Mortgage Interest Deduction Explained_780x440

Mortgage Interest Deduction Explained

Homeownership has long been a part of the American dream, and it opens the door to benefits like the mortgage interest deduction for those who itemize deductions on their taxes.

Itemizing typically makes sense only if itemized deductions on a primary and second home total more than the standard deduction, which nearly doubled in 2018.

Here’s what you need to know about the mortgage interest deduction.

What Is the Mortgage Interest Deduction?

The mortgage interest deduction allows itemizers to count interest they pay on a loan related to building, purchasing, or improving a primary home against taxable income, lowering the amount of taxes owed.

The tax deduction also applies if you pay interest on a condominium, cooperative, mobile home, boat, or recreational vehicle used as a residence. The deduction can also be taken on loans for second homes, as long as it stays within the limits.

States with an income tax may also allow homeowners to claim the mortgage interest deduction on their state tax returns, whether or not they itemize on their federal returns.

What Are the Rules and Limits?

The passage of the Tax Cuts and Jobs Act of 2017 was a game-changer for the mortgage interest deduction. Starting in 2018 and set to last through 2025, the law greatly increased the standard deduction and eliminated or restricted many itemized deductions.

For the 2022 tax year, the standard deduction is $25,900 for married couples filing jointly and $12,950 for single people and married people filing separately. For 2023, the standard deduction is $27,700 for married couples filing jointly and $13,850 for single people and married people filing separately.

If you itemize deductions, you’re good to go and can deduct the interest. There’s further good news, as you may also be able to deduct interest on a home equity loan or line of credit, as long as it was used to buy, build, or substantially improve your home.

The loan must be secured by the taxpayer’s main home or second home and meet other requirements. For tax purposes, a second home not used for income is treated much like one’s primary home. It’s a home you live in some of the time.

The IRS considers a second home that’s rented some of the time one that you use for more than 14 days, or more than 10% of the number of days you rent it out (whichever number of days is larger). If you use the home you rent out for fewer than the required number of days, it is considered a rental property—one that you never live in, and not eligible for the mortgage interest deduction.

Generally, your interest-only mortgage is 100% deductible, as long as the total debt meets the limits.

According to the Internal Revenue Service, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of debt. Higher limitations ($1 million, or $500,000 if married filing separately) apply if you are deducting mortgage interest from debt incurred before Dec. 16, 2017.

You can’t deduct home mortgage interest unless the following conditions are met:

•   You must file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040).
•   The mortgage must be a secured debt on a qualified home in which you have an ownership interest.

Simply put, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you can’t pay the debt, your home can then serve as payment to the lender to satisfy the debt.

A qualified home is your main home or second home. The home could be a house, condo, co-op, mobile home, house trailer, or a houseboat. It must have sleeping, cooking, and toilet facilities.

Know that the interest you pay on a mortgage on a home other than your main or second home may be deductible if the loan proceeds were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.


💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a great rate with SoFi Mortgage Loans.

How Much Can I Deduct?

No doubt you want the answer to that question. In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

The IRS says that if all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.)

1. Mortgages you took out on or before Oct. 13, 1987 (called grandfathered debt).

2. Mortgages you (or your spouse if married filing jointly) took out after Oct. 13, 1987, and prior to Dec. 16, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

(There is an exception. If you entered into a written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and you purchased the residence before April 1, 2018, you are considered to have incurred the home acquisition debt prior to Dec. 16, 2017.)

3. Mortgages you (or your spouse if married filing jointly) took out after Dec. 15, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.

What Are Special Circumstances?

Just like you need to understand your home loan options, you need to know the special situations where the IRS says you might or might not qualify for the mortgage interest deduction.

You can deduct these items as home mortgage interest:
•   A late payment charge if it wasn’t for a specific service performed in connection with your mortgage loan.
•   A mortgage prepayment penalty, provided the penalty wasn’t for a specific service performed or cost incurred in connection with your mortgage loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

Is Everything Deductible?

