Mar
06
2025
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Navigating Needs vs Wants: Your Guide to Smart Budgeting

By | Budgeting & Goals | No Comments

Budgets typically require you to categorize your expenses by “needs” versus “wants.” While that sounds straightforward enough, it’s not always easy to do. There may be times when you want something so badly (say, a leather jacket or trendy sneakers), it feels like a need. Or, you might dismiss a real need, like taking a week off work, as a want by not fully grasping its importance to your mental health.

Distinguishing between wants and needs, however, is key to your financial well-being — it provides the framework for a budget, allows you to make the most of the money you have, and can help you reach your future goals.

Read on to learn the real difference between needs versus wants, and how to fit both into your budget.

Key Points

•   Differentiating between needs and wants is essential for effective budgeting, as it helps manage essential living expenses while allowing for enjoyable purchases.

•   Needs typically include essential items for survival and functionality, such as food, housing, transportation, and healthcare, while wants enhance quality of life.

•   The distinction between needs and wants can be subjective, as individual circumstances may influence whether an expense is categorized as essential or indulgent.

•   Implementing a budgeting method like the 50/30/20 rule helps allocate finances into needs, wants, and savings, promoting better financial management.

•   Regularly reviewing and adjusting budgets ensures they remain relevant to changing financial situations and goals, fostering long-term financial health.

What Is a Need vs a Want?

Both wants and needs are factors that drive your spending behavior. Understanding the difference between wants and needs is key for setting up a budget that allows you to meet your basic needs, enjoy your life, and still work towards your future goals.

•   Needs are usually defined for budgeting purposes as your essential living expenses, things necessary for your health, and expenses that are required for you to do your job.

•   Wants, on the other hand, are generally defined as desires for things that go beyond the basic necessities. They can range from small indulgences like a fancy coffee or a new hardcover book to luxurious items like a premium car or designer clothes.

To stay on top of your budget and avoid overspending, it’s important to distinguish between needs and wants. However, you may find that these terms are more fluid than they appear at first. While working through your list of expenses, it may seem like items can fit into both categories, making the process somewhat confusing. It can help to dive deeper into what exactly constitutes a need versus a want.

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Identifying Your Needs

Strictly defined, money management guides will tell you that a need is something that is necessary to live and function. By this definition, a need includes food, clothing, shelter, and medical care.

In budgeting, however, the category gets broader. There are things that you could technically survive without, but which you need in order to operate as a functional, productive member of society — and to keep that job that’s getting you the paycheck you need to buy food and keep a roof over your head.

For example, if you work in a position that requires you to show up at a specific time and place, transportation is going to be a need, not a want. Since insurance offers financial protection, and in some cases is legally required, you can count insurance as a need.

Needs tend to be recurring expenses that, generally, eat up a large chunk of your paycheck.

Examples of Needs

Here are some common budget items that typically count as needs:

•   Rent or mortgage payment

•   Utilities (e.g., gas, electricity, water, wifi connection)

•   Food

•   Transportation

•   Insurance

•   Necessary clothing

•   Health care

Recognizing Your Wants

Wants are basically everything that’s not a need. They are expenses that help you live more comfortably and enhance your quality of life.

Wants are the things you buy for fun or leisure. You could live without them, but you enjoy your life more when you have them. For instance, food is a need, but daily lunches out (vs. bringing a turkey on rye sandwich) are likely to be more of a want. Outerwear is definitely essential to protect you from the elements, but if you have two other coats in your closet, that jacket you’re eyeing is probably a want.

Wants are not inherently bad or a poor use of your money. Often, they can help you accomplish important goals like meeting people and socializing with friends, having fun, or staying healthy. Along with needs, they deserve an important place in your budget.

Examples of Wants

Here are some examples of expenses you might classify as wants in your budget:

•   Entertainment

•   Dining out

•   Travel

•   High-end clothing

•   Luxury cars

•   Fitness classes/gym memberships

•   Streaming accounts

•   The latest smartphone

•   Fancy coffees

•   Hobby-related expenses

Where the Line Between Needs vs Wants Gets Blurry

Sussing out your financial needs versus your wants might sound like a simple task. But this seemingly black-or-white issue can actually get surprisingly gray, depending on your situation.

One source of confusion is that wants and needs won’t be the same for everyone. For example, two people may both need a car for work. However, one might need a luxury car to drive around important clients, while the other just needs a car that will get them to and from work. In the second case, a basic car will suffice. Recognizing that you don’t need to go for the top-of-the-line car can help free up funds and give you automatic savings on your spending.

Another complicating factor is that some expenses contain both wants and needs. Your grocery bill, for example, is a need because you need to eat. However, some items on the list, like expensive cheeses, soda, and ice cream represent wants rather than needs. You could survive without them.

The Needs vs Wants Test

To determine if something you want to purchase is a want vs. a need, consider:

•   Does this fulfill a basic need? (Basic needs typically include shelter, food, water, security, health care, and necessary clothing.)

•   Is this essential to living a healthy life?

•   Will not having this in your life cause you any sort of harm?

•   Will this make you happier or healthier in the long term?

•   Is it necessary for you to do your job?

Another good way to differentiate wants vs. needs is to let some time pass before you make a decision about a purchase. Generally, the desire to purchase a need will grow stronger over time, while the desire for a want will wane with passing time.

