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The average length of a mortgage is 30 years, but that’s not the amount of time that most borrowers will keep the loan. Homeowners only stay in a home for eight years on average, and many refinance their home loans.

So most folks will sign up for a 30-year mortgage but keep it for a far shorter time. Why 30 years? It tends to keep monthly payments affordable.

Let’s review mortgage terms to help you decide what’s best for your situation.

What Is a Mortgage Loan Term?

The term is the number of years that a borrower agrees to repay the total amount borrowed on a mortgage.

When choosing a mortgage term, a homebuyer or refinancer picks a term of, for example, 30, 20, 15, or 10 years, divided into monthly payments. A 30-year loan is divided into 360 monthly payments, and a 15-year loan is divided into 180 monthly payments.

Choosing a loan term is one of the most important considerations you’ll make during your home purchase or refinance. It will help determine the monthly payments and how much interest you’ll pay over the life of the loan.

Understanding how mortgage amortization works is a key part of this. A loan with a shorter term will result in a much lower overall interest cost but higher monthly payment.

An online mortgage payment calculator can help you find your desired monthly payment number.

30-Year Mortgage Term

A 30-year mortgage term is the most common mortgage term by far. More than 70% of mortgages have a 30-year term, according to data collected from the Home Mortgage Disclosure Act.

Five years earlier, a Bureau of Labor Statistics survey found that 30-year mortgages represented 61% of mortgages.

The increase in the number of 30-year mortgages could be an indication of home affordability as buyers look to qualify for a mortgage.

With average 30-year monthly payments of nearly $1,950 nationwide in 2022, it’s no wonder borrowers usually choose the 30-year term over others. The National Association of Realtors® reported that statistic and that June’s affordability index figure was the lowest since June 1989.

Aspiring homeowners, even with first-time homebuyer programs, have faced sky-high home prices in a hot housing market whose future temperature remained uncertain.

20-Year Mortgage Term

The 20-year mortgage is far less common than a 30-year mortgage, and even less common than a 15-year mortgage, but could be considered the sweet spot between the two, offering substantial savings on interest costs compared with the 30-year loan.

After all, a mortgage loan that you’re not paying interest on for 10 years is bound to cost less. As a bonus, shorter-term mortgages tend to have lower interest rates.

Recommended: Mortgage Lender vs Servicer

15-Year Mortgage Term

With 9% of the market share, according to Home Mortgage Disclosure Act data, a 15-year mortgage is the second most common mortgage term.

Like 20-year mortgages, 15-year mortgages offer substantial savings on interest costs. The catch is you have a much higher monthly mortgage payment.

10-Year Mortgage Term

The 10-year mortgage term is found in both fixed- and adjustable-rate mortgages.

A fixed-rate 10-year mortgage is an accelerated mortgage that allows borrowers to build equity fast. Someone choosing traditional refinancing or cash-out refinancing might opt to pair a lower rate with a faster loan payoff.

A 10/1 adjustable-rate mortgage (ARM) is actually a 30-year loan most of the time, but the introductory period, when the rate may be lower than fixed-rate loans, is what holds appeal. A 10/1 has a fixed rate for 10 years, after which the rate will adjust every year.

More and more, you’ll see ARMs whose rates will adjust every six months (so a 10-year ARM will be offered as a 10/6), thanks to a new benchmark index.

The teaser rate for a 10/1 ARM is higher than that of other ARMs.

5-Year Mortgage Term? Not Exactly, but …

A 5/1 ARM is actually a 30-year loan most of the time, but the intro rate is the star attraction. A 5/1 ARM features a low rate for five years, after which the rate will adjust every year according to an index.

You’ll also see 5/6 ARMs, whose rate adjustments are based on the Secured Overnight Financing Rate, or SOFR, which replaced the London Interbank Offered Rate, or LIBOR. A 5/6 ARM rate can go up or down by one percentage point every six months. A 5/1 ARM rate can rise or fall by up to two percentage points each year.

For borrowers who are not planning to keep their home for long or for those hoping to refinance before the initial rate adjustment, a five-year ARM may make sense.

Recommended: Home Loan Help Center

The Takeaway

The average length of a mortgage is 30 years, which keeps monthly payments affordable. The savings on a loan with a shorter term are substantial, but many homebuyers and refinancers can’t abide the higher payments that come with a faster loan payoff.