The government is only so generous, and there are many costs associated with homeownership. Some of them are not tax deductible under the mortgage interest deduction, like homeowners insurance premiums.

One caveat: You might be able to write off a portion of insurance, as well as utilities, repairs, and maintenance, if you have a home office and deduct those expenses on Schedule C.

Also not on the list for inclusion in the mortgage interest deduction are title searches, moving expenses, and reverse mortgage interest. Because interest on a reverse mortgage is due when the property sells, it isn’t tax deductible.


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

How to Claim the Mortgage Interest Deduction

An itemizer will file Schedule A, which is part of the standard IRS 1040 tax form. Your mortgage lender should send you an IRS 1098 tax form, which reports the amount of interest you paid during the tax year. Your loan servicer should also provide this tax form online.

Using your 1098 tax form, find the amount of interest paid and enter this on Line 8 of Schedule A on your tax return. It’s not a heavy lift but gets a tad more complicated if you earn income from your property. If you own a vacation home that you rent out much of the time, you’ll need to use Schedule E.

Furthermore, if you’re self-employed and write off business expenses, you’ll need to enter interest payments on Schedule C.

The Takeaway

You can take the mortgage interest deduction if you itemize deductions on your taxes. Keep in mind that it’s typically only worth taking if the write-offs exceed the standard deduction.

The mortgage interest deduction, though, can be a bonus of sorts, especially if you’re a homeowner with a second home.

As with all matters that affect your taxes, you’ll want to consult with your financial advisor about claiming the deduction.

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.



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


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


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

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.

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

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

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Should You Buy or Rent a Home?

For many people, purchasing a home is the very definition of living their best life and achieving the American dream. But it’s not the right choice for everyone or might not be the right move to make at a given moment.

Owning a home may be the biggest financial commitment you’ll ever make, so it makes sense to carefully consider the upsides and downsides of buying vs. renting. Sometimes, the flexibility and affordability possible with renting can be a good fit.

Read on for advice that will help you answer, “Should I rent or buy a house?”

•   Learn the pros and cons of buying vs. renting a home

•   Take a quiz to help you decide if you should buy or rent a home

•   Find out the steps to take when you’re ready to start hitting the open houses

Rent or Buy a Home: Pros and Cons

Deciding whether to rent vs. buy is a very individual decision. There’s no rule about which is better; much will depend on your personal goals and your financial situation.

Here, take a closer look at whether it is better to buy or rent a house.

Advantages of Renting

Here, the upside of being a renter:

•   Low-maintenance lifestyle. Your landlord is typically responsible for repairs and maintenance, so your time and money can be spent elsewhere.

•   Potentially lower monthly expenses. Your landlord may also pay some of your monthly utilities, and you aren’t responsible for paying property taxes.

•   Flexibility. When your lease is up, you can renegotiate or move…across the street or across the country. If you aren’t ready to lock into a location for at least a few years, renting can be a smart step.

•   Low investment. You don’t need to make a big investment (like the down payment and closing costs associated with home buying) when you move into a rental. You might have to put down a security deposit, but that will typically be much less costly.

Disadvantages of Renting

Now, consider the downside of being a renter vs. a homeowner.

•   Rules to follow. Your landlord may have restrictions that you don’t like, such as no pets or no remodeling.

•   Not building wealth. The rent you pay each month doesn’t give you any equity in a property. It just goes to the owner, unless you set up a rent-to-own agreement.

•   Lack of control over your monthly charges. Your rent could spike due to inflation, the housing market heating up in your area, and other factors.

•   Uncertainty. If the owners decide to sell the building you live in, you may need to move unexpectedly and quickly, which can also get expensive.

Advantages of Buying

If you decide to buy vs. rent, here are some of the benefits you may enjoy.

•   Building wealth. As you make mortgage payments, you are usually building home equity.

•   Tax advantages. Homeowners may be able to deduct both mortgage interest and their property tax payments (plus possibly other related expenses) from their federal income taxes if they choose to itemize their deductions.