Another distinguishing characteristic between needs and wants is that needs rarely change over time, whereas wants are often trends that will fade. If you’re trying to rein in unnecessary spending, it pays to consider whether a purchase will make you happy, healthy, or otherwise fulfilled for a long time or if it’s just something you want because it’s currently popular.

While there’s something to be said for retail therapy, you don’t want to fall into the trap of buying things because they make you feel better in the moment (especially if it means running up credit card debt). These purchases tend to get forgotten relatively quickly, sometimes in a just a few days or weeks. If on the other hand, a purchase will likely serve its purpose for at least two years, you can feel better about spending the money.

Practical Strategies for Budgeting

To account for both needs and wants in your budget, you might consider the 50/30/20 budget method.

This approach divides your net income (whether received via direct deposit, mobile deposit, or another way) into three basic categories, spending 50% on needs, 30% on wants, and 20% on savings and paying off debt (beyond the minimum payment). Just keep in mind that those percentages may not be realistic for everyone. If you live in an area with steep housing costs, for example, you may need to spend more than 50% on needs and take some away from the wants and/or savings categories.

•   To see how your spending currently measures up, go through your monthly expenses (including online bill pay), create a master list of things you spend your money on, and then create a list of needs and wants.

•   The next step is to tally up what you’re spending in each category and see how the totals compare to your monthly take-home income. If you find your current spending is out of line with your chosen breakdown (such as 50/30/20), you’ll want to make some adjustments.

•   Next, you’ll want to look for places to cut back. While you may think your needs’ costs are fixed, it may be possible to shop around for a better price on certain monthly essentials, like insurance or a phone plan. Or, maybe you don’t need to drive to work but could spend less by taking public transportation or carpooling with a coworker.

   Typically, however, it’s easiest to find places to cut back in the wants category. For example, you might decide to get take-out less often and cook more nights a week, brown bag your lunch, get rid of streaming services you rarely watch, and/or jog outside instead of going to a gym.

•   Any savings you uncover can then go towards your savings and debt repayment category. This can help you to get out from under high-interest debt faster (which will free up even more money for saving) and allow you to work towards goals like building an emergency fund, going on a vacation, buying a home, and funding your retirement.

You can use a 50/30/20 rule calculator to take a closer look at using this budgeting method.

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Reviewing and Adjusting Your Budget

Once you’ve rejiggered your spending and created a basic 50/30/20 (or similar) budget, it’s important to track your spending to make sure you’re sticking to your budget and spending an appropriate amount on needs versus wants.

•   One easy way to do this is to put a budgeting app on your phone (many are free for the basic service). Budgeting apps typically connect with your financial accounts (including bank accounts and credit cards), track spending, and categorize expenses so you can see exactly where your money is going each month.

•   Once you start tracking your spending, you may find that your original budget breakdown isn’t realistic and you’ll need to make some adjustments to your budget. For example, maybe it isn’t feasible to save 20% of your take-home pay right now. You might start with 5% or 10% and increase the percentage as your income grows.

•   It’s also a good idea to check in on your budget every six to 12 months. Your needs, wants, and goals will change over time. The key to creating a sustainable budget is to treat it as a living document and periodically evaluate it and adjust it as necessary to ensure that it meets your current financial goals.

The Takeaway

Some things you need — a place to live, electricity in your home, gas in your car to get to work — and some things you just want, like tickets to a concert or a membership to a gym. The key to smart budgeting is making room for both needs and wants, as well as saving. There are several techniques, from budgeting apps to various popular methods, that can help provide guardrails for your spending. A balanced budget can help you live well right now while also getting you closer to your short- and long-term financial goals.

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FAQ

How do I determine if something is a true need?

To determine if something is a true need, ask yourself if it is essential to your survival, your wellbeing, and doing your job. If the answer is yes, it’s a true need. Sometimes, however, the line is blurry. For instance, you may need a smartphone in order to do your job, but that doesn’t necessarily mean you need the latest pricey model.

What percentage of my budget should go to wants?

If you follow the popular 50/30/20 budget rule, 30% of your take-home pay can go toward wants, such as dining out, travel, and other non-essential spending. In some cases, that amount may vary. If you, say, live in an area with a very high cost of living or you have significant debt (mortgage, student loans, and a car loan), you may reduce that allocation to, say, 20% or less.

How can I reduce spending on wants without feeling deprived?

There are various ways to reduce spending on wants without feeling deprived. A couple of ideas: Instead of paying for a pricey gym membership, you might try different free workouts on YouTube. When you go out to eat with a friend, share a main course or a few appetizers. Or skip the expensive cocktails and after-dinner coffee. You also might create a small bucket in your budget for fun spending: If you know you have $20 a week, it can be a treat to decide whether to go out to lunch or, say, get a manicure with that money.

Is a smartphone a need or a want?

A smartphone is one of those “gray area” items. It’s probably vital for you to have a smartphone and stay connected for work and wellness purposes, meaning it’s a need. However, upgrading to the latest expensive model not because your current phone is broken but because the new version has cool features could be an expense that qualifies as a want.

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Mar
06
2025
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Are You a Shopaholic? Signs to Know

By | Budgeting & Goals, money | Comments Off on Are You a Shopaholic? Signs to Know

People shop for all kinds of reasons — to acquire the things they need or want, to browse stores for new and interesting finds, and (sometimes) for the little thrill that comes with snagging a great deal.