Need a mortgage? SoFi offers a variety of terms. Scroll through the features of SoFi Mortgages for each category.

FAQ

What is the most common mortgage term?

The most common mortgage term is 30 years, according to Home Mortgage Disclosure Act data.

What is the longest mortgage term?

It may be possible to obtain a 40-year mortgage. Any mortgage with a term longer than 30 years is not considered a “qualified mortgage,” which means few lenders will offer a loan that risky.

Forty-year loan modification options for borrowers in distress are more common.

Are there 40-year mortgages?

Forty-year mortgages do exist, but they’re not considered qualified mortgages, which is a requirement for a mortgage to be sold on the secondary mortgage market to investors. This is ultimately what makes a mortgage affordable.

You can only get a 40-year mortgage from a portfolio lender, which is a lender that keeps the loan on its books.

Photo credit: iStock/Elena Katkova

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

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

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.

SOHL1022003

For those who love living near the water, or really near, a floating home may be the perfect fit. These unique dwellings provide rooms with a view, a community vibe, and more.

Isn’t this another name for a houseboat? No. Floating homes almost always stay put.

Read on to find out what a floating home is and what type of person might be the best fit for one.

Characteristics of a Floating Home

Floating homes have the following features:

•   Permanently docked. Floating homes sit on the water like houseboats, but they are anchored and permanently connected to land-based utilities. Unlike houseboats, floating homes have no engine.

•   HOA membership. Floating home residents pay homeowners association or moorage fees to maintain the docks and slips and cover common utility bills like water, sewer, and garbage service.

•   Slip might be included. Floating homes are often sold with their slip.

•   What lies beneath. The hull is often made of concrete, although it could be wood, metal, or foam. A houseboat hull is likely made of fiberglass, aluminum, or steel.

Pros and Cons of a Floating House

For water lovers, floating houses offer a unique lifestyle that might fit the bill. But they come with their fair share of drawbacks as well.

Benefits

•   Close community. Floating homes typically are very close to their neighbors. This can mean a tight-knit community.

•   No engine maintenance. Unlike houseboat owners, floating home owners don’t have to worry about the upkeep of an engine.

•   Water, water, everywhere. Forget waterfront homes; floating homes are in the water. For the homebuyer with a love of the outdoors and watersports, the location is unbeatable.

•   Possibly less expensive housing. In certain cities in California, Washington state, and Florida where homes on terra firma might be sky-high, a floating home could cost less. Look into the cost of living by state if you’re thinking about a move.

•   Tend to hold their value. Whereas houseboats tend to depreciate, floating homes may appreciate.

•   Potential for property tax breaks. A floating home might be classified as personal property, not “real property,” so owners may not not have to pay property taxes. Instead, they would pay an annual personal-property tax. (Tax laws pertaining to floating homes differ by state, county, and even water body, so it’s important to know the applicable law where the floating home exists.)

Drawbacks

•   Fees. Floating home owners typically pay HOA or moorage fees. They can be sizable and keep rising.

•   Limited locations. Floating homes are pretty rare. That means limited opportunities to purchase one or limited space in moorages to build one.

•   Seasickness or motion sickness. While floating homes aren’t mobile (unless they are, in rare instances, towed), owners will still experience some rocking and rolling, which might not be the best for those with sensitivity toward motion sickness.

•   Weather and water damage. If there’s inclement weather on the body of water, floating home owners may face expenses for repairs. And being on the water all the time can take a toll on wood and metal.

•   Harder to finance. Securing a loan can be a challenge. Some lenders do offer long-term loans (but not FHA or VA loans) for floating houses. They usually require at least 20% down and have a higher rate than traditional mortgage rates. A personal loan might be another option.

Moorage Rules

The moorage is the community where a floating home stays, usually permanently.

A slip in a moorage may be part of a floating house purchase. Other owners rent a slip. The price of a floating home with slip will be much more but cost less in monthly fees.

Like any neighborhood, moorages will have their own personality based on the residents. As floating homes tend to be close together, the communal spirit may come into play more than in a traditional neighborhood.