•   Freedom. You have far fewer restrictions involving remodeling, pet ownership, and so forth. Want to paint a bathroom purple, rip out a wall, or adopt five rescue dogs? Go for it.

•   Stability. You can put down roots in a community and school district. When you decide to move, it’s your decision.

•   Affordability. Sometimes a mortgage payment can be cheaper than rent, especially if you get a good mortgage rate.

Looking at the price-to-rent ratio of a city helps gauge whether it makes more sense to buy or pay a landlord. The housing market dynamics of your location may determine this aspect of whether to buy or rent a house.

Disadvantages of Buying

Now that you know the potential upsides of owning your own home, take a look at the potential drawbacks.

•   High costs. The price of homeownership may be painful in a hot market.

What’s more, accumulating the cash to make a down payment can be challenging and take years of saving. Plus, the closing costs when securing a home can be considerable.

•   Credit score. You typically need to qualify for a mortgage, and your credit score will be a factor. Those with excellent credit scores will get better rates; those with lesser scores may want to wait to build their rating before buying.

•   Maintenance. You’re generally responsible for all repairs, maintenance, and utilities, plus homeowners insurance, property taxes, and any homeowner association (HOA) dues. These can not only impact your finances but also your lifestyle. Taking care of a home and property can require an investment of time and energy.

•   Locked in place. You probably can’t pick up and move on a whim. If you decide to move, until your home is sold, you’re still responsible for mortgage payments and the expenses attached to your new place.

Take the Rent or Buy Quiz

Are You Really Ready to Buy?

When deciding between renting vs. buying a house, the answer may already be clear to you. If you’ve decided to buy, it might make sense to take the following steps.

•   Make sure you’re ready for a long-term commitment. If you’ve saved enough for a down payment and know how much house you can afford, those are good signs. Otherwise, create a home-buying budget and saving plan to get started.

•   Consider if your line of work allows for job continuity with steady income. Have you had this type of income for the past two years or more? That kind of stability can be important to lenders.

•   If your debt-to-income ratio (DTI) appears too high for a loan program you would like to apply for, you may need to consider paying down some debt. To calculate your DTI ratio, divide your monthly debt payments by your monthly gross (pretax) income. The federal Consumer Financial Protection Bureau advises renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio). However, mortgage lenders usually like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

•   Save money for a down payment, closing costs, and other fees, plus some funds for moving expenses and any remodeling/repairs.

•   Check if your credit score is good enough to buy a house, and, if yours falls short, work on building it.

•   Do a gut check to see if you’re really ready to be your own landlord, meaning being responsible for your own home maintenance, inside and out.

•   Get pre-qualified or pre-approved for a mortgage by providing a few financial details to lenders, who usually will do a soft credit check and estimate how much you may be able to borrow and the terms. A pre-qualification or even a pre-approval can also help give you a leg up when you start home shopping.

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

Questions? Call (888)-541-0398.


The Takeaway

Should you buy or rent a home? That will be a personal decision, reflecting your finances, the housing market’s dynamics, your willingness to take on the responsibilities of homeownership, and your inclination to put down roots in a certain location. Both owning and renting have pros and cons, and making the right decision will likely require deep thinking and thorough planning.

If you’re ready to become a bona fide homeowner, getting pre-qualified for a mortgage loan with SoFi is quick and convenient. SoFi offers competitive rates and may require as little as 3% down for qualifying first-time homebuyers.

SoFi: The smart and simple way to find your home mortgage rate.

FAQ

Is it better to rent or buy a home?

There isn’t a simple yes/no answer to whether it is better to rent or buy a home. Each has its advantages and disadvantages and may or may not suit a person’s needs at a given moment. For instance, owning a home can allow you to build equity and personal wealth, but the maintenance responsibilities and expenses may offset that. Renting may be cheaper, but you may not be able to personalize your space the way you’d like or perhaps own pets.

Is renting cheaper than owning a home?

