How Much Will a $250,000 Mortgage Cost per Month?

When buying a house, many of us get caught up in the down payment and other large upfront costs. It’s important to factor in the long-term costs associated with a $250,000 mortgage, which includes the monthly mortgage payment.

Just how much will that payment be each month? Read to learn the monthly cost of a $250K mortgage.

Total Cost of a $250K Mortgage

Homebuyers have some large expenses to deal with before making mortgage payments. Both upfront costs and long-term expenses should factor into figuring out how much house you can afford.

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

Questions? Call (888)-541-0398.


Upfront Costs

Upfront costs associated with buying a home are more than just the earnest money and down payment. A buyer can expect to pay closing costs, including some or all of the following:

•   Abstract and recording fees associated with the documentation of a property, which can cost from between $200 to $1,200 and $125, respectively.

•   Application fees for a mortgage from the lender, which can cost up to $500.

•   Appraisal fees to estimate the home’s value for the lender, which could cost between $300 to $400.

•   Home inspection fees if the buyer opts for an inspection of the property before buying, can run between $300 to $500 on average.

•   Title search and title insurance fees are required to ensure there are no liens or unexpected claims to the property being purchased. This usually costs between $75 to $200.

These fees before and during closing don’t include the down payment. The median down payment on a house is 13%, but to avoid things like private mortgage insurance, a buyer may have to put down as much as 20% of the home’s purchase price.

A buyer who takes out a $250K mortgage and makes a 20% down payment is likely putting in around $62,500. In addition to the down payment and closing costs, keep in mind expenses around moving and furnishing a new home.


💡 Quick Tip: You deserve a more zen mortgage. SoFi Mortgage Loan Officers are dedicated to closing your loan on time — backed by a $5,000 guarantee offer.

Long-Term Costs

You’ll pay down the principal plus interest on your loan over the long term, with a higher proportion of interest in your monthly payments early in the life of the loan. Near the end of your loan term, you’ll be paying almost entirely principal.

If you put down less than 20% on your home, you may also be paying private mortgage insurance (PMI) each month. Here are some other long-term costs:

•   Maintenance Homeowners should factor in the cost of maintenance and repairs in their long-term housing budget. Many owners default to the 1% rule, setting aside 1% of a home’s purchase price annually for ongoing repair costs.

•   Property taxes These vary based on your location but can be thousands of dollars a year.

•   Homeowners association (HOA), co-op, or condo fees These also vary, but you will know what they are before you close on the property.

•   Insurance Depending on where your home is located, you may need hazard insurance to cover you in the event of a natural disaster, in addition to standard homeowners insurance.

Recommended: First-Time Homebuyer Guide

Estimated Monthly Payments on a $250K Mortgage

The monthly cost of a $250K mortgage payment will vary based on several factors, including:

•   Down payment, or how much a buyer puts down when purchasing a home

•   Length of loan, or the timeline in which a buyer agrees to pay off their mortgage

•   APR, the annual percentage rate of the mortgage

Breaking things down further, the terms can also influence the monthly payments on a $250K mortgage. Buyers can choose between a:

•   Fixed-rate mortgage, where they pay the same APR over the life of the loan.

•   Adjustable-rate mortgage (ARM), where buyers typically pay a lower rate at the beginning of the loan, but the APR will change over the life of the loan.

How you choose from among the different types of home mortgage loans will depend on your financial goals and qualifications.

Monthly Payment Breakdown by APR and Term

What interest rate a buyer will get when applying for a mortgage depends on the market and their financial history. The length of the loan can also impact the estimated monthly mortgage payment. A 30-year loan will have lower monthly payments but you will pay significantly more interest over the life of the loan:

Interest rate

15-year term

30-year term

3.00% $1,726 $1,054
3.5% $1,787 $1,122
4% $1,849 $1,193
4.5% $1,912 $1,266
5% $1,976 $1,342
5.5% $2,043 $1,419
6% $2,110 $1,499
6.5% $2,178 $1,580
7% $2,247 $1,663

As a reminder, these estimates do not include additional costs that might be included in monthly payments, like insurance and property taxes. Consider using a mortgage calculator to figure out monthly payments based on personalized annual percentage rate (APR) and terms.

How Much Interest Is Accrued on a $250K Mortgage?

How much interest a homeowner will accrue on a $250K mortgage depends on the APR and terms of the loan. As a general rule of thumb:

•   The higher the APR, the more interest paid

•   The longer the loan, the more interest paid

In the beginning, monthly mortgage payments will primarily cover the interest on the mortgage, paying only a small portion of the principal. However, over the life of the loan, the homeowner begins to pay more toward the principal and less in interest.

For example, on a $250K mortgage with a 30-year loan term and 4% APR, a buyer can expect to pay $179,673.77 in interest over the life of the loan. For a $250K mortgage with a 15-year loan term and 4% APR, a buyer will pay $82,859.57 in interest.

While the owner will pay less in interest with a shorter loan term, they can expect higher monthly payments than a 30-year loan term.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

$250K Mortgage Amortization Breakdown

Suppose a buyer secures a $250K mortgage on a home with a 7% rate and a 15-year term. Their monthly payment on the mortgage, including principal and interest, would be roughly $2,247.