Similar to an HOA, moorages have community rules, which could include:

•   Stipulations on renting out floating homes

•   Standards of exterior upkeep of floating homes

•   Quiet hours

•   Share community spaces or equipment

Buyers may want to shop around for a moorage that suits their personalities.

Finding a Floating Home to Buy vs Building One

Because many floating homes are sold along with the slip, buyers don’t have to seek out a new moorage for the property.

Homebuyers in the market for a floating home will have to refine their search to areas where floating homes are popular and communities are established.

The benefit of building a floating home is the technology available today. Modern floating homes typically use different foundations than older floating homes, which could translate to lower maintenance costs down the line.

But a drawback to building a floating home is the stress of finding a moorage that can accommodate it. Float home builders may have to wait for an opening.

Recommended: How to Build a House

Maintaining a Floating House

When it comes to upkeep, floating homes have most of the maintenance of single-family homes, with the added challenge of keeping them afloat.

Floating home owners should keep a close eye on their home’s foundation and reach out to specialists whenever a crack or issue emerges.

Even basic repairs such as plumbing or electrical may require a contractor. Not all plumbers are certified scuba divers, but they may have to be to work on a floating home. That means even basic repairs could cost much more than they would for a land-based home.

Floating houses need ongoing maintenance thanks to exposure to the elements. To keep siding and other exterior parts in good condition may require constant maintenance and more frequent replacement.

Who Should Get a Floating House?

Floating homes can be expensive and fees can add up, so buyers will have to weigh whether this unusual choice among the different types of homes is worth its salt. Floating home buyers may be interested in some or all of the following:

•   A love of water and proximity to nature. With waterfront views around the entire property, floating homes are a great fit for those who love activity on the water and unbeatable sunsets.

•   A sense of community. If a buyer is looking for neighbors nearby and with similar interests, a floating community could be a great fit.

•   Minimalism. When everything has to be hauled from the dock onto a property, it can be exhausting. Floating homes and downsizing may go hand in hand.

•   A go-with-the-flow mentality. This style of living comes with some day-to-day inconveniences. Plumbing and electrical outages are more common in floating homes because of the nature of the hookups. If the moorage is in a remote area, cellphone service and internet access may be limited.

The Takeaway

Floating homes aren’t for everyone, but water lovers may feel the urge to say ahoy to this lifestyle steeped in nature. A floating house has benefits, but inconveniences and fees make this way of living best for a unique type of buyer.

3 Personal Loan Tips

1. Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees. If you get a personal loan from SoFi, there are no fees required.
2. In a climate where interest rates are rising, you’re likely better off with a fixed interest rate than a variable rate, even though the variable rate is initially lower. On the flip side, if rates are falling, you may be better off with a variable interest rate.
3. Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

FAQ

What is a floating house, and what is the difference between a floating house and a houseboat?

A floating home is permanently docked with a floating foundation. Houseboats have an engine and can move to different locations.

What is the cost of maintaining a floating home?

Maintaining a floating home may be similar to the upkeep on a waterfront or beachfront property. Basic repairs, including plumbing and electric, will likely require a specialist with experience in floating homes, which could be more expensive.

Can you get a loan to buy a floating home?

You could use a floating-home loan, personal loan, or home equity line of credit to buy a floating house, but floating homes are not eligible for a traditional mortgage.

Are floating homes safe?

Most are. Most floating home communities have standards in order to maintain property values. And the homes are usually subject to inspection and enforcement of regulations of the moorage and jurisdiction.

Photo credit: iStock/DR pics24
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.

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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If you’re applying for a mortgage, you’ll want to know what credit score mortgage lenders use when they’re looking at your credit. It’s more complex than it sounds.

More than 90% of mortgage lenders use scores generated by FICO® models — but each of the three major credit reporting agencies uses a different version of the FICO software.

How Mortgage Credit Scores Work

When you apply for a mortgage and your credit is pulled, the lender will see scores from credit reporting agencies Experian, Equifax, and Transunion.

Which FICO score do mortgage lenders use? The middle number. If two of the three scores are the same, lenders will use that number.

If you’re applying for a mortgage with another person, the lender typically will look at the middle score of both parties and use the lower of the two. Fannie Mae calls for things to be done differently: Lenders of conventional conforming loans are to average the middle credit scores of all applicants.