For some people, however, shopping crosses the line into unhealthy territory. If you tend to hit the stores every weekend, spend the majority of free time planning for and making purchases, and/or have have tallied up some major debt as a result of your frequent shopping, you may actually be addicted to shopping.

Read on to learn more about what it means to be a shopaholic, signs that you may be addicted to shopping, and ways to curb the habit.

Key Points

•   A preoccupation with shopping and buying to relieve stress are hallmarks of shopping addiction.

•   Spending beyond one’s budget and accumulating unopened goods are common.

•   Individuals often hide purchases and feel guilt and regret after shopping.

•   Shopping addiction can lead to financial strain and emotional distress.

•   Managing compulsive shopping involves tracking triggers, finding alternatives, and seeking professional help.

Definition of a Shopaholic

Known as oniomania or compulsive shopping, shopping addiction is a behavioral disorder that involves frequent, excessive buying as a way to feel good and temporarily relieve feelings of stress, anxiety, or boredom. Like other types of addictions, a shopping addiction can substantially harm a person’s life, including their relationships and financial well-being.

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4 Shopaholic Symptoms

People who are addicted to shopping often get a sense of emotional relief right after buying something. Shopaholics also tend to spend more time and money on shopping than they can afford, and many get into financial problems — such as large amounts of credit card debt — as a result of their overspending.

Below are four signs that you may be addicted to shopping.

1. Experiencing a Rush of Excitement When You Buy

Shopaholics generally shop not because they really need something but rather for the sense of euphoria they experience when they’re shopping.

Similar to a drug addiction, compulsive shoppers will often experience a “high” or an adrenaline rush from the act of purchasing something. The brain then associates shopping with this pleasure and the person wants to try and recreate that feeling over and over again. This pattern can be used by a shopaholic to fill an emotional need or override a negative emotion.

2. Experiencing Post-Shopping Regret

Unfortunately, the high shopaholics experience is typically short-lived and later gets replaced by negative feelings, including shame, remorse, and guilt.

Shopaholics will often feel guilty after spending money, whether they splurged on something expensive or snagged something on clearance. Despite any remorse that follows, though, they tend to be good at rationalizing any purchase if they’re challenged.

Buyer’s remorse can force a shopaholic back into a negative cycle, since they know shopping is a surefire way to chase away negative feelings, at least temporarily.

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3. Accumulating Unopened Goods

Though shopaholics enjoy shopping, they often don’t care all that much about their purchases when they get home or when their online orders arrive in the mail. In fact, the items they purchase often end up unopened and shoved in the closet or under the bed.

Those living with a shopping addiction can actually develop hoarding tendencies as they accumulate more goods than they need and yet continue buying.

Recommended: 9 Questions to Ask Before You Buy Something

4. Concealing Shopping Habits

Shopaholics will often try to conceal their shopping habits from their spouses, family members, coworkers, and friends. This is often due to feelings of shame and/or the fact that they are shopping and spending money at the expense of their job or loved ones.

Normal Shopping vs Compulsive Shopping

If you enjoy shopping and make the occasional splurge, does that mean you are a shopaholic? Not necessarily. There are several distinct differences between normal shopping and compulsive shopping. Here’s a side-by-side comparison of normal shopping versus compulsive shopping.

Normal Shopping

 Compulsive Shopping
No addictive or compulsive component Resembles addictive behavior
Purchases are generally needed and used Purchases are often not needed and go unused
Isn’t followed by negative emotions Often followed by guilt, remorse, and shame
Does not lead to financial problems Continues despite negative financial consequences
No secrecy involved Secrecy is often involved
Occasional shopping sprees Frequent overbuying

Treating Compulsive Shopping

If you feel like shopping has become your main way of coping with stress, there’s a lot you can do to address the issue and regain control of your spending. Here are some strategies to try.

Understanding Your Triggers

Consider keeping a journal of how you feel when the shopping urge hits: Are you bored? Angry? Anxious? Do you feel the desire to buy new things after you hang out with a certain person, spend time on social media, scroll your email, or watch certain shows?

Tracking your triggers can provide insight into what drives you to want to shop and how you can better manage (or avoid) those triggers in the future. For example, you might seek out other friends, unsubscribe from marketing emails, and unfollow shopping-focused social media accounts.

Developing Other Coping Strategies

Overcoming any addiction typically requires learning alternative ways of handling the stress of everyday life. You might come up with a list of non-shopping activities you find relaxing and enjoyable, such as calling a friend, watching a movie, reading, going for a walk, listening to music, doing yoga, or engaging in a hobby. You can consult your list when you get the overwhelming urge to shop. This can help you break the cycle of using shopping as a way of trying to feel better about yourself.

Delaying Gratification

Another way to deal with impulsive or compulsive shopping is to establish a waiting time before you spend money on anything nonessential. “Combat the urge to impulse spend by instituting a holding period on all purchases,” suggests Brian Walsh, CFP® and Head of Advice & Planning at SoFi. “Before hitting the buy button, wait 24 to 48 hours. After the holding period, come back to the shopping cart and reevaluate. In some cases, you might not even remember why you wanted it in the first place.”

Seeking Expert Help

If you think you may be addicted to shopping and can’t seem to get a handle on it on your own, it can be worth seeking professional help.
A mental health professional can help you understand the emotional roots and psychological factors contributing to your compulsive shopping. Addiction therapy, including cognitive behavioral therapy (CBT), can help you understand your triggers and come up with coping strategies that don’t involve shopping.