Renting can be cheaper than owning a home, though that can depend upon housing market conditions in a given area and the particulars of the home in question. In general, people who rent don’t have to pay property taxes and they may not be responsible for the cost of improvements and repairs, which can make things more affordable.

Is homeownership a good investment?

Buying a home can be a good investment. It allows you to build equity and may offer tax deduction opportunities. However, if property taxes rise steeply or major home repairs loom (like a new roof), home ownership could prove financially challenging.


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

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


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


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 .

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

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How Long Does It Take to Build a Manufactured Home?

Many manufactured homes take just a week to build. (Yes, a week!) Manufactured homes can be built so quickly because they’re made in a factory — a controlled environment. All of the materials and tradespeople are on hand, and the standard sizes of manufactured homes make for quick and easy builds.

The time it takes for the manufactured home to be placed on land is much longer, however. In this article, you’ll read about the basics of new manufactured homes, as well as the timeline for building and delivering a manufactured home. And we’ll share the factors that affect the building timeline so you can be on the lookout for possible slowdowns.

Key Points

•   The process of building a manufactured home takes two to four months.

•   Construction in the factory typically takes a few days to a week.

•   Site preparation, transport, and installation can take 1 to 4 weeks.

•   Securing financing can take 4 to 8 weeks.

•   Selecting and preparing the site can take 1 to 4 weeks.

What Is a Manufactured Home?


A manufactured home is built in a factory according to standards set by the U.S. Department of Housing and Urban Development (HUD). The home, which usually has one, two, or three sections, is transported to a dealer, plot of land, or manufactured home community.

Manufactured homes average a lower cost and shorter construction timeline than traditional homes, but homebuyers should be aware that manufactured homes may depreciate. Then again, depending on the local housing market and the home’s setting, a manufactured home might gain value.

How much does a new manufactured home cost? The average price nationwide was $127,800 in late 2024, with a single-wide averaging $86,600 and a double-wide $156,300, according to the Manufactured Housing Survey conducted by the Census Bureau and sponsored by HUD.

That helps to show why manufactured housing is gaining in popularity. In 2024, manufactured homes accounted for 8.6% of new-home starts. It’s the second most popular home type, after detached, single-family homes.

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

Questions? Call (888)-541-0398.


Recommended: What Is a Modular Home?

Timeline for Building a Manufactured Home


How long does it take to get a manufactured home? From placing an order to moving in, it could take two to four months. That compares with 10 months for a traditional contractor-built home.

The site can be prepared, if needed, while the manufactured home is being built. If you need to develop raw land (i.e., put in your own utility connections, clear the land, or install a driveway), the process could take much longer.

Process of Building a Manufactured Home


Several factors help determine how long it takes to get a manufactured home, start to finish. Keep in mind that sales centers for manufactured homes may be able to offer help or coordinate the process.

Design, Model, and Floor Plan Selection: 1-3 Weeks


You’ll most likely start your manufactured housing journey by choosing your home model, floor plan, design, finishes, exterior elements, and other details of the home. This process can take a week or more.

It’s a good idea to start here, because you may have to wait until the factory is available to build your home. If you choose a model that has already been built, you can save some time.

Financing: 4-8 Weeks

Before construction can begin on your manufactured home, you’ll need to get approved for a loan for the home and, if applicable, the land. You’ll submit your personal information, your income and employment, specs on your chosen manufactured home, who you’re purchasing the home from, and information about where you’re going to place the home.

Most of the time, financing options depend on whether the home is real property or personal property.

Some manufactured homes qualify for conventional mortgage. An option is a government-backed home loan. In most cases, the home must be permanently attached to a foundation and on land that you own or will own: That makes it real property. Going through the mortgage prequalification process can help you determine how much home you can afford.

An exception is an FHA Title I loan, for the purchase of a new or used manufactured home on land you do or do not own. There are loan limits.

It’s also possible to finance a manufactured home with a large personal loan. It’s worth noting that a personal loan may have a higher interest rate than a home mortgage loan.