Experian uses FICO Score 2, Equifax uses FICO Score 5, and Transunion uses FICO Score 4. If your middle credit score comes from Equifax, then your credit will have been scored on FICO Score 5. If your middle score comes from Transunion, your credit will have been evaluated using FICO Score 4, and so on.

Most mortgage lenders only consider FICO scores, but some also will look at a VantageScore® typically gleaned from one of the two latest scoring models.

Both FICO and VantageScore calculate credit scores in a range between 300 to 850, and both put the most weight on payment history and credit utilization (the amount of credit a cardholder is using compared with the person’s credit limits).

It might be mind-blowing to hear, but you have multiple credit scores.

And the scores you see on a credit card statement or in your credit monitoring app are likely higher than the score your lender will see.

Commonly Used Scoring Model in Mortgage Applications

Why do the three credit reporting agencies each use a different FICO scoring model for mortgages?

FICO designed the different versions specifically for each credit bureau because of the way the credit bureaus store and report information in a credit report. These legacy models have been used for years because until recently they were required by Fannie Mae and Freddie Mac for conventional conforming loans.

Despite each credit bureau using a different scoring model, the scores generated should be the same or similar.

Recommended: What Credit Score Is Needed to Buy a House?

Other Factors Mortgage Lenders Consider to Determine Mortgage Terms

Beyond knowing which credit score is used to buy a house, you may also want to know what other factors mortgage lenders consider when deciding whether or not to offer mortgage preapproval on your way to a loan.

Mortgage lenders also consider the following:

•  Steady income. Stable employment is one of the key indicators of a low-risk borrower who is able to repay the loan.

•  A low amount of debt. Lenders look at how much debt you have relative to your income. This is also called your debt-to-income ratio. If you have too much debt, you may not qualify for a new mortgage.

•  Assets. Though not as important as your income or debt, lenders will also look for high-value assets. This includes cash in your checking and savings accounts, investments, retirement accounts, and other property. Assets help a borrower appear less risky to a lender since the money could be used for a large down payment or to cover monthly expenses.

•  Down payment. Your down payment will affect your loan-to-value ratio, which will also affect your interest rate. With a higher down payment, the risk to the lender decreases, which is why you’ll pay a lower interest rate. This calculator for mortgages can help you find a mortgage amount that may work for your situation.

How Your Credit Score Affects Your Interest Rates

Simply put, a better credit score gives you a better interest rate on most mortgages.

An FHA loan is an outlier: Your rate and mortgage insurance premium will be the same no matter what your FICO score is. FHA loans are especially popular with first-time homebuyers in part because of the lenient credit score requirements.

Your options, terms, and interest rates are often more favorable when you have a good credit score.

Recommended: Stop by the Mortgage Help Center

What Factors Go Into a Credit Score?

Improving your credit score before you apply for a mortgage could pay off. It’s helpful to know what to work on that could help you.

•  Payment history. Paying on time every time may be the single most important thing you can do to improve your credit score. It shows that you’re a reliable borrower.

•  Credit utilization. Using most of the credit available to you shows a lender you may be overleveraged and unable to repay your loans. Keeping your credit utilization under 30% is preferred by many lenders.

•  Recent applications. Applying for a lot of credit in a short amount of time can be seen as risky by a lender. It may be wise to limit credit applications leading up to your mortgage application. However, this is different from shopping for a mortgage, when your application at different lenders within 14 or 45 days, depending on the scoring model used, is only considered one hard pull. (Also, be sure not to open any new lines of credit while your mortgage is being processed.)

•  Derogatory marks. A bankruptcy, delinquent account, judgment, charge-off, or accounts in collections are looked upon negatively. It may be best to take care of any issues on your credit report before applying for a mortgage.

Free credit reports are available from annualcreditreport.com. If you find an error, contact the business that issued the account or the credit reporting agency that issued the report. The Consumer Financial Protection Bureau also will assist with complaints.

What Is a Good Credit Score to Buy a House?

To qualify for the best rates on a conventional mortgage, aim for a score above 740. Higher scores reflect a lower credit risk, which is usually rewarded by lenders with more favorable terms.

Can you buy a house with a bad credit score? Possibly. Someone with a credit score as low as 500 (a “poor” FICO score) may qualify for an FHA loan or, with sufficient residual income, a VA loan.

