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A bathroom remodel is a major project. Whether you’re looking to do a cosmetic refresh or a total gut job with all new high-end fixtures, the process takes planning, time, effort, and money. But the end product can be well worth it: A beautifully updated bathroom can significantly improve your home, bump up its resale value, and make your everyday life more enjoyable.

How much will it cost? Depending on the scope of work, a bathroom remodel typically ranges from $9,000 to $48,000, but many homeowners in the U.S. will pay around $28,500 on average. If you live in a major metro area (where the cost of living is generally higher), however, you may pay as much as $75,000 for a bathroom remodel.

Your bathroom budget will greatly depend on the purpose of your remodel. Whatever you have in mind, these 10 steps can help you plan appropriately, anticipate problems, and ensure you end up with a room you love.

Why Homeowners Remodel Bathrooms

Here’s a look at the most common reasons why homeowners decide to remodel a bathroom. For many, it can be a combination of reasons.

Updating the Look

Happy with the layout of your current bathroom but feel it just needs a refresh? Focus your attention on material selection, and perhaps add new cabinetry or plumbing fixtures. You can find plenty of inspiration online, including ideas for how to make a small bathroom look bigger.

Even if you’re not making a major structural change, you’ll still want to pay attention to the age of your home and the remodels done by previous homeowners. After all, laying new tile over a foundation rife with mold or making do with an outdated electrical system may mean inviting big problems down the road.

Resale Value

If you’re updating your bathroom in preparation for selling your home, think about what potential buyers might look for. While it’s impossible to anticipate what any one individual might want in a new home, you can research your local real estate market to learn what appeals to the majority of homeowners.

You also can find out the resale value of bathroom remodels by using an online home project value estimator.

Better Functionality and More Storage

Perhaps you’ve always hated how the door hits the vanity as it swings open, or you’re tired of stacking toilet paper on the tank and seeing makeup on the counter. Or maybe you never use the bathtub and long for a large shower stall, or would prefer two sinks instead of one to expedite the family’s morning rush. Is your bathroom a dark, moist cave? It may be crying out for more natural light and better ventilation.

This level of bathroom remodel may require gutting the entire space, possibly rearranging the fixtures and rerouting plumbing. Not only will your bathroom be brand new in that case, it could be higher end, too.

Recommended: 32 Inexpensive Ways to Refresh Your Home

How to Plan a Bathroom Remodel

Embarking on a bathroom remodel can be daunting, and there are many parts of the process where things can go disastrously wrong. What follows are 10 steps that can help streamline the process and ensure your remodel is a success.

1. Determine What Your Bathroom Remodel Should Achieve

When starting any home improvement project that requires a good chunk of time and cash, you want to determine what the overall goal is. Is it to expand the existing space? To add a shower or a tub? To improve your home’s value? To update a vintage bathroom to one that is more modern in design and functionality? Your answers will factor into your design and budget.

Other considerations to make when planning a bathroom remodel include:

•   How many people will use the room?

•   How much time do you spend in the bathroom in the morning, afternoon, and evening?

•   What’s your routine? How does your current space hinder it? How could a new space improve it?

•   Do you just want something that’s easy to clean? Or do you want to improve the look for resale?

2. Research and Budget

Before you get too far with planning, it’s good to know how much bathroom you can afford. Depending on the type of bathroom reno you’re looking to do, costs average between $600 and $800 per square foot, according to Remodeling magazine’s 2024 Cost vs Value Report.

Before proceeding with your dream plans, think about whether you’re after a basic update, a mid- to upper-range remodel, or a deluxe spa getaway. It’s also a good idea to factor in a cushion of 20% for unforeseen costs. An online home improvement cost calculator can help you get a ballpark estimate of what your plan will cost.

One way to cut expenses is to avoid moving the existing plumbing and wiring. Some homeowners focus on just a shower remodel, which can run anywhere from $500 to $20,000.