Here’s how those payments would split between interest and principal balance over the life of the loan, otherwise known as an amortization breakdown:

Year

Beginning balance

Annual interest paid

Annual principal paid

Ending balance

1 $250,000 $17,190 $9,774 $240,226
2 $240,226 $16,484 $10,481 $229,744
3 $229,744 $15,726 $11,239 $218,506
4 $218,506 $14,914 $12,051 $206,454
5 $206,454 $14,042 $12,922 $193,532
6 $193,532 $13,108 $13,857 $179,675
7 $179,675 $12,107 $14,858 $164,817
8 $164,817 $11,032 $15,932 $148,885
9 $148,885 $9,881 $17,084 $131,801
10 $131,801 $8,646 $18,319 $113,482
11 $113,482 $7,321 $19,643 $93,838
12 $93,838 $5,901 $21,063 $72,775
13 $72,775 $4,379 $22,586 $50,189
14 $50,189 $2,746 $24,219 $25,970
15 $25,970 $995 $25,970 $0

Keep in mind that this table doesn’t include additional costs that may be rolled into mortgage payments, such as insurance or property taxes.

Amortization tables can be helpful tools for understanding payments across the life of a mortgage.

What Is Required to Get a $250K Mortgage?

The process of getting a $250K mortgage has several requirements, including:

•   You’ll need a credit score of at least 500 for some mortgages, but most lenders require a score of 620 or more

•   You’ll prequalify for a mortgage. You’ll provide a little information about yourself and the lender will perform a soft credit inquiry. This will give you a sense of what the lender might offer in terms of interest rate.

•   You’ll find the right lender. The right lender for a borrower will vary based on the rates they offer, in addition to other fees and features.

•   You’ll fill out a mortgage application and get preapproved for your mortgage. The application may require tax documents, W-2s, and bank account statements. If you’re preapproved, you’ll receive a letter from the lender providing conditional approval for the mortgage within a certain window, typically 60 to 90 days. SoFi’s Help Center can help you start your journey to homeownership today.

The Takeaway

Considering monthly payments on a $250,000 mortgage is an important step in understanding the budget behind buying a home. Multiple factors can impact the monthly cost, including interest rate and loan terms, making it essential to consider all options and make the choice that best suits your budget.

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’s the monthly payment on a $250K mortgage?

The size of your payment will depend primarily on the length of the loan’s term and its interest rate. A 15-year term at 7% would give you a monthly payment of about $2,247, while a 30-year term at 7% would yield a payment of $1,663. Note that although the 30-year term has a lower monthly payment, you’ll pay significantly more in interest over the lifetime of the loan.

How long will it take to pay off a $250K mortgage?

How long it takes to pay off a $250,000 mortgage will depend on the term of your loan and whether you refinance along the way. You might have a loan term of 30, 20, 15, or even 10 years. And remember, you can always pay off your loan sooner if you like, although in rare cases there can be a prepayment penalty.

How much do I need to earn to get a $250K mortgage?

You’d need to earn about $90,000 per year in order to afford a $250,000 mortgage, so that your monthly debt payments don’t cause undue financial stress.


Photo credit: iStock/Worawee Meepian

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

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

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Jumbo Loans for the Self-Employed: What to Know

Buying a house is an exciting milestone, but it can also be stressful — especially if you’re self-employed and have to jump through extra hoops to secure a loan. Self-employed borrowers may have even more difficulty when applying for a jumbo loan for a more expensive house.

Below, we’ll walk through jumbo loans for the self-employed: types of loans available, typical requirements, and what the lending process is like.

What Are Jumbo Loans for the Self-Employed?

Each year, the Federal Housing Finance Agency (FHFA) sets a maximum limit on the dollar amount of mortgages that government-sponsored Freddie Mac and Fannie Mae will purchase. Loans within those limits are called conforming loans.

But what if you want a more expensive house and need a larger mortgage? That’s where jumbo loans come in. Jumbo loans, also called non-conforming loans, pose a higher risk to the lender and thus come with stricter requirements for borrowers.

Self-employed individuals can get conforming mortgages just like any other borrowers, though they may be asked for additional documents to prove their income. (The same is true when it comes to personal loans for the self-employed.) But what about jumbo loans for self-employed individuals? Are those possible?

Many lenders allow self-employed individuals to apply for and secure a non-qualified mortgage, also called a non-QM loan. Lenders enable borrowers to qualify for a non-qualified mortgage using alternative methods, particularly for income verification. Some examples of non-QM loans include 1099-only loans, bank statement loans, and investor cash flow loans.

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

Questions? Call (888)-541-0398.


1099-Only Loan

A 1099-only loan is just what it sounds like. Self-employed individuals typically receive 1099s, not W-2s, at tax time. Though lenders usually review an applicant’s W-2s, a self-employed individual may be able to apply for a jumbo loan by showing 1099s from previous years. Loan requirements will vary by lender.