Minimum Credit Score Required by Mortgage Loan Type

Different mortgage types have different minimum score requirements.

•  FHA: 500 if you can put down 10%. 580 if you want to put down 3.5%.

•  Conventional: 620

•  Jumbo loan: 700

•  USDA: No minimum, but scores above 640 are most successful with lenders

•  VA: No minimum, but it is advisable to have a score above 620

A lower credit score may be offset by compensating factors like a 20% down payment or substantial cash reserves.

The Takeaway

Your credit score is the key to unlocking great rates and terms from the lender of your choice. Knowing which credit score is used for a mortgage is a great first step to getting mortgage terms that can work for you.

If you need a home mortgage loan, getting a mortgage with SoFi could be a great option. SoFi has a range of mortgages with competitive rates, flexible terms, and low down payment options.

A mortgage loan officer can answer your mortgage questions and help you find a loan for your unique situation.

FAQ

What does “A” credit mean?

“A” credit is the grade equivalent of a credit score. It’s also called a credit rating and can be assigned to individuals, businesses, or even governments, though it’s usually reserved for . higher credit scores. Credit ratings can range from AAA to a C or D, with AAA being excellent. Credit with an “A” grade represents a desirable borrower.

Which FICO score do mortgage lenders use?

Of the three FICO credit scores pulled from the three credit bureaus, lenders will home in on the middle number.

Can I get a home loan with bad credit?

There are options for borrowers with poor credit. FHA, for example, backs loans with 10% down when a borrower’s credit score is between 500 and 579. Borrowers with scores of 580 and above are eligible to put 3.5% down on FHA loans.

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

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

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

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.

SOHL0322019

A bathroom renovation can add beauty to your home and boost its value. If you have a small bathroom, you’ll want a remodel that makes the most out of the space.

Fortunately, there are lots of interior design tricks to make a tiny bathroom feel like a spa getaway.

But even a small-bathroom remodel can cost big bucks. Here are some tips on how to redo the loo without taking a bath on the investment.

Basics of Remodeling a Small Bathroom

Here are some things to consider when remodeling a small bathroom:

•   Bathtub. Installing a new bathtub typically costs about $7,000, HomeAdvisor says, although the price tag can run the gamut.

•   Sinks. Ditto on price. There’s a vast difference between a porcelain pedestal sink and a unit with a marble countertop.

•   Toilet. There are several types: one-piece, two-piece, in-wall, high-tank, and integrated toilets (with bidet). A two-piece toilet may cost $100 to $300. The labor cost for any toilet ranges from $100 for a simple installation to several hundred for a wall-hung toilet, which must connect to the studs.

•   Tile. Bathroom tiles for the floor and walls come in a wide range of materials, colors, and styles. Classic ceramic subway tiles run about $2 per square foot, while marble tiles cost around $6 to $9 per square foot.

•   Fixtures and hardware. Faucets, shower knobs, lighting, and towel racks can be an inexpensive way to spruce up your bathroom if you stick to mid-priced materials.

•   Storage. Cabinets and shelves add stylish functionality to a small bathroom.

•   Length of the project. A bathroom renovation can take weeks. If you have a second bathroom, great. Otherwise, you may need to seek temporary accommodations or plan a vacation.

•   Labor. Labor costs can eat up the majority of any small-bathroom remodel. The more you can DIY, the more you’ll save.

Average Cost of a Small-Bathroom Remodel

Whether you’re a first-time homebuyer — generally defined as anyone who has not owned a principal residence in the past three years — or an existing homeowner, you might be interested in a low-budget small-bathroom remodel.

What constitutes “small”? A small bathroom typically measures around 40 square feet. A half-bath with only a shower can be 20 square feet or less.

What constitutes low budget? For low-end fixtures with DIY labor, expect to pay about $70 per square foot (vs. $250 per square foot for high-end fixtures installed by a contractor), according to HomeAdvisor.

You probably didn’t ask yourself How much does it cost to remodel a small bathroom? when you were plugging numbers into a home affordability calculator, and in any case, the answer isn’t clear cut.

The average cost of a small-bathroom remodel is $6,500, according to HomeAdvisor, but depending on the quality of materials and need for installation, the cost can range from $1,500 to $15,000.