3. Hire the Right Professionals

Given the complexity of rerouting plumbing, laying tile and flooring, and installing vanities and toilets, you may need to hire a few different professionals to get the job done:

•   Interior designer, to reimagine the space and source materials

•   Architect, to handle structural changes

•   Plumber

•   Electrician

•   Tile installer

•   General contractor, to manage them all

What exactly will all these folks be doing, besides spending your money? We’ll walk you through it.

First, a professional interior designer will think of things a homeowner will not. For instance: which way the cabinet doors open, if there’s room for a washer/dryer, how a skylight could brighten the space, or ways to rearrange the room in a creative way that maximizes both functionality and efficiency.

On the other hand, if you know what you want and where to find the products you need — and have an eye for good design — then you might take on the design process yourself.

A general contractor will hire and supervise the various subcontractors, and keep the project on schedule and on budget. If you have DIY experience and are comfortable tackling (or supervising) the demolition, construction, and installation, you may not need a general contractor. Just remember that once you start exposing layers of old work, a straightforward update can devolve into something more complex.

For major structural changes, you’ll want to hire an architect, and consider bringing in an experienced plumber and electrician, too. In some places, it’s required by law.

While you’re keeping an eye on the budget, don’t forget about your valuable time. Even with DIY experience, a bathroom remodel can take homeowners several times as long as a professional to complete — and your results may not be up to your high standards. To keep your budget on track, you might take on simpler tasks like demo and painting and hire out the rest.

Recommended: How to Pay for Emergency Home Repairs

4. Refine Your Bathroom Remodel Plan

If your dream bathroom couldn’t ever fit in the space you have, think about what’s on the other side of the bathroom walls. Can you steal square footage from an adjacent closet, adjoining bedroom, or underused hallway? Is it possible to punch out an exterior wall to add square footage?

Other options to consider: whether you want the toilet out in the open or housed in its own private water closet, and what kind of special storage you may need — for hair tools, makeup, and other everyday essentials.

Choosing the style of bathroom you want can also be tricky. You may love the look of the industrial-style bathroom in your favorite restaurant, but will it look right in your Craftsman bungalow? Designers recommend that you look to the rest of your house for inspiration. You may also want to consult resources like Pinterest for ideas.

5. Approve Your Bathroom Remodel Design

Next you’ll consult with your interior designer and/or architect to review preliminary floor plans and sketches. These will show how the room’s components — shower, vanity, any cabinetry — fit in the space.

At this point, you’ll focus on the big picture: where the major elements go and the functionality of the space. Don’t worry about the finishing touches like colors and materials. These drawings and scope of work will be used to interview contractors and solicit estimates.

6. Get Estimates From Contractors

It’s a common process to get three separate estimates from licensed contractors for each home remodel project in which you bring in professional help. If you’re already working with a designer, they may know skilled contractors or can help you interview professionals to make sure they’re right for the job.

You’ll want to carefully evaluate each contractor’s bid. Don’t let the highest bid scare you, or immediately jump on the lowest bid.

Recommended: How Do Home Improvement Loans Work?

7. Choose Your Bathroom Materials, Finishes, and Colors

Now it’s time to research materials, so you’ll have a basic knowledge of what you need and final costs. Marble may look great, but it’s not stain-resistant and is a pain to maintain.

Maybe you want to look at easy-to-clean options. Or perhaps you didn’t know that wood can indeed work for countertops in bathrooms if properly treated, or you weren’t aware of the vast stone possibilities that could work with your design.

8. Work on Design Development and Construction Documents

At this stage, you should be actively reviewing the floor plan, elevations, tile layout, and any other relevant drawings associated with your project. More planning on the front end of the project can mean fewer mistakes will arise later in the process.

You’ll also want to be kept up to speed on everything that goes into your project: what materials will be used, and how they will be laid out. If something in construction drawings isn’t specified — such as general tile layout or how you want trim pieces in your shower niche to look — chances are your tile installer will make a decision on the spot, especially if you’re not around on the install day.

