage. (The actual annual appreciation for American homes over the last 10 years on average was 7.4%.)

Year Home Value Loan Balance Home Equity LTV
0 $300,000 $240,000 $60,000 80%
1 $330,000 $237,596 $92,404 72%
2 $363,000 $235,196 $127,803 65%
3 $399,300 $232,611 $166,689 58%
4 $439,230 $229,825 $209,405 52%
5 $483,150 $226,822 $256,327 47%
6 $531,470 $223,587 $307,882 42%
7 $584,620 $220,101 $364,519 38%
8 $643,080 $216,343 $426,736 34%
9 $707,380 $212,294 $494,085 30%
10 $778,120 $207,931 $570,188 27%

Recommended: How Much Will a $300,000 Mortgage Cost You?

What Is a Good Amount of Home Equity?

Common wisdom says that it’s smart to keep at least 20% equity in your home. This is why many lenders limit your LTV to 80%. To borrow against your home, then, you’ll typically need more than 20% equity.

Fortunately, that’s not a problem for most homeowners. Research firm Black Knight recently estimated that Americans have $193,000 of “accessible” home equity on average, over and above the recommended 20%. This is mostly due to rising home values.

Recommended: How Home Ownership Can Help Build Generational Wealth

How Much Home Equity Can You Take Out?

The amount of equity you can take out depends on the lender and the type of loan. However, most lenders will allow you to borrow 80%-85% of your home’s appraised value. The other 15%-20% remains as a kind of financial cushion.

A homeowner who doesn’t want to take out a home equity loan but needs cash might consider a Home Equity Line of Credit (HELOC). A HELOC allows owners to pull from their property’s equity continually over time. Borrowers can take only what they need at the moment. HELOCs use the home as collateral, which might not appeal to all borrowers.

Homeowners looking to fund renovations often explore home equity loans or HELOCs to access funds at competitive home improvement loan rates, allowing for flexible financing of their projects.

Tips on Increasing Home Equity

Your initial home equity is determined by your down payment. The larger the down payment, the more equity a homeowner has right off the bat. The average down payment among American homebuyers is currently 13%. But a down payment of 20% or more can qualify borrowers for more favorable mortgage rates and also helps you avoid paying for private mortgage insurance.

After the down payment, home equity typically accumulates in three ways: monthly mortgage payments, appreciation, and home improvements. Beyond waiting for their home to appreciate, homeowners can increase their equity in several ways:
Pay more than your minimum mortgage payment each month. The extra money will go toward your principal, increasing your equity more quickly. Learn how to pay off a 30-year mortgage in 15 years.

Make biweekly payments instead of monthly. Your mid-month payment will incrementally lower your interest due. And by the end of the year, you’ll have made an extra mortgage payment.

Make strategic home improvements. Certain updates increase your home’s value more than others.

Refinance to a shorter-term loan. By refinancing to a 10- or 15-year mortgage instead of a standard 30-year, each mortgage payment will increase your equity at a faster rate.

The Takeaway

Calculating home equity involves subtracting your mortgage payoff balance (found on your lender’s website) from your home’s current value. To get the most accurate idea of your home’s market value, you’ll need an appraisal by your mortgage lender, which can cost $300-$450. Homeowners typically can’t borrow more than 80%-85% of their home equity. Knowing how to calculate equity in your home can be a first step in determining how to use that equity to fund renovations or another important expense.

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 do you determine your home equity?

To quickly estimate your home equity, subtract the amount you owe on your current mortgage from your home’s current value.

What is the formula to calculate home equity?

To figure out home equity, simply subtract the amount you owe on your home mortgage loan (and any other loan you may have that is secured by your home) from your home’s current value.

How much equity can you borrow from your home?

A lender will generally let you borrow 80%-85% of your home’s value, minus the amount you owe on your mortgage. Some lenders allow you to borrow more.


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*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.
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