Why not just look at previous tax returns? All 1099 income appears on your tax return, after all. However, self-employed workers write off business expenses to lower their taxable income and reduce their overall tax burden. An individual who brings in good money but has a lot of write-offs may have a harder time qualifying based on their tax return, which shows adjusted gross income, but could qualify based on their 1099.

Bank Statement Loan

Another route that self-employed individuals can take to get a jumbo mortgage loan is through bank statements alone. Again, requirements will vary by lender, but lenders offering bank statement mortgages will often approve self-employed individuals for jumbo loans with just recent bank statements (personal or business) demonstrating income, rather than with traditional tax documents.

Investor Cash Flow Loan

Self-employed individuals who want to diversify by purchasing an investment property may be able to get a jumbo loan with no income verification at all. Instead, with an investor cash flow loan, borrowers can get a loan by using the anticipated cash flow from the rental property.


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Challenges Faced by Self-Employed Borrowers

These non-QM loan options for self-employed borrowers address typical challenges that self-employed borrowers face when applying for a mortgage, particularly a jumbo mortgage. For instance, self-employed borrowers:

•   Can’t produce W-2s to verify their income or employment.

•   May have a lot of write-offs on their tax return that make it look like they earn less.

•   May otherwise need to provide a lot of complicated business documents for underwriting.

Recommended: Benefits of Being an Entrepreneur

Jumbo Loan Underwriting Guidelines

Jumbo loans may allow you to buy a more expensive home, but you’ll have to meet a lot of strict requirements, self-employed or not. Below are the core underwriting guidelines that lenders use when considering jumbo loan applications:

•   Credit score: Credit score requirements for jumbo loans will vary by lender, but expect to need a higher credit score than you’d need for a more traditional loan. A credit score of 700 or above should do the trick, although some lenders will have more lenient standards, while some may have tighter restrictions for a second home or investment property.

•   Debt-to-income ratio: Lenders may have varying income requirements for jumbo loans, but they’ll also look at your debt-to-income (DTI) ratio. If you have significant monthly debt obligations compared to your monthly income, you may not qualify for a jumbo loan.

•   Cash reserves: For certain loans and certain applicants, lenders may require you to have mortgage reserves — liquid assets (money in a bank account or certificate of deposit, stocks and bonds, or vested retirement funds, for instance) set aside to cover a certain number of months’ worth of housing costs. The money you’ll spend on your down payment and closing costs is not considered part of your cash reserves. For a jumbo loan, it’s possible you’ll need to have six to 12 months’ worth of reserves.

Tips for Increasing Chances of Approval

As a self-employed borrower, it’s crucial that you work on your credit score, reduce your monthly debts, and have strong evidence of solid monthly income before trying to qualify for a mortgage, particularly a jumbo loan. Here are a few tips to increase your chances of approval:

•   Work on your credit score first: Having a high credit score is one of the major requirements for approval. If you’re right beneath the 700 threshold, it may be worth it to wait a few months if you’re actively working on maintaining a good credit score.

•   Pay off outstanding debts: An easy way to decrease your DTI (and thus increase your chances of approval) is to pay off debts before buying a house. Stop accruing new credit card debt, and work on paying off existing debts before applying. If you’re able to knock out your credit card debt or pay off your car before applying for a jumbo loan, you may have a better shot.

•   Collect all the documentation you can: Having documentation of your income and employment is key. As a self-employed individual, it might be worth it to work with an accountant to compile all the paperwork.

Understanding the Jumbo Loan Process

The jumbo loan process is similar to the standard conforming loan process, but it may take longer. Here are the general steps for getting a jumbo loan:

1.    Make sure you’re qualified: Review your credit score, DTI, and cash reserves to make sure you’re likely to get approved for a jumbo loan. Gather all the necessary documents.

2.    Find a lender: Not every lender offers jumbo loans to self-employed borrowers. Do some research to find out which lenders will offer you the best chances. Loan terms and interest rates will vary depending on the lender, the current market, and your finances. Get preapproved for a loan.

3.    Make an offer on a home: Once you have funding approved, find a house you love and put in an offer.

4.    Get an appraisal: As with a conforming mortgage, the lender will require a home appraisal to ensure the home is worth what you’re borrowing.

5.    Close on the home: Because jumbo loans are larger, expect to need a larger down payment. Closing costs will also be higher. Because jumbo loans pose more risk to lenders, the timeline between the offer and closing may take longer than for a traditional home loan.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

Pros and Cons of Jumbo Loans for Self-Employed Individuals

Jumbo loans are possible for self-employed individuals, but there are also some drawbacks to consider. Self-employed borrowers should keep the tough requirements in mind when considering purchasing a home above the FHFA conforming loan limits, but if they really want that more expensive home, it could be worth the effort.

Here are the pros and cons to consider:

Pros

•   Higher loan limits: Self-employed individuals who make enough money to justify buying a house priced above conforming loan limits can get jumbo loans to finance their dream home.

•   Flexible underwriting: By using non-QM loans, self-employed borrowers can use documentation like 1099s or bank statements instead of W-2s and tax returns to demonstrate their income and employment.