This stage will also involve pulling permits. If you’re working with a knowledgeable contractor, they will likely take this on. Many are skilled at navigating the process with contacts they’ve made at the local planning office. If you’re doing much of the work yourself, you’ll need to brush up on what permits you’ll need, and where and how to submit drawings for approval.

9. Plan for Installation and Prepare for Bathroom Demo

In an ideal world, you will have every last detail planned and every material picked out and ordered before construction starts. The last thing you want is to get halfway through your remodel and have to tell your construction crew to take a two-week break while you wait for that back-ordered marble to arrive from Italy.

You’ll also want to nail down the nuts and bolts of how construction will flow and where supplies will be stored. You’ll need a dry space inside for most materials, so you’ll need to decide where you’re going to keep displaced furniture and household items while construction is underway. Can you make space in your garage or on the side of your house?

Other questions to consider:

•   Are you prepared for the disruption?

•   What time will the workers be there, and will someone be on-site to answer questions and oversee the construction?

•   Will it affect your work schedule or any trips planned?

•   Where will you shower during construction?

•   Do you have an alternate place to stay should the inconvenience of not having a bathroom become too much?

•   Who in your family will be available should a construction question come up?

Any last-minute decisions need to take top priority to ensure a smooth-running bathroom remodel that stays on budget and on time.

10. Make a Post-Completion Punch List

Despite meticulous planning, it’s likely that something with your bathroom remodel will go wrong. Maybe you overlooked something, materials arrived broken or scratched or not at all, there’s a dent in the wall, or the caulk was too messy.

Now is the time to make a list of these things, either in an informal email or more formal document with your contractor. Get it into the hands of the person responsible for correcting the mistakes and include a date by which the fixes and finish work should be completed.

It’s normal for a contractor to return several times to address any post-project concerns, so try not to worry. Everyone makes little mistakes in a big, complicated project like a bathroom remodel. Just hold off making your final payment until the problems are fixed.

The Takeaway

A bathroom remodel can be a complex and costly project. Before you jump in, consider the purpose of your remodel, the scope of work it will involve, and your budget. Costs vary widely, anywhere from $9,000 on the low end up to $48,000 on the higher end, with the average falling at $28,500. To keep costs down, take the time to plan meticulously and get multiple bids from contractors.

Need a way to finance your new bathroom remodel? SoFi can help. SoFi’s home improvement loans range from $5K-$100K and they’re unsecured, which means that your house is not used as collateral to secure the loan. Checking your interest rate takes just a minute.

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.

SOPL-Q324-036

Seeing a significant dip in your credit score can be disheartening, especially if it’s taken a 60-point plunge. But keep in mind there are many explanations for a drop, including changes to your mix of credit, the age of your accounts, credit utilization, or payment history. Or it could be due to an error in your credit report or even a case of identity theft.

Understanding why your credit score fell by 60 points is an important first step as you work to boost your numbers.

Should You Be Worried About Your Credit Score Dropping?

It depends. It’s not uncommon for credit scores to fluctuate by several points, and a slight drop in is usually nothing to stress about. However, if your score dropped suddenly or has been decreasing over time, it’s a good idea to investigate what might be behind the change.

A lower credit score can have far-reaching effects. It could impact your ability to rent an apartment or secure a home, car, or personal loan with favorable interest rates. And if you’re applying for a job, potential employers may run a credit check.

Why Did My Credit Score Drop 60 Points?

It’s fairly normal for your credit score to change by a few points here and there over time. That’s because credit scores are based on the most recent available credit information reported by lenders and collection agencies — and that information may be received at different times throughout the month. The score you see today may be different a few weeks later.

But if your score dropped 60 points, chances are it happened for a reason. Late payments, an increase in your credit utilization, signing up for multiple new credit cards in a short time frame, or closing an old account could all help explain a dip.

Recommended: Why Do I Have Different Credit Scores?

7 Reasons Why Your Credit Score Went Down

Here are some common scenarios that could negatively affect your credit score.