You might also benefit from financial counseling, particularly if your shopping behavior has left you in debt. A financial advisor can help you set up a spending budget that allows you to pay off expensive debt, while also building — or rebuilding — your savings.

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Financial Consequences of Compulsive Shopping

Many compulsive shoppers continue making purchases even when they struggle to pay bills, max out credit cards, or face financial hardship. This behavior can create a cycle of stress and anxiety, reinforcing their shopping addiction.

Key financial consequences of compulsive shopping include:

•   Excessive debt: Constant impulsive purchases can quickly accumulate, causing you to spend beyond what you can pay off at the end of the month and mounting overwhelming credit card debt.

•   Poor financial decisions: Compulsive shoppers may neglect essential financial planning, fall for scams, or buy unnecessary items instead of prioritizing needs.

•   Damaged credit score: High credit utilization and any missed payments can have a negative impact on your credit profile, making it difficult to secure loans, mortgages, or even rent an apartment.

•   Depleted savings: Continuous spending on nonessential items can drain your savings account, leaving little to no financial cushion for emergencies.

•   Bankruptcy risk: In extreme cases, uncontrolled debt from compulsive shopping may lead to bankruptcy, further complicating financial recovery.

How to Support a Loved One Struggling with Shopping Addiction

Supporting a loved one with a shopping addiction requires patience, empathy, and constructive action. You might start by having an open, non-judgmental conversation about their behavior, expressing concern without blame. You could also offer some helpful suggestions, such as tracking their spending habits, avoiding triggers, and (possibly) seeking professional help like therapy or support groups.

At the same time it’s important to set healthy boundaries and to avoid enabling their behavior by lending money or covering debts. Instead, you might offer alternatives like budgeting together or engaging in non-shopping-related activities. If they’re open to it, you could help them set financial goals and spending limits or offer to be their accountability partner.

Letting Your Savings Grow With SoFi

If your goal is to start saving more and spending less, you’ll want to choose a bank account that helps your money grow faster than it could in a traditional savings account and charges minimal or no fees.

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 are the signs of being a shopaholic?

Signs of a shopping addiction include frequent impulsive purchases, spending beyond one’s budget, hiding purchases from family or friends, feeling guilt or regret after shopping, and using shopping as a way to cope with stress or emotions. Shopaholics may also experience financial strain, accumulate debt, and have difficulty controlling their shopping urges.

What is the root cause of shopping addiction?

Negative feelings, such as stress, anxiety, and loneliness, are often the underlying causes of shopping addiction. Shopping can provide a distraction from these unpleasant emotions and help you feel more in control. It can also elicit a kind of psychological “high,” which is why compulsive shoppers often seek this behavior out again and again.

How do you cure a shopping addiction?

People who are addicted to shopping often respond well to various treatments, including antidepressant medications, talk therapy, cognitive-behavioral therapy (CBT), self-help books, support groups, and financial counseling.

Are there support groups for compulsive shoppers?

Yes, support groups like Shopaholics Anonymous and Debtors Anonymous provide help for compulsive shoppers. These groups are available in-person and online and offer a safe space to share experiences, gain support, and learn coping strategies from others facing similar challenges. These groups can also help you determine when you might need additional help from a mental health professional.

How can I prevent relapse after overcoming shopping addiction?

Preventing relapse involves maintaining strong financial habits, avoiding triggers, and developing alternative coping mechanisms for stress or emotions. Some strategies that can help you stay on track include regularly reviewing your budget, using shopping lists, implementing a waiting period before making purchases to help control impulses, and engaging in non-shopping activities (like hobbies or volunteering). You might also seek out ongoing support from therapy, accountability partners, or support groups.

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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.
*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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

SOBNK-Q125-082

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Mar
06
2025

Top 12 Jobs for Skilled Seniors That Pay Well in 2025

By | Budgeting & Goals, Preparing for Retirement, relay | Comments Off on Top 12 Jobs for Skilled Seniors That Pay Well in 2025

For a growing number of Americans, turning 65 no longer automatically means retirement. Between 2015 and 2024, the number of Americans 65 and older who worked increased by more than 33%, according to a 2025 CNBC analysis of Bureau of Labor Statistics (BLS) data.

If you want to keep up the 9 to 5 into your golden years, there’s a wide range of options for you to explore. This is especially true if you’re a skilled senior interested in full-time employment.

Tips When Finding a Job as a Senior

There are pros and cons and working after retirement. If returning to the daily grind is right for you and your financial situation, then there are a few things you’ll want to keep top of mind:

•   Weigh the pros and cons of working for a company versus freelancing or consulting.

•   Think about whether you’d prefer to work from home or go into an office or to a job site.

•   Read the job listing carefully, paying close attention to the requirements listed.

•   Remove graduation dates from your resume unless they’re fairly recent.

•   Include a couple of your key accomplishments in a cover letter.

•   During an interview, be sure to strategically share key career highlights from the past 10 to 15 years, and spotlight the ways in which you’ve kept your skills up to date.

•   Move ahead with confidence!

Check your score with SoFi

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12 Jobs for Skilled Seniors That Pay Well

Working can help provide seniors with extra income as well as other benefits, such as connecting with coworkers and creating a sense of purpose. Let’s take a closer look at jobs for skilled seniors that suit a variety of skills and interests.