Cons

•   Higher interest rates: Jumbo loans may have higher interest rates because they pose a greater risk to the lender.

•   Stricter qualification criteria: Anyone applying for a jumbo loan should be prepared for stricter qualification criteria, but self-employed borrowers may have even more hurdles to clear. Lenders might want to see multiple years’ worth of income — and the income, credit score, and DTI thresholds may be higher than for a conforming loan.

Recommended: What to Consider When Choosing a Mortgage Lender

The Takeaway

Self-employed individuals may have a tougher time getting approved for a jumbo loan, but it’s not impossible. Having a strong credit score and low DTI are important, but having the proper documentation to demonstrate stable income is also crucial.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

How many years of tax returns do I need to provide for a jumbo loan?

Typical borrowers will need to provide at least two years of tax returns to get a jumbo loan. Self-employed individuals, however, may need to provide additional documentation to get approved for funding.

Can I use 1099 income to qualify for a jumbo loan?

Some lenders allow you to use 1099 income to qualify for a jumbo loan. Self-employed individuals who don’t receive any W-2 income may want to consider lenders that offer 1099-only loans.

What is a 1-year self-employed mortgage and how does it work?

Lenders typically want to see at least two years of stable income. Borrowers who have been self-employed for just one year, however, may be able to get a mortgage from specific lenders.This mortgage can be more challenging to get: Lenders will need borrowers to demonstrate the stability of their income, the financial strength of their business, and a promising business outlook. Usually, the self-employed borrower needs to have been in the industry longer than a year, even if they’ve only been self-employed in said industry for a year.

Are there any special requirements for 1099 home loans?

Each lender will have its own requirements for a 1099 home loan, like minimum credit score, maximum DTI, and loan limits. Check a lender’s requirements before applying.

What is the minimum credit score required for a jumbo loan?

Credit score requirements for jumbo loans vary by lender, but typically, you’ll need at least a 700 score to qualify. Before applying, ask potential lenders what their minimum credit score requirements are. Some lenders may approve loans for borrowers with scores below 700, but interest rates may be higher.

How much of a down payment do I need for a jumbo loan?

Down payment requirements for jumbo loans vary by lenders. Many lenders require that you put at least 20% down for a jumbo loan, but in some cases, lenders may approve jumbo loans with as little as 5% down.


Photo credit: iStock/SeventyFour

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


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


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

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How to Make End of Year Donations

Tax-Deductible or Not? Your Guide to End-of-Year Donations

At the end of the year, when holiday celebrations and expressions of gratitude are in full swing, many people think about making a charitable donation. If you donate to a qualifying organization, not only can your funds do good, they may also be deductible when you pay your taxes.

Maybe it’s the animal shelter around the corner from your home, or perhaps it’s a scholarship fund at your alma mater that does amazing work. Whatever pulls at your heart and makes you feel like you’re doing the right thing can be a good cause for donations. The organization you give your money to benefits. Read on to learn if your contribution could also lower your tax bill.

What Qualifies as Charitable Giving?

In the eyes of the Internal Revenue Service (IRS), a charitable donation is a gift of money, property, or other asset that you give to a qualifying organization, known as a 501(c)(3).

To find out if an organization you’d like to support is eligible to receive tax-deductible contributions, you can search for it on the IRS’s database .

You may want to keep in mind that money or assets given to political campaigns or political parties do not qualify as tax-deductible donations. In fact, no organization that qualifies as a 501(c)(3) can participate in political campaigns or activities.

Organizations that engage in political activities without bias, however, can still sometimes qualify. So, a group can educate about the electoral process and remain within guidelines. They just have to go about it in a nonpartisan way.

Can I Deduct My Year-End Charitable Donation?

In tax years 2024 and 2025, charitable donations can only be deducted by tax filers who itemize their deductions. That means that rather than take the standard deduction on their income tax return, they chose the more complicated path of listing all of their eligible expenses.

Recommended: 26 Tax Deductions for College Students and Other Young Adults

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How Much of a Charitable Donation Is Tax-Deductible?

The IRS sets limits on how much of a charitable contribution you can deduct from your taxes, and these are frequently updated. The amount is typically expressed in terms of the percentage of your adjusted gross income (AGI) that you may claim.

In 2024 and 2025, this limit for cash contributions (say, money debited from your checking account) is 60% of a person’s AGI. The top figure is 20%-50% of AGI if you make a non-cash contribution, such as stock shares or a vehicle. The exact figure will vary with both the type of organization to which you are making the donation as well as the kind of item you are donating.

Of course, you are welcome to donate as much as you like. Just keep in mind that any charitable giving above those figures is not eligible for a deduction at tax time.

Recommended: How to Reduce Taxable Income for High Earners

Tips for Making End-of-Year Donations

To ramp up both the impact and benefit of a charitable donation, here are some strategies you may want to keep in mind:

Making a Timely Donation

Don’t lose track of your timing: The deadline for charitable donations is December 31. If you’re looking to deduct the donation in the current tax year, you will want to make sure your charity has ownership of whatever asset you are donating by the close of business on the 31.