And a chattel mortgage may be used to finance a home that will not be permanently affixed to the land.

Recommended: Credit Score Needed for Personal Loans

Site Selection: 1-4 Weeks


When it comes to placing your manufactured home, you’ll typically be faced with two options: Lease or buy land. It could take time to find the proper setting.

Lease the land: With leased land, you’ll pay a fee — usually between $100 and $1,000 per month — to place your manufactured home on a lot. Lots are typically close together and include utility connections and some community maintenance. Some may feature community amenities like a swimming pool or park.

Purchase land: Many lenders offer financing for a manufactured home with the land. A lot in a community may already have a paved pad and utility hookups. If you need to install your own utilities, you may need to find a contractor to coordinate the exterior elements. Your manufactured home sales center may also be able to help with some of these details. A land loan on its own could take around a month to secure.

Permitting: 1 Week to Several Months


Setting a manufactured home on land requires a permit. Requirements can be found from your county or city. The permitting process can take a few days or a few months, depending on your locale, but be sure to submit all required documents and plans so you don’t face additional delays.

Site Preparation: 1-4 Weeks


Site preparation for raw land can include tree and rock removal, land grading, a driveway, well or water connection, sewer connection or septic system, and other utilities.

Minimal site prep can be completed in less than a week, while more extensive site prep can take up to a month.

Construction: 1 Week


The factory environment makes for quick construction: a few days to a week. Materials, tools, and craftspeople are located in the same factory to increase efficiency. Standard sizes and finishes also account for the short construction timeline.

The manufacturer tests the mechanical systems, such as electrical or plumbing, as your home nears completion.

Transport and Installation: 1-4 Weeks


After construction is complete, you may be wondering how long it takes to set up a manufactured home. While transporting your manufactured home will likely only take a few days at most, you may have to spend more time on the installation of the home.

Once the home has been transported to your site, it is attached to ground anchors and utilities are connected. Then, if you desire, additional exterior elements such as a porch or a garage can be added. Customizations like this will take several weeks to complete.

Factors That Affect the Building Timeline

Type of Manufactured Home


The size and type of your home will affect the building timeline. A triple-wide manufactured home, for example, will take longer to build and will also require more site development. A larger septic system, for example, would be required for a larger manufactured home.

Features of the Home


Some custom features like French doors will take additional time to build into your home. But manufacturers say these features usually add only a little time to the process.

Backlog


Although the actual construction of your home may only take a week, you may need to wait for months for the manufacturer to begin construction due to a backlog.

The Takeaway


Financing, permitting, and finding and developing land all take much more time than the construction of a manufactured home. It could take four months from the time you order a manufactured home to stepping into your new home. Getting your financing plan in place can help keep things moving along smoothly to move-in day.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ


How do you speed up the process of building your manufactured home?


If you want to build a manufactured home faster, you can shop builders to check on their availability and get your finances in order. Know which loans apply to the home’s setting, leased or owned land, and consider getting preapproved. You can also select a manufactured home that is already built rather than design your own custom home.

Are manufactured homes cheaper?


Manufactured homes are usually cheaper than traditional homes. The average sales price for a new double-wide manufactured home (not including land) was $156,300 in late 2024, compared with the median sales price for a new single-family home, $402,600, around the same time, according to the U.S. Census Bureau and HUD.

Do manufactured homes take a shorter time to build?


Manufactured homes take much less time to build than other forms of housing. Because the homes are built in a controlled environment, manufacturers can avoid weather delays and supply shortages and can schedule trades (like plumbing) more efficiently. Everything is in one spot, and the standard dimensions of manufactured homes make construction efficient.


Photo credit: iStock/uptonpark

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


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


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

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

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

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

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10 Small-Bathroom Remodel Ideas

10 Small-Bathroom Remodel Ideas

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. Below, you’ll find some tips on how to redo the loo without taking a bath on the investment.

Key Points

•   A DIY small-bathroom remodel can cost around $2,500.