#1: Teacher

If you have the appropriate credentials, teaching can be a rewarding job. Don’t fret if you don’t have the right credentials — you might still be able to land a position. Many high schools, career centers, and community colleges may be open to hiring experienced people to teach general interest or professional development courses. Educational organizations may also be seeking teaching assistants or tutors, both of which can be excellent jobs for skilled seniors.

#2: Pet Groomer

Have a way with four-legged friends? Consider a career as a pet groomer, where the average worker earns around $31,830 a year. You can find work in a number of settings, including grooming salons, veterinary clinics, pet stores, zoos, and animal shelters. Or, you may decide to strike out on your own. The field is experiencing a boom right now. There are more than 422,000 jobs today, according to the BLS, and the field is expected to grow by 15% between 2023 and 2023.

#3: Tax Preparer

Interested in becoming a tax preparer? If you have an accounting background, then this type of work may be a natural fit. That said, you don’t need to be a certified accountant — you just need to obtain a Preparer Tax Identification Number from the IRS and pass a competency exam.

#4: Real Estate Agent

You can earn a good income helping people buy and/or sell their home or property. But there’s another selling point to being a real estate agent: the ability to set your own schedule, as long as you can still satisfy your clients. In fact, this flexibility can be useful if you’re deciding whether you want to work part time or full time. Before you start working, you’ll need to get a license, and requirements vary by state.

#5: Bank Teller

You typically only need a high school diploma or the equivalent to qualify for a bank teller’s job, and you may be required to undergo a short period of on-the-job training. In this position, you’d handle the standard transactions at the financial institution. So if you’re comfortable handling a steady flow of cash and enjoy working with customers, this could be a job to consider.

Need help managing your own finances? A money tracker can help you keep tabs on where your money is going.

#6: Medical Biller

A medical biller works for a healthcare organization such as a hospital or doctor’s office and is responsible for appropriately billing insurance companies, managing the status of claims, and addressing problems that arise. This is one of those jobs for skilled seniors that require organization and the ability to follow through — in this case, with both patients and the insurance companies.

Recommended: How to Negotiate Medical Bills

#7: Virtual Assistant

Plenty of small businesses in the United States need help with daily administration tasks. Depending on your skills, virtual tasks could include making phone calls, managing emails, scheduling appointments, maintaining calendars, offering bookkeeping services, handling social media, and so forth. Although many virtual assistant jobs are part time, if you wanted more work, you could have multiple clients to whom you provide your services.

#8: Telework Nurse or Doctor

Telehealth services have greatly expanded since 2020, and demand for remote healthcare providers remains high. If you’re a recently retired nurse or doctor, and are still licensed, you may want to explore a telehealth position. It could allow you to continue providing care but from the comfort of home (or a home office).

#9: Counselor

More than half of all Americans live in an area with a shortage of mental health care professionals, according to data from the U.S. Department of Health and Human Resources. If you’re a retired counselor or therapist and are interested in working again, re-entering the field could allow you to provide much-needed services.

#10: HVAC Technicians

From installation to maintenance to repairs, HVAC pros can find themselves in great demand all year long. If you have this kind of experience, or are handy and able to incorporate HVAC into your skill sets, then this type of work can be a steady source of income.

Recommended: 25 High-Paying Trade Jobs in Demand

#11: Paralegal

Busy attorneys need plenty of help researching information, creating documentation, and contacting clients. If you have the education and experience — and you’re highly organized and able to multitask — then a paralegal job may be right for you.

#12: Grant Writer

Grant writing is a specialized type of writing where you’d write proposals to help nonprofits and other agencies to obtain funding for their programs. To succeed at grant writing, it’s important to research the requirements and deadlines of the funding, write compelling proposals to receive the grant dollars, follow up with the proposals, and write reports about them.

The Takeaway

Your golden years are what you make of them — and for some, that can mean re-entering the workforce or pursuing a new, rewarding career path. Fortunately, there are plenty of jobs for skilled seniors that suit different skills and interests and provide a source of extra income.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

Can seniors still work full time and receive Social Security benefits?

According to the Social Security Administration, the answer is “yes.” If you’ve already reached your full retirement age, then you can work and earn as much as possible without a reduction in benefits. If you aren’t yet at full retirement age, then you can earn up to $23,400 in 2025 without a reduction. For income earned beyond that annual limit, your benefits would be lowered by $1 for each $2 earned.

What types of job skills are in high demand?

Management and leadership skills are appreciated by many employees, and these are skills seniors may well have developed over the years. It’s important to be able to effectively communicate, both verbally and in writing, and to work well with others. For many jobs, sales and marketing abilities are key, while in others the ability to research and analyze are crucial. Note that these are general categories. Specific skills will depend upon the job you’re applying for.

What type of work-life balance should working seniors expect?

Maintaining a work-life balance is especially important for working seniors. As you consider re-entering the workforce, you’ll want to consider your physical and mental health as well as your finances, and ensure that whatever job you take on will fit in your lifestyle. As an older adult, you may discover that you don’t have quite as much stamina as you once did. On the other hand, having children out of the home and on their own may open up more time than you expected.

Photo credit: iStock/Vesnaandjic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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

SORL-Q125-068

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Mar
05
2025

What Is House Hacking?

By | Family Finances, Home Ownership, mortgage | Comments Off on What Is House Hacking?

House hacking is a relatively new term for an old-school goal: Finding a way to earn income from a property you own while you also reside there.