You may also want to make sure that your preferred payment method is accepted by the charity so it doesn’t get kicked back and cause delays. Putting a reminder in your calendar for, say, mid-December can be a good way to make sure you don’t run late with your giving. (Of course, you also want to make sure you don’t miss the tax-filing deadline come April, either.)

Taking Advantage of Company Matching Programs

Your place of employment might have a matching program for charitable giving. They might, for example, match your donation amount dollar for dollar up to a certain amount. If so, it could significantly bump up the amount you could otherwise afford to give.

If you’re unsure about whether your company has a program, it can be worth reaching out to your HR department for further information.

Giving Rewards on Your Credit Card

If you are making a contribution on a budget, you might consider donating credit card rewards you earn, such as hotel points or airline miles. This can be a great way to use points or other rewards that would otherwise just expire. Many credit card companies, hotels, and airlines will make it easy to give your rewards to nonprofit organizations.

Donating Assets from Your Brokerage Account

If you’re looking to lower your taxes, you may want to consider donating assets from your brokerage account to a nonprofit. This may take some time and planning, but the benefits of donating an over-allocated position that’s outperforming can be worth it.

You may be able to receive tax advantages and rebalance your portfolio, while also helping an organization increase its assets.

Recommended: What Tax Bracket Am I In?

Setting up a Recurring Donation

You can get a headstart on next year by creating a recurring contribution now. Many organizations allow you to donate monthly through their websites using a credit card, so you might be able to earn rewards at the same time. By establishing your donation plans now, you won’t have to even think about end-of-the-year giving next year.

Keeping Good Records

If you want to deduct your donation on your taxes, you’ll want to make sure you have the right receipts to back up the transaction.

You’ll want to keep records of your donations. For cash donations under $250, you’ll either need a bank record (like a canceled check or bank statement) or a written acknowledgment from the charity which includes the date and amount of your contribution. (The exception is goods dropped off at, say, a clothing donation bin.)

For cash donations over $250, a bank record isn’t insufficient. Instead, you’ll need something in writing from the charity which includes the date and amount of your donation.

If you are making noncash donations valued at $500 or more, you’ll need to fill out one or more of the IRS Form 8283 . If the donation exceeds $5,000 in value (say, if you gift a car you no longer need to a favorite local organization), you’ll also need to get a written appraisal from a qualified appraiser. In addition, know that donations of $250 or more will also require what is known as a “contemporaneous written acknowledgment.” This is a document that describes the property, states whether the organization provided the donor with goods or services as a result of the contribution,and share an estimate of the value of any such goods or services provided.

Speaking with a Professional

Working with a personal accountant can help answer any questions you may have about how tax laws will impact your tax contribution, as well as help you make the most strategic and efficient charitable donation.

Recommended: Are 401(k) Contributions Tax Deductible? Limits Explained

The Takeaway

Giving can be a good idea for a number of reasons. In addition to helping a nonprofit organization meet its operating costs for the year, you can feel good about what you are doing with your money, and you may also benefit from tax deductions.

Giving can also help you get the new year started on the right foot. If you’re looking for other ways to get your financial life in order, consider a new bank account.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

Should donations be deductible?

Charitable contributions are usually tax-deductible, but there can be limitations as well as exceptions, so it can be wise to inquire in advance. Contributions can often take the form of cash, artwork, cars, and other items of value.

Are charitable contributions no longer tax-deductible?

Charitable contributions can be tax-deductible. However, they must be claimed as itemized deductions; you would do so on Schedule A of IRS Form 1040. Keep in mind that there’s a limit on charitable cash contributions: For 2024, it’s 60% of the taxpayer’s adjusted gross income.

Can you deduct $300 in charitable contributions without itemizing?

The short answer is no. Currently, you must itemize charitable contributions in order to claim them as deductions.


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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% 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 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 a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% 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 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 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 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 Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% 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 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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.

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.

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How to Buy an Apartment Complex

When the idea of buying a home comes up, many people imagine a sweet house with a white picket fence: the classic American dream. But in truth, purchasing a home can mean buying an apartment, especially if you are a city dweller, or it might even include buying an apartment complex, where you can both live and earn some rental income.

Apartment living can be perfect for those who love urban life, singles, small families, and empty-nesters. However, it’s not only in cities that you will find apartments: There are beach condos, suburban and rural buildings that house more than one family, and other options available. Wherever it may be located, owning a complex can be a way to enjoy the apartment lifestyle and make money. Typically, an apartment complex is defined as a residential property with five or more units.

Here, you’ll learn the full story on real estate options that may be available when you’re considering the purchase of an apartment complex.

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

Questions? Call (888)-541-0398.


Condo vs Co-Op

If you are considering becoming an owner and resident of an apartment complex, you will likely encounter the terms “condo” and “co-op.” Both a condominium and a housing cooperative involve multi-unit buildings, but there are key differences between a condo and a co-op. It can be important to understand these points upfront.

Ownership

When you buy what is known as a condo, you own the unit. The exterior of the units and land are usually considered common areas, owned collectively.

If you buy into a co-op, you don’t own your apartment. You purchase shares or an interest in the entire building. So, you don’t “buy” a co-op apartment; you become a shareholder in the corporation that owns the co-op.