•   Enhance the bathroom with light paint, new lighting, and updated fixtures for a fresh look.

•   Financing options include a credit card, personal loan, and home equity line of credit (HELOC).

•   Space-saving solutions like sliding shower doors are recommended.

•   Light colors and using only one color can make a small bathroom appear larger and more open.

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 $7,100, 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. All in, the average cost for a new toilet is $500.

•   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 a seasoned 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 without a shower or tub can be 20 square feet or less.

What constitutes a 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 $2,500 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.

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

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. Consider a 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.

Recommended: The Cost of Living By State

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 on a home improvement loan 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? A home improvement loan is one way to get your hands on the funds quickly, with no collateral necessary. But if you’re looking for the lowest available interest rate, a HELOC is a flexible way to borrow and you only pay interest on the amount of the credit line that you use.

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

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

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 small bathroom could cost about $2,500. Add a 30% overage allowance for a realistic budget of $3,250.

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.


Photo credit: iStock/Drazen_

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


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


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

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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


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

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A Guide to Reverse Mortgage Pros and Cons

A Guide to Reverse Mortgage Pros and Cons

For those who are at or getting close to retirement age and are looking for ways to rev up their cash flow, a reverse mortgage may seem like a wise move. After all, the TV ads make them look like a simple solution to pump up the money in one’s checking account.

A reverse mortgage can be a way to translate your home equity into cash, but, you guessed it: There are downsides along with the benefits. Whether or not to take out a reverse mortgage requires careful thought and research.

Here, you’ll learn the pros and cons to these loans, so you can decide if it’s the right move for you and your financial situation.

Reverse Mortgages 101

There are many different types of mortgages out there. Here are the basics of how reverse mortgages work.

•   A reverse mortgage is a loan offered to people who are 62 or older and own their principal residence outright or have paid off a significant amount of their mortgage. You usually need to have at least 50% equity in your home, and typically can borrow up to 60% (or more, but not 100%) of the home’s appraised value.

•   The lender uses your home as collateral in order to offer you the loan, although you retain the title. The loan and interest do not have to be repaid until the last surviving borrower moves out permanently or dies. A nonborrowing spouse may be able to remain in the home after the borrower moves into a health care facility for more than 12 consecutive months or dies.

•   Here’s another aspect of how reverse mortgages work: Fees and interest on the loan mean that over time, the loan balance increases and home equity decreases.

•   You may see reverse mortgages referred to as HECMs, which stands for Home Equity Conversion Mortgage. This is a popular, federally insured option.



💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

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

Questions? Call (888)-541-0398.


Pros of Reverse Mortgages

A reverse mortgage offers older Americans the opportunity to turn what may be their largest asset — their home — into spendable cash. There are a variety of ways in which this can be attractive.

Securing Retirement

Many seniors find themselves with a fair amount of their net worth rolled up in their home but without many income streams. A reverse mortgage is a relatively accessible way to cover living expenses in retirement.

Paying Off the Existing Home Loan

While you have to have some of your home loan paid down in order to qualify for a reverse mortgage, any remaining mortgage balance is paid off with reverse mortgage proceeds. This, in turn, can free up more cash for other expenses.

No Need to Move

Those who take out reverse mortgages are allowed to remain in their homes and keep the title to their home the entire time. For established seniors who aren’t eager to pick up and move somewhere new — or downsize — to lower expenses, this feature can be a major benefit.

No Tax Liability

While most forms of retirement funding, like money from a traditional 401(k) or IRA, are considered income by the IRS, and are thus taxable, money you receive from a reverse mortgage is considered a loan advance, which means it’s not.

Heirs Have Options

Heirs can sell the home, buy the home, or turn the home over to the lender. If they choose to keep the home, under HECM rules, they will have to either repay the full loan balance or 95% of the home’s appraised value, whichever is less.

Thanks to FHA backing, if the home ends up being worth less than the remaining balance, heirs are not required to pay back the difference, though they’d lose the house unless they chose to pay off the reverse mortgage or refinance the home.