Generally, house hacking is defined as renting out parts of your home (one or two rooms, a basement apartment, or one side of a duplex, for example), and using your tenants’ payments to help cover your mortgage and other expenses. But whether you’re a first-time homebuyer, an aspiring real estate investor — literally trying to get a foot in the door of a high-priced housing market — or a longtime homeowner hoping to earn some passive income, there are multiple house-hacking methods to consider.

You’re really only limited by the amount of time and effort you want to put in … and, of course, the homeowners association (HOA) rules and zoning laws in your area. Read on for a look at some of the benefits and challenges of house hacking, and some ways you might put an income-generating home-sharing strategy into action.

Key Points

•   House hacking involves renting parts of a home to cover expenses and build equity.

•   For first-time homebuyers, house hacking can significantly reduce or cover mortgage payments.

•   Retirees can enhance financial security through passive income and reduced living costs from house hacking.

•   A challenge of house hacking is maintaining a balance between personal life and managing tenants.

•   The live-in flip strategy involves buying, renovating, and living in a property to sell for profit.

How House Hacking Works

In its most basic form, house hacking isn’t that different from sharing an apartment with one or several roommates, with everyone paying their portion of the rent to a landlord or management firm. Except in this scenario, you’re the landlord. You own the house, condo unit, or multi-family building, and you also live there. And you’re using your property as a tool to earn money to make your monthly mortgage loan payments and cover other costs; pay down student loans and other debts; or grow your savings.

Benefits of House Hacking

Millennials and Gen Zers often use a house hack as a way to cut the costs of homeownership. And for those interested in real estate investing, it may also be a step toward building a portfolio of properties. But it could also be an opportunity for boomers who own a home to create a passive income stream in retirement (and maybe enjoy a little company while they’re at it). These are are some of the benefits a house-hacking strategy, done right, can offer:

Reducing Expenses While Building Equity

Housing prices can be daunting, especially for first-time homebuyers who often are just starting out on their own. For those on a tight budget, house hacking may make homeownership more affordable by reducing the burden of monthly payments, and possibly helping to cover other costs, such as insurance, HOA fees, and maintenance. Meanwhile, successful house hackers can look forward to building equity — in a starter home that leads to something bigger or better, or maybe the forever home they hope to live in with their future family someday.

Accessing the Tax Benefits of Homeownership

How does homeownership affect your taxes? If you itemize on your tax return, you may be able to deduct several expenses, including your mortgage interest, property taxes, certain home improvements, and some of the costs of purchasing a home. It’s important to remember, though, that you’ll also have to include the income from your tenants’ rent payments on your return. Talk with a tax professional about your new benefits and obligations.

Testing Out a Rental Property Career

Want to get a feel for what life as a landlord might be like? Living on-site with your tenants can give you an up-close-and-personal look at what property management involves, from dealing with late payments to making sure appliances and fixtures are working.

Building Wealth

Single- and multi-family homes don’t always appreciate with time, but if you take care of your property, and choose the location carefully, you may see an increase in your property’s value, which can add to your equity and your net worth. (You also may be able to charge higher rental prices over time, which could further help you grow your wealth.)

House-Hacking Strategies for Beginners

If you think house hacking might be something you want to try, you’re probably wondering how to get started. It can be a good idea to do some research first, to determine what is and isn’t allowed in your community, city, or county. And, of course, you’ll want to choose a hack that fits with your priorities.

Here are some tips on how to house hack that could be especially useful for beginners:

Renting Out Extra Rooms

If you already own a home, or plan to purchase one soon, renting out extra rooms may be the easiest way to dip your toe into house hacking. You can get help with your mortgage payments and perhaps other costs, including utilities. And if the experiment doesn’t work out, you can always find a new housemate or, if you can afford it, opt for going it alone.

Offering Short-Term Rentals

Not sure you want to commit to a long-term lease? You may want to consider offering a spare room on a short-term rental platform. Your rental income may not be as stable, and the cleaning and guest prep associated with turnover may be challenging, but you’ll get more me-time alone in your home with this option. (Just make sure you aren’t breaking any HOA or other rules.)

Trying a Live-In Flip

Forget about finding suitable housemates: With this strategy, you can go it alone (or team up with a like-minded weekend warrior) to buy and renovate a property with the idea of selling it for a profit in a few months. In the meantime, you can live in the place yourself — as long as it’s deemed habitable. Keep in mind, though, that you’ll be paying the mortgage during that time, while also dealing with repairs and other expenses. So unless you have enough money stashed away, or a few co-investors, the upfront costs may be problematic.

Buying a Multifamily Home

By purchasing a multifamily property, you may be able to maintain a little more personal privacy while also reaping the benefits of bigger rent payments. Anything larger than a duplex might be an ambitious undertaking for a beginner, though — unless you’re willing to go full-on landlord, and set rules, manage repairs, collect rent, and deal with potential disputes with or between your neighbors.

Financial Considerations When House Hacking

If you’re preparing to purchase a property with a plan to house hack, there are several financial considerations to keep in mind.

Researching Your Best Financing Options

As an owner-occupant, you may qualify for a few different types of mortgages, including a conventional loan from a private lender or a government-backed FHA or VA loan. Taking the time to compare loan types and lenders can be an important part of going through the mortgage process and getting the interest rate and loan term that best suit your needs.