Professional labor can cost around $50 to $110 an hour. Tile installation and plumbing generally rack up the most work hours.

Recommended: How to Find a Contractor

Is Removing a Tub a Good or Bad Idea?

Bathtubs tend to take up a lot of space. When remodeling a small bathroom, you may be tempted to remove yours and replace it with a walk-in shower.

But most people love a long soak in a hot bath. Whether you’re planning to put your home on the market within a few years or you need to sell your house fast, removing your bathtub may reduce your buyer pool, especially if you only have one in the house.

10 Low-Cost Ways to Remodel a Small Bathroom

If you don’t have the financial means or the DIY know-how to do a gut renovation, there are more affordable ways to transform your bathroom and make it feel like new.

1. Salvage the Bathtub

A small-bathroom remodel with tub replacement can really inflate your costs. For around $300 to $600, you can have an old tub reglazed or refinished and put the savings toward some rubber duckies.

2. Tilt Toward Reasonable and Limited Tile

Tile can be another high-ticket item when it comes to a bathroom remodel. Luckily your bathroom is small. To save money, consider lower-cost porcelain and ceramic tile. You can also create a tile wall accent rather than full-on tile.

You might want to tile either your floor or walls but not both. Peel-and-stick tiles (often vinyl) can be a budget-friendly option for flooring.

3. Refresh With Light Paint Colors

A fresh paint job is a surefire way to revitalize any space, and the cost to paint may be the lowest among ways to transform a room. Light colors will make a small room feel larger.

To create the illusion of more space, match the wall color with the floor tiles and go with white for the ceiling. Light, continuous color from floor to ceiling will help elongate the room.

4. Upgrade the Showerhead

Don’t have the means to totally redo your shower? A high-quality showerhead can add a new and luxurious experience to your bathroom. Rain showerheads start at a few hundred dollars.

5. Replace Light Fixtures

Swapping out old fixtures for new ones can do a lot for an outdated bathroom. Many affordable bathroom light fixtures are available at home improvement stores, or you could consider recessed lighting.

6. Add Shelves and Storage

To lend a sense of height to your small bathroom, try adding an open shelving unit above the toilet for extra storage space. Decorate with photos, candles, and bottles of colorful bath salts.

7. Make Accessories Sing

Perk up your tired bathroom with a new shower curtain, fluffy hand towels, and a plush bath mat. A pop of color against a newly white-tiled wall can make a big splash.

8. Consider Sliding Shower Doors

Shower doors that open on hinges can take up a lot of space in a small bathroom. For around $100 to $300, you could buy a sliding glass door unit. You’ll pay an additional $200 to $300 for installation.

9. Add a Mod Mirror, Mirror on the Wall

A large, long mirror that stretches over the sink area can add the illusion of more space and help brighten the room with reflective light. Home improvement stores offer reasonably priced bathroom mirrors, including ones with cabinets for extra storage.

10. Pedestal Sink vs Vanity?

While a pedestal sink can create a sense of space, it can also come with a higher price tag than a vanity sink because drain pipes and water supply lines have to be obscured. A vanity also provides storage.

Ways to Finance a Small-Bathroom Remodel

When the budget for your small-bathroom remodel exceeds the amount in your piggy bank, there are several financing options.

Credit Cards

Slapping down a credit card is an easy way to finance your small-bathroom renovation. If you have a 0% interest card, it can be a smart way as well, plus you could earn travel or other bonus points.

But if you have a high-interest card, or don’t think you’ll be able to pay off the debt before that 0% jumps to 21%, that could spell trouble. You could end up paying a lot more for your new tub in interest charges, and could hurt your credit if you can’t make a payment.

Personal Loan

A personal loan for a small-bathroom redo can be a good option.

With a home improvement loan, you’ll receive a lump sum from a financial institution and repay it with interest in monthly installments. These loans typically offer same-day funding with no collateral required.

Approval and the rate offered are based on creditworthiness and other personal financial factors.

HELOC

If you own your home and have sufficient home equity, you may be able to qualify for a home equity line of credit (HELOC), using your home as collateral.

A HELOC rate is usually lower than that of a credit card or personal loan. You only make payments on what you spend, and the borrowing limit can be higher than with a credit card or personal loan.