Recommended: Guide to Cost of Living by State

Cons of Reverse Mortgages

As attractive as all of that may sound, reverse mortgages carry risks, some of which are pretty serious.

Heirs Could Inherit a Loss

While heirs may not be forced to pay the shortfall of an upside-down reverse mortgage, inheriting a home in that scenario could come as an unpleasant surprise. Keeping a home in the family is an accessible way to build generational wealth and ensure that heirs have a home base for the future. Therefore, the potential for them to lose — or have to refinance — the house can be painful.

Losing Your Home to Foreclosure

Unfortunately, losing your house with a reverse mortgage is a possibility. You’ll still be required to pay property taxes, any HOA fees, homeowners insurance, and for all repairs, along with your regular living expenses, and if you can’t, even with the reverse mortgage proceeds, the house can go into foreclosure.

Reverse Mortgages Are Complicated

As you probably realize this far into an article explaining the pros and cons of reverse mortgages, these loans aren’t exactly simple. Even if you understand the basics, there may be caveats or exceptions written into the documentation.

Before applying for an HECM, you must meet with a counselor from a HUD-approved housing counseling agency. The counselor is required to explain the loan’s costs and options to an HECM, such as nonprofit programs, or a single-purpose reverse mortgage (whose proceeds fund a single, lender-approved purpose) or proprietary reverse mortgages (private loans, whose proceeds can be used for any purpose).

Impacts on Other Retirement Benefits

Although your reverse mortgage “income” stream isn’t taxable, it may affect Medicaid or Supplemental Security Income benefits, because those are needs-based programs. (Proceeds do not affect Social Security or Medicare, which are non-means-tested programs.)

Costs of Reverse Mortgages

Like just about every other loan product out there, reverse mortgages come at a cost. You’ll pay:

•   A lender origination fee

•   Closing costs

•   An initial and annual mortgage insurance premium charged by your lender and paid to the FHA, guaranteeing that you will receive your expected loan advances.

These can be rolled into the loan, but doing so will lower the amount of money you’ll get in the reverse mortgage.

Reverse Mortgage Requirements

Not everyone is eligible to take out a reverse mortgage. While specific requirements vary by lender, generally speaking, you must meet the following:

•   You must be 62 or older

•   You must own your home outright (or have paid down a considerable amount of your primary mortgage)

•   You must stay current on property expenses such as property taxes and homeowners insurance

•   You must pass eligibility screening, including a credit check and other financial qualifications

Recommended: How Homeownership Can Help Build Generational Wealth

Is a Reverse Mortgage Right for You?

While everyone interested in a reverse mortgage needs to weigh the pros and cons for themselves, there are some instances when this type of loan might work well for you:

•   The value of your home has increased significantly over time. If you’ve built a lot of equity in your home, you probably have more wiggle room than others to take out a reverse mortgage and still have some equity left over for heirs.

•   You don’t plan to move. With the costs associated with initiating a reverse mortgage, it probably doesn’t make sense to take one out if you plan to leave your home in the next few years.

•   You’re able to comfortably afford the rest of your required living expenses. As discussed, if you fall delinquent on your homeowners insurance, flood insurance, HOA fees, or property taxes, you could lose your home to foreclosure under a reverse mortgage.

There are options to consider. They include a cash-out refinance, home equity loan, home equity line of credit, and downsizing to pocket some cash.

The Takeaway

A reverse mortgage may be a way to turn your home equity into spendable cash if you’re a qualified older American, but there are important risks to consider before taking one out. While reverse mortgages can free up funds, they are complicated, can involve fees, and can wind up putting your home into foreclosure if you can’t keep up with payments.

Reverse mortgages are just one of many different mortgage types out there — all of which can be useful under the right circumstances. SoFi doesn’t offer reverse mortgages at this time but has an array of home loan products that may meet 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.


Photo credit: iStock/Prostock-Studio

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

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


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


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.

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