For example, if you plan to expand your real estate portfolio using the BRRRR method (buy, rehab, rent, refinance, and repeat), having a good relationship with your lender can help you move on to the next property with fewer worries.

Finding the Best Property for Your Budget

Even if you’re buying a home you expect to live in for a while, it can still be helpful to look at your purchase as a business decision. That means considering the location, the condition of the property, the rental potential, what you might charge, if you want a separate entrance for a tenant, etc. Also, as a beginner, you may want to get some professional advice from a real estate agent or an experienced real estate investor.

Deciding If Your Choices Make Financial Sense

Whether you’re looking at sharing a single-family home with one housemate or a building with several tenants, don’t forget to run the numbers to be sure the arrangement makes financial sense. Add up all your costs vs. what you hope to take in. Will the net amount help you achieve your financial goals?

Recommended: Understanding Mortgage Basics

Risks and Challenges of House Hacking

It’s not hard to imagine where this could all go wrong. House hacking is not without risk. Being a landlord for just one housemate (even a friend) turns out to be more than some people are willing or able to deal with. Some potential pitfalls include:

Maintaining Work-Life Balance

House hacking can blur the lines between what is your home and what is your business/investment. It’s not unlike working from home every day — except your tenants may be even more demanding than your family or your boss. As a live-in landlord, you may find it more difficult to go on vacation, have a pet, throw a party, or take a new job on short notice.

Tenant Troubles

Depending on how much of your space will be shared, the lack of privacy could get old. And even with careful vetting, personality differences (noise, cleanliness, tenant disputes) may become a problem.

Occupancy Instability

If you’re relying on the extra rental income to manage your mortgage payments, keeping your extra room, basement apartment, or multiple units occupied could make or break your ability to hold on to your home. When you budget for income with a long-term tenant, it’s wise to assume your property won’t be rented 100% of the time.

Increased Wear and Tear

With multiple occupants, with or without pets or children, your property might show more wear and tear than a standard owner-occupied home in the neighborhood. This could mean higher maintenance and repair costs than you expected, or it could lower the resale value if you decide to move on.

Recommended: Home Mortgage Calculator

The Takeaway

If all goes well, house hacking can provide an effective way to help pay off your mortgage, build equity, expand your real estate portfolio, and grow your net worth. But making it work can take patience and planning. Beginners may want to start with small steps — renting to just one or two housemates or tenants, for example, and becoming familiar with the appropriate financing options for your needs — before building up to a bigger investment.

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

What financial factors should I consider when house hacking?

If you plan to purchase a home or building, it’s a good idea to be sure the loan type and terms fit both your short- and long-term goals, that the property costs will fit with your budget, and that the amount you expect to net from your rentals makes sense for the time and effort you’ll put in and the risk you’re taking.

Are there risks involved with house hacking?

Yes, there are both personal and financial risks involved with house hacking.

Can I house hack with a mortgage?

Absolutely. Using the income from your house hack to help pay down your mortgage is typically one of the primary goals of investors who choose to use this strategy.

Photo credit: iStock/andresr

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.


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



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

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


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q125-063

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Mar
05
2025

Basics of a Mortgage Transfer

By | Growing Wealth, Home Ownership, mortgage, Terminology, Tools & Calculators | Comments Off on Basics of a Mortgage Transfer

It may seem as though transferring a mortgage — allowing a new borrower to take over the payments for the remainder of the loan term and relieving the original borrower of that obligation — would be a pretty straightforward process.

It isn’t.

For one thing, most lenders don’t allow mortgage transfers as a general rule. (Note: This includes SoFi.) And even when transfer of a mortgage is allowed — a government-backed loan may be assumable, for example, if the lender approves it — the process can be complicated and time-consuming.
If you’re considering pursuing a mortgage transfer, read on to learn some of the basics.

Key Points

•   A mortgage transfer reassigns an existing home loan to a new borrower, who assumes all payment responsibilities.

•   Lender approval is necessary, involving credit checks and documentation of financial status.

•   Paperwork includes original loan documents, a new application, and financial documents.

•   Special circumstances like death, divorce, or living trusts can allow transfers despite “due-on-sale” clauses.

•   Compared to refinancing, a mortgage transfer often has fewer closing costs and can retain favorable loan terms.

What Is a Mortgage Transfer?

A mortgage transfer involves reassigning an existing home loan from the original borrower to a different borrower, and letting the person (or entity) who assumes the loan keep the same interest rate, loan amount, loan length, and monthly payment.

The new borrower takes over all responsibility for paying off the remaining loan balance without getting a new loan, and the original borrower is legally released from any obligation.

A mortgage transfer can help both original and potential new owners: It may make it easier for the homeowner to attract potential buyers, for example, with the prospect of getting a lower interest rate than is currently available. And the homebuyer can look forward to saving money over the life of the loan and possibly paying off the home sooner.

Recommended: Mortgage Basics

How a Mortgage Transfer Works

The only way to make the transfer of a mortgage official is to work through your lender, and the process typically requires several steps, including:

Getting Your Lender’s Approval

If your lender won’t approve the transfer, you won’t be able to move forward — and it’s quite possible your lender will say no. Most conventional mortgages tend to have something called a “due-on-sale” clause,” which says the balance of the loan must be fully repaid in order for the original owner to be rid of the loan obligation. And even if you have an assumable mortgage (an FHA or VA loan, for example), the lender will have to approve the new borrower and the transfer.