You’ll usually sign a contract or a lease agreement that allows you to live in one of the co-op units.

Oversight

Both condos and co-ops answer to an oversight body. For condos, it’s a homeowners association. For co-ops, it’s the residents who own shares in a nonprofit corporation that owns the building.

When it comes to buying and selling, the co-op association can influence the deal. Most require a prospective buyer to be approved by the co-op board.

💡 Quick Tip: Mortgage loans are available with flexible term options and down payments as low as 3%.*

Costs

Here are some of the key differences for residents of co-ops and condos:

•   Co-ops tend to cost less per square foot and often have lower closing costs. But some lenders aren’t keen on co-ops or require higher down payments. And some co-op documents outright prohibit financing.

•   Co-op monthly fees tend to be higher than condo fees. A co-op shareholder’s fee could include payments for the building’s mortgage and property taxes, security, amenities, and utilities.

•   Condo owners pay property taxes on their unit, which may provide them with a tax deduction.

•   With a co-op, the monthly dues for maintenance include the property taxes associated with the units, technically owned by the corporation, which receives one property tax bill. Each resident’s portion of that bill is tax-deductible.

House vs Apartment

If you are pondering whether to buy an apartment complex or a house, consider some of these key lifestyle differences.

•   Unlike a co-op apartment or a condo, houses stand alone, and some folks prefer that breathing room. Hey, communal living isn’t everyone’s cup of tea.

•   Along with the home, the owner owns the land that the home sits on, as well as any detached structures on their property like a garage or pool house.

•   Similar to a condo, homes may require HOA fees that cover costs relating to security, maintenance, and access to any amenities in the neighborhood.

•   A house typically will cost more than a condo or co-op apartment, but it usually appreciates faster than a condo. However, in hot housing markets, an apartment or an apartment complex could prove to be an excellent investment.

•   With a house, there’s that yard to mow. Then again, you can have your own garden. With an apartment complex, you may or may not have common outdoor space, whether a courtyard or a roof garden. If it is part of the property, as the owner, you will be responsible for its maintenance.


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Finding the Right Real Estate Agent

While buyers can search for an apartment complex on their own, professional help is often a smart move.

Whether you’re a first-time homebuyer or a seasoned one, listing your top priorities can help an agent narrow down the options. Examples of things that could be important to you:

•   Proximity to work or school

•   Local crime rates

•   Parking, traffic, and transportation

•   Cost of living

•   Nearby amenities (gym, grocery store, shops, etc.)

When choosing a real estate agent to work with, it can be smart to speak to a few and ask them key questions to determine if they’ll be a good fit.

Think of it as a job interview and review their qualifications, learn more about their area of expertise, and find out how much it’s going to cost to work with them. Some questions worth asking are:

•   How many clients do you currently work with?

•   How many apartment units/complexes have you helped clients buy?

•   Do you have references?

•   What is your availability to show apartment buildings?

•   How quickly do you typically respond to emails and phone calls?

•   What are your fees? Do you have a network of professionals who can help with other aspects of buying and owning an apartment complex?

Recommended: Buying a Multifamily Property With No Money Down

Renting vs Buying an Apartment

Renting is not always cheaper than buying, but at the same time, any type of homeownership comes with added costs that renters don’t have to incur.

Before deciding whether to buy or rent, it’s best to ask yourself some important questions. And then you might want to check out a rent vs. buy calculator.

There are many calculators available, but they can only provide a loose idea of what may be a better deal long term, so that’s worth keeping in mind. Each calculator will have a different methodology.

Obviously, buying an apartment complex brings a different set of financial obligations and expenses to the table. Consider those vs. potential rental income carefully.

Next, take a closer look at the responsibilities that come with buying an apartment complex vs. just a single apartment.

Why Buy an Apartment Complex?

While the practicality and value of buying an apartment complex will depend on each person’s needs, goals, and financial situation, there are a few ways to tell if buying a multifamily building is a good opportunity.

•   Income. You can earn rental income as an owner of an apartment complex. If you live in one unit and rent out the others, you will have a form of passive income coming your way.

•   Wealth building. When you buy an apartment complex, you may well be building your wealth long-term as your equity in the property grows and its value potentially increases over time.

•   Tax incentives. You may benefit from mortgage interest, depreciation, and other deductions come tax time.

•   Supplemental income. You may be able to earn additional funds via providing laundry machines, parking spots, and the like.

However, you must also consider these obligations:

•   Time and energy. You will likely have to invest a significant amount of time in shopping for and purchasing an apartment complex. Not only are you considering whether there’s a unit you yourself would like to live in, but you must also think about the real estate investment you will be making.

For instance, is the building structurally in good shape? What kind of capital improvements may be required in the future? And if you do become an owner, you will either need to find and hire a management company or be on-call for tenant issues and repairs 24/7 yourself.

•   Funding. Buying one apartment can be pricey enough. Buying a multifamily building? More so. You will need to spend time getting your financing in order, and also recognize that you lose the liquidity of, say, cash in the bank or investments when you purchase real estate.