Most HELOCs have a variable rate. There may be minimal withdrawal requirements, plus fees and closing costs. If you default on a HELOC, you risk losing your house.

The Takeaway

A small-bathroom remodel can pack a big punch and raise your home’s value. Focus on a few key upgrades and design elements to make a small bathroom more inviting.

How to finance a bathroom redo? SoFi offers home improvement loans for $5,000 to $100,000. The loans come with a fixed rate, absolutely no fees, and fast funding.

With a HELOC brokered by SoFi, you can access up to 95%, or $500,000, of your home equity to remodel a bathroom or any other area of your home.

FAQ

How can I cheaply renovate a small bathroom?

Doing it yourself will save the most money. Ideas include refreshed paint, an interesting shower curtain and fluffy towels, and new lights, shelves, and new hardware. It’s a good idea to leave plumbing and wiring issues to a pro.

How much is a small-bathroom remodel?

The average cost to remodel a small bathroom is $6,500, according to HomeAdvisor. That said, the price point can vary widely based on your tastes and the extent of the project. And the one constant with any remodeling project is that you will spend more than you planned.

How much does it cost to DIY a small bathroom?

A DIY reno of a 40-square-foot bathroom could cost about $4,000, HGTV notes. Add a 30% overage allowance for a realistic budget of $5,200.

What is the best way to remodel a small bathroom?

Start with a list of must-haves and nice-to-haves. Read up on types of toilets (it’s true, the unsung toilet comes in many varieties), sink fixtures, and lighting. That will help inform your budget and whether you need to hire a contractor.

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

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

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

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

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Buying an investment property to rent out or flip for a profit can be a great way to put extra cash in your pocket, but you may need a mortgage to pull it off.

Because there’s more risk involved for lenders, mortgage rates for “non-owner-occupied” property tend to be higher.

This article will discuss types of investment property loans, typical rates, and more.

Note: SoFi does not offer investment property mortgage rates at this time.

Why You Might Need an Investment Property Mortgage

Purchasing a rental property or buying a fixer-upper could be a rewarding way to invest your money, but if you don’t have the cash to pay out of pocket, you’ll need another way to fund the deal.

For many, that means taking out an investment property loan.

Recommended: How to Shop for a Mortgage

Types of Investment Property Loans

The type of mortgage loan you choose can affect your interest rate and required down payment.

How you plan to use the investment property and the number of units it contains also will affect your loan choices.

Conventional and Government Loans

Experienced investors typically prefer conventional loans when buying two- to four-unit properties. Buildings with four or fewer units are considered residential and eligible for the same loans as a single-family home.

Those with five or more units require a commercial loan, which usually has a higher rate, higher down payment requirement, and shorter term.

FHA and VA loans, government-backed home loans, can be used to buy a two- to four-unit property with a low down payment or none at all, respectively, if you live in one of the units.
Is the sky the limit? Not exactly.

The Federal Housing Finance Agency sets conventional conforming loan limits each year that depend on the number of units (one, two, three, or four) and the cost of the area. Staying under a loan limit means you’ll most likely obtain a lower-cost mortgage.

But jumbo loans, which exceed those limits, have their place. Lenders set their own limits and other criteria.

FHA loan limits for one to four units are set at 65% of the new year’s conforming loan limits. There are no VA loan limits for active-duty military members and veterans who have full VA loan entitlement.

Home Equity Loan or HELOC

If you have enough equity in your primary residence, you may be able to take out a home equity loan or home equity line of credit (HELOC) to fund your investment.

Other Kinds of Financing

Finally, if you’re serious about getting an investment property, you can think about and read up on these options:

•   personal loan

•   cash-out refinance

•   hard money loan

•   owner financing

•   assumable mortgage

Understanding Investment Property Mortgage Rates

It’s no surprise that rising inflation influences mortgage rates and that rates have risen — but they’re even higher for investment properties. Though rental property mortgage rates can vary, they are often at least 0.50% to 1% higher than rates for a primary residence.

Why are investment mortgage rates higher? Lending to an investor is inherently riskier. While someone who purchases a primary residence is likely to prioritize the mortgage payments for that house, an investor often has their own primary residence to prioritize above the investment property, meaning they would likely default on the investment mortgage before their own.