That said, no matter what type of loan you have, you can always ask. There are some special situations in which a lender must agree to a transfer, despite the “due-on-sale” clause.

Filing the Proper Paperwork

If you are allowed to do a transfer, both the original and new borrower should prepare for some paperwork. The lender will likely want to verify the homeowner’s reasons for transferring the loan and check on the loan’s current status. And the new borrower can expect the lender to do a credit check and ask for documentation of employment and income to ensure he or she can manage the payments.

To avoid delays, borrowers should be ready to answer the lender’s questions and provide documentation as quickly as possible. You may find it makes sense to hire an attorney to help with this process.

Keeping the Loan in Good Standing

It may take several weeks for the transfer to go through, and any payments that are due during that waiting period should be made on time. If your loan becomes delinquent, it could affect the transfer. Homeowners also should be diligent about keeping up to date with required insurance policies, property taxes, and any homeowners association fees.

Paying the Appropriate Taxes

Most states charge a real estate transfer tax when real estate is sold or transferred. The amount and who’s responsible for this payment (the original borrower, the new borrower, or both) varies depending on where you live. Your attorney and/or lender should be able to help you understand your tax responsibility.

When Can You Transfer a Mortgage?

If you have a government-backed mortgage, your loan transfer request can likely be approved as long as the person assuming the mortgage meets the lender’s qualifications. But if you have a mortgage with a “due-on-sale” clause, which generally prohibits a borrower from transferring a loan to another borrower, you may only be able to get a transfer approved under special circumstances.

Transferring a Mortgage to Another Person

•   The federal law that allows lenders to include the due-on-sale clause in their contracts lists several situations in which the clause isn’t enforceable, including:

•   The transfer is made due to the death of a spouse, joint tenant, or relative.

•   The transfer is part of a living trust arrangement in which the new borrower is a beneficiary.

•   The transfer is part of a divorce or separation agreement in which the ex-spouse continues to live in the home.

•   The transfer is passing the property to an immediate family member.

Mortgage Transfer vs. Refinancing

If you’re a homeowner whose mortgage (or situation) isn’t eligible for a transfer, but you’re struggling to make your monthly payments or you want to make some changes to your current loan terms, you might consider a mortgage refinance. This could allow you to:

•   Extend the length of the loan with the goal of reducing your monthly payments.

•   Shorten the loan term and pay less interest over the life of the loan.

•   Add a second borrower to the refinanced loan to help with making payments.

•   Switch from a variable rate to a fixed interest rate. (If your loan’s current adjustable rate already has or is about to increase, you may benefit from a more reliable and possibly lower fixed rate.)

•   Get a lower interest rate. If your credit profile has improved, or interest rates have dropped since you got your loan, you may qualify for a lower rate.

•   Do a cash-out mortgage refinance and use some of your equity to pay other expenses.

None of these options will remove the original borrower’s responsibility for paying the loan the way a mortgage transfer can. But it could relieve some of the financial stress.

Benefits and Drawbacks of Transferring a Mortgage

As mentioned above, a mortgage transfer can be beneficial for both the original homeowner and the person taking over the loan. Here are a few of the pros and cons involved with a mortgage transfer:

Benefits

•   Lower interest rate for the new borrower: If the owner’s interest rate is lower than current market rates, a transfer could result in significant savings for the new borrower.

•   Fewer closing costs: Assuming a loan typically can mean fewer closing costs than getting a new mortgage. The new borrower may be able to avoid paying an origination fee, appraisal fee, and other costs typically associated with the standard mortgage process.

•   Savings can make a home more appealing to buyers: If buyers see that they can get a lower interest rate and avoid some closing costs, it might make the sale more attractive.

Drawbacks

•   Higher upfront costs: As part of transferring the loan, buyers typically must cover the equity the seller has built up in the home, which may require a hefty upfront payment.

•   Limited loan options: Since most mortgages can’t be transferred, few sellers can offer this option to buyers. Those that do will likely be transferring FHA, VA, or USDA loans, which means as a buyer, you likely won’t have your choice of different mortgage types.

•   Mortgage insurance: If the transferred mortgage is an FHA loan with an annual mortgage insurance premium (MIP), the buyer should expect to continue paying that amount in addition to other loan costs. FHA MIP is unavoidable, and payments typically last for the life of the loan.

The Takeaway

A mortgage transfer can have benefits for both homeowners and homebuyers, especially if mortgage rates at the time of the transaction are significantly higher than the rate assigned to the original home loan. But most conventional loans aren’t eligible for mortgage transfers, except in specific circumstances. And even if you have a mortgage that is assumable (such as an FHA loan), a transfer isn’t automatic. The lender must approve the new borrower before the transfer can go through.
Before moving forward with a mortgage transfer, which can be a complicated process, it can be a good idea to compare the pros and cons of different loan options to be sure you’re making the best choice for your needs.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Are there fees associated with transferring a mortgage?

Yes, there may be some fees associated with transferring a mortgage, but closing costs are typically lower than with the standard mortgage process.

What documents are needed for a mortgage transfer?

Documents required for a mortgage transfer may include the original loan agreement/mortgage documents, new borrower’s loan application, original borrower’s authorization for the transfer, and proof of income and other financial documentation for the buyer.

How does a mortgage transfer affect interest rates?

When you transfer a mortgage, the interest rate and other terms of the original loan stay the same.

Photo credit: iStock/Delmaine Donson

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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.

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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.
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