•   Ongoing expenses. You must have an operating budget and be ready to finance the maintenance issues that are bound to occur. Also, as residents move out, you will need to expend time, energy, and resources to re-rent units. And what if an apartment sits empty for a while? Can you handle that in terms of cash flow?

•   Liability. If an accident or crime were to occur at the property, you could be liable. It’s important to understand, prepare for, and protect yourself in the event of such incidents.

Steps to Buy an Apartment Complex

Soon-to-be apartment buyers will want to understand that getting their finances in order and securing a mortgage loan are some of the final steps toward the goal.

1. Do Your Research

Before you go shopping or apply for a loan, it’s important to understand the responsibilities of owning an apartment complex and to know the four different types of buildings, from Class A (best condition and amenities) to Class D (likely older and in need of repair).

You will probably want to learn more about the housing market and cost of living in areas you are considering. You want to feel comfortable that the area you are investing and living in is stable or on the upswing to protect your business interests and enhance your daily life.

2. Develop Your Budget

Purchasing an apartment complex can involve a six-figure down payment and a positive financial standing. You will also need to have worked through the cash flow implications of owning a multifamily building, including a budget for maintenance and reserves for unexpected expenses.

3. Get Preapproved for Your Loan

Finding the right financing may require a different path than getting preapproved for the purchase of a single-family home. You will need to find a lender who serves borrowers for multifamily properties. It’s likely you will need to have detailed financials prepared for this investment as well.

Don’t be surprised if you need up to 30% as a down payment, and recognize that your financial projections may count more toward your mortgage approval than your credit history.

Recommended: How to Afford a Down Payment, Step by Step

Pros and Cons of Buying an Apartment

If you are thinking of buying an apartment complex and living in one of the units, consider the upsides and downsides.

First, the pros of buying an apartment complex:

•   Income. As an owner/tenant, you should be bringing in a stream of passive income which can build your personal wealth. This can be enhanced by offering additional amenities to tenants, such as laundry facilities or onsite parking.

•   Wealth growth. You will likely build equity in your property, and the value of your building may increase over time.

•   Tax deductions. As the owner of an apartment complex, you may be able to claim deductions and depreciation on your taxes.

•   Convenience. In terms of your own residence, apartment life appeals to many who want an urban lifestyle or the ease of maintaining a smaller footprint.

On the other hand, consider these potential negatives:

•   Expense. Buying a multifamily property will likely require a hefty down payment and an ongoing investment of funds to operate and maintain the building. You may have to cover loss on income also if, say, a tenant moves out and it takes several months to re-rent the unit.

•   Time and energy. Maintaining your property, its financials, and tenant needs 24/7 is a major commitment. It’s not a simple side hustle in most cases!

•   Liability. If someone were to be injured on your property or a crime were to occur, you might be liable.

•   Lack of flexibility. As a resident of an apartment, you may lack the opportunity to customize your home as you could with a single-family house. You probably can’t add another bathroom or expand the kitchen much, for instance.

Tips on How to Buy an Apartment Complex

If you think buying an apartment complex is right for you, follow these tips to help make your ownership dreams come true:

•   Do your due diligence. Scrutinize not just the structure and its mechanicals but also its financial records. You may want to review copies of leases and tax returns and have an appraisal done.

•   Consider your financing carefully. You might get financing from the seller, a commercial bank, or a private lender. You may want to look into what are known as non-recourse loans which, if you were to default, would not allow the borrower to seize your personal property. These loans are typically costlier than recourse loans but can be a smart move for some borrowers.

•   Get the right support. You’ll likely want to be advised by a real estate attorney with experience in this realm, and you may want to interview and hire a property management company to help you handle the sometimes constant demands of owning an apartment complex.

The Takeaway

Are you ready to buy an apartment complex and possibly live in it? If so, it’s wise to be aware of the differences between a condo and co-op building, the financing and expenses involved, and how it may impact your cash flow, tax returns, and net worth. When securing financing, not all lenders will offer funding for multifamily properties, so it’s wise to shop around. If, however, you are simply shopping for an apartment in a building that someone else owns, you’ll likely have a more streamlined path (and many lenders to consider) as you pursue homeownership.

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

Is it profitable to buy an apartment complex?

Many factors determine whether it is profitable to buy an apartment complex. You will have to consider the cost of the property and its financing, maintenance expenses, the local housing market, occupancy rates, and many other variables. As with any business venture, it may or may not be profitable.

What questions should you ask when buying an apartment building?

When buying an apartment building, it is important to understand the condition of the building and improvements that will need to be made in the future, current and past occupancy rates and rents (ask to see leases), and the tax returns of the current owner (to know what the cash flow is likely to be like). It’s also wise to personally inspect each unit and request an appraisal.

How can you make money when investing in apartments?

It is definitely possible to make money when investing in apartments, but it’s not a given. You will need to have the means to afford the purchase, manage cash flow successfully, understand the rental market in your area, and keep up with maintenance and other liabilities while turning a profit. Working with an experienced, highly recommended real estate attorney and management company may contribute to your success.


*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.


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.