•   If the investment property is a flip but doesn’t sell as quickly as expected, the investor must keep making mortgage payments on the home after investing money to renovate — and may struggle to do so.

•   If the investment property is a rental, a vacancy results in no rental income to put toward the mortgage.

Recommended: Home Loan Help Center

What Determines the Rate?

So what determines investment property mortgage rates? Fannie Mae and Freddie Mac set rules regarding conventional investment property mortgages, including rate increases for single-unit and multiunit properties. Beyond that, mortgage rates for rental properties depend on a few additional factors:

Credit Score

As with any loan, a higher credit score typically results in a lower interest rate for an investment property mortgage.

Recommended: 18 Mortgage Questions for Your Lender

Debt-to-Income Ratio (DTI)

The lower your debt-to-income ratio, the better your chances of loan approval — and at a better rate. To calculate your DTI, add all your monthly debt payments, divide them by your gross monthly income, and multiply the result by 100.

Generally, 43% is the highest DTI you can have and still qualify for a mortgage, but many lenders prefer to see a 36% DTI or lower.

The lender may factor in 75% of your projected rental income when calculating your DTI, which works in your favor.

Cash Reserves

Because you may not immediately make money from an investment property — you typically need time to find renters or to rehab and list — lenders often like to see that you have adequate cash reserves.

Cash reserves refer to liquid (i.e., accessible) money that you have set aside for use in an emergency; in this case, it’s to cover the mortgage until your investment starts showing some ROI.

Though it can vary by lender, having six months’ worth of mortgage payments is often a good start. Having even more could improve your chances of approval and a lower rate.

Loan-to-Value Ratio (LTV) on the Investment Property

As with a traditional mortgage, lenders consider the loan-to-value ratio on the investment property. LTV expresses the ratio between how much money you’re borrowing and the appraised value of the property.

The closer those two numbers are, the higher the LTV ratio (expressed as a percentage) will be. By making a larger down payment and financing less, you can lower the LTV and potentially increase your chance for approval at a lower rate.

Making a Larger Down Payment

On a related note, you might benefit from offering a larger down payment. Although you may get approval with only 15% down, a larger down payment may yield a lower rate.

Not sure where to start? You can use a mortgage calculator to see how different down payment amounts may affect monthly payment and interest paid.

Recommended: How to Buy a Multifamily Property With No Money Down

Getting a Lower Investment Property Mortgage Rate

Now that you know what determines a rental property mortgage rate, let’s see how you can use that info to potentially earn a lower one.

Coming in With a Good Credit Score

Other than an FHA loan, which is more lenient about credit scores, lenders usually require a minimum credit score of 640 for investment property loans; some set the barrier for entry at 680.

Regardless, catapulting your number into the high FICO score range can improve your chances of a lower rate.

Paying Off Debt

A lower DTI ratio may also improve your chances of approval and a lower interest rate. But repaying debt is easier said than done; you may need to wait on an investment property if you’re working toward paying down a lot of credit card debt.

Increasing Your Cash Reserves

Showing a lender that you can cover the mortgage and other expenses like renovations or maintenance increases the odds of approval. The more liquid money you have, the lower your interest rate could be.

The Takeaway

Investment property loans are a good way for investors to purchase real estate for a rental property or a house flip, but the rates tend to be higher than rates for mortgages for a primary residence. A lender may offer a lower rate depending on a credit score, down payment, debt load, and cash reserves.

3 Home Loan Tips

1.    To see a house in person, particularly in a tight or expensive market, you may need to show proof of prequalification to the real estate agent. With SoFi’s online application, it can take just minutes to get prequalified.

2.    Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

3.    Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

FAQ

Can I get a mortgage for an investment property?

You can if you qualify, but keep in mind that investment property mortgage rates are typically higher, and lenders may have stricter requirements for approval.

Do investment properties have higher mortgage rates?

In general, yes, because lenders take on more risk when lending to an investor than to a person or family shopping for a primary dwelling.

What’s the minimum down payment for an investment property mortgage?

The minimum down payment for an investment property depends on the type of loan you’re using.
For a conventional loan, you usually need to put down at least 15%. An FHA loan for an owner-occupied one- to four-unit property calls for a down payment as low as 3.5%; a similar VA loan, no down payment.

Photo credit: iStock/Drazen Zigic

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

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

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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