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

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What Is an Interest-Only Loan Mortgage?

An interest-only mortgage lets you pay just interest for a set period of time, typically between seven and 10 years, as opposed to paying interest plus principal from the beginning of the loan term.

While interest-only mortgages can mean lower payments for a while, they also mean you aren’t building up equity (ownership) in your home. Plus, you will likely have a big jump in payments when the interest-only period ends and you are repaying both interest and principal.

Read on to learn how interest-only mortgages work, their pros and cons, and who might consider getting one.

Note: SoFi does not offer interest only mortgages at this time. However, SoFi does offer conventional mortgage loan options.

How Do Interest-Only Mortgages Work?

With an interest-only mortgage, you solely make interest payments for the first several years of the loan. During this time, your payments won’t reduce the principal and you won’t build equity in your home.

When the interest-only period ends, you generally have a few options: You can continue to pay off the loan, making higher payments that include interest and principal; look to refinance the loan (which can provide for new terms and potentially lower interest payments with the principal); or choose to sell the home (or use saved up cash) to fully pay off the loan.

Usually, interest-only loans are structured as a type of adjustable-rate mortgage (ARM). The interest rate is fixed at first then, after a specified number of years, the interest rate increases or decreases periodically based on market rates. ARMs usually have lower starting interest rates than fixed-rate loans, but their rates can be higher during the adjustable period. Fixed-rate interest-only mortgages are uncommon.

An interest-only mortgage typically starts out with a lower initial payment than other types of mortgages, and you can stick with those payments as long as 10 years before making any payments toward the principal. However, you typically end up paying more in overall interest than you would with a traditional mortgage.

💡 Quick Tip: When house hunting, don’t forget to lock in your mortgage loan rate so there are no surprises if your offer is accepted.

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

Questions? Call (888)-541-0398.


Interest-Only Loan Pros and Cons

Before you choose to take out an interest-only mortgage, it’s a good idea to carefully weigh both the benefits and drawbacks.

Pros

•  Lower initial payments The initial monthly payments on interest-only loans tend to be significantly lower than payments on regular mortgages, since they don’t include any principal.

•  Lower interest rate Because interest-only mortgages are usually structured as ARMs, initial rates are often lower than those for 30-year fixed-rate mortgages.

•  Frees up cash flow With a lower monthly payment, you may be able to set aside some extra money for other goals and investments.

•  Delays higher payments An interest-only mortgage allows you to defer large payments into future years when your income may be higher.

•  Tax benefits Since you can deduct mortgage interest on your tax return, an interest-only mortgage could result in significant tax savings during the interest-only payment phase.

Cons

•  Cost more overall Though your initial payments will be smaller, the total amount of interest you will pay over the life of the loan will likely be higher than with a principal-and-interest mortgage.

•  Interest-only payments don’t build equity You won’t build equity in your home unless you make extra payments toward the principal during the interest-only period. That means you won’t be able to borrow against the equity in your home with a home equity loan or home equity line of credit.

•  Payments will increase down the road When payments start to include principal, they will get significantly higher. Depending on market rates, the interest rate may also go up after the initial fixed-rate period.

•  You can’t count on refinance If your home loses value, it could deplete the equity you had from your down payment, making refinancing a challenge.

•  Strict qualification requirements Lenders often have higher down payment requirements and stricter qualification criteria for interest-only mortgages.

Recommended: What Is Considered a Good Mortgage Rate?

Who Might Want an Interest-Only Loan?

You may want to consider an interest-only mortgage loan if:

•  You want short-term cash flow A very low payment during the interest-only period could help free up cash. If you can use that cash for another investment opportunity, it might more than cover the added expense of this type of mortgage.

•  You plan to own the home for a short time If you’re planning to sell before the interest-only period is up, an interest-only mortgage might make sense, especially if home values are appreciating in your area.

•  You’re buying a retirement home If you’re nearing retirement, you might use an interest-only loan to buy a vacation home that will become your primary home after you stop working. When you sell off your first home, you can use the money to pay off the interest-only loan.

•  You expect an income increase or windfall If you expect to have a significant bump up in income or access to a large lump sum by the time the interest period ends, you might be able to buy more house with an interest-only loan.

Recommended: Tips for Shopping for Mortgage Rates

Qualifying for an Interest-Only Loan

Interest-only loans aren’t qualified mortgages, which means they don’t meet the backing criteria for Fannie Mae, Freddie Mac, or the other government entities that insure mortgages. As a result, these loans pose more risk to a lender and, therefore, can be more difficult to qualify for.

In general, you may need the following to get approved for an interest-only loan:

•  A minimum credit score of 700 or higher

•  A debt-to-income (DTI) ratio of 43% or lower

•  A down payment of at least 20% to 30% percent

•  Sufficient income and assets to repay the loan

The Takeaway

An interest-only mortgage generally isn’t ideal for most home-buyers, including first-time home-buyers. However, this type of mortgage can be a useful tool for some borrowers with strong credit who fully understand the risks involved and are looking at short-term ownership or have a plan for how they will cover the step-up in payment amounts that will come down the road.

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.

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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