There’s a Missing or Late Payment

A consistent, on time payment history is one of the biggest factors that determine your credit score. It makes up 35% of your FICO® Score, which is used in 90% of lending decisions.

While missing a credit card or loan payment can happen to anyone, a payment that’s 30 days past due can dramatically lower your credit score, particularly if it’s high. For instance, someone who has a credit score that falls within the good to excellent credit score ranges may see their score drop by 63 to 83 points with one missed payment. Meanwhile, someone with a fair credit score could see a drop between 17 to 37 points, according to FICO.

Your Credit Utilization Is Too High

Credit utilization, or the amount of credit you’re using versus the amount of credit you have available, is also important, as it accounts for 30% of your FICO score.

If you use too much of your available credit, it could signal to lenders you’re overextended and may not be able to keep up with your debts. On the flip side, the lower your credit utilization, the higher your credit score can be. A good rule of thumb is to aim to keep your credit utilization below 30%.

Whether you use a spending app or go the DIY route, creating a budget can help you keep your finances in order and your credit utilization low.

There’s a Mistake in Your Credit Report

Mistakes happen, but they could cause your credit score to fall. Common credit report errors to be on the lookout for include a false late payment, incorrect account balances, a closed account that’s still showing up as open, and a misreported current balance or credit limit.

One way to help spot issues early on? Check your credit report regularly and dispute any errors. You can now check your credit report for free on a weekly basis from each of the three major credit bureaus: TransUnion, Equifax, and Experian.

Recommended: Why Did My Credit Score Drop After a Dispute?

You’ve Closed a Credit Card Account

If you’ve paid off a credit card balance, you may consider getting rid of that card altogether. But that can lower your credit score. That’s because when you close out an account, your overall available credit is lower.

And if that account is older, the length of your credit history decreases, too. Lenders like to see borrowers who have active accounts and a history of making regular on-time payments.

You’ve Recently Applied for Credit

There’s nothing wrong with applying for a new credit card. But keep in mind that every time you apply for a new line of credit or a loan, the lender may perform a hard credit check. (That’s when the lender pulls your credit report to assess your credit history.)

A single hard inquiry will result in a slight dent in your credit score. But multiple hard inquiries could cause your score to drop by as much as 10 points each time they occur.

You Paid off a Loan

When you pay off an installment loan, like a personal or auto loan, the account shows up as closed on your credit report. As a result, your credit mix — which composes 10% of your credit score — may change.

You’re a Victim of Identity Theft

If your identity has been stolen — and thieves open up a line of credit or max out your current credit cards — you may see a significant drop in your credit score.

If you suspect you’re the victim of identity theft, you’ll want to report fraudulent transactions ASAP to your creditor or financial institution. If you think your Social Security number or other important personal information has been stolen, you should report it to the Federal Trade Commission (FTC).

You might also want to contact one of the three major consumer bureaus and ask them to place a fraud alert on your credit report. This lets lenders know they need to take extra measures to verify your identity if they get a credit application in your name.

What Can You Do If Your Credit Score Dropped by 60 Points?

There are several things you can do to get your score back up if it falls by 60 points.

The first thing you’ll want to do is review your current credit report to make sure there aren’t any glaring errors. As noted previously, you can obtain a free credit report from TransUnion, Equifax, or Experian via AnnualCreditReport.com.

Another thing to do is to pay your bills on time, every time. One way to ensure you won’t miss a payment, or pay late, is to set up automatic payments so the money is automatically deducted from your bank account on the due date. Tools like a money tracker app can help you spot upcoming bills and manage payments.

How to Build Credit

Building credit can take time, but here are some strategies to consider:

•   Become an authorized user on someone else’s credit card account. This allows you to reap the benefits of the cardholder’s good credit. Just be sure the person who authorizes you is trustworthy and uses their card responsibly.

•   Get credit for other bills you pay, such as rent or utilities, by having them added to your credit report. Experian Boost, for example, adds on-time payments from other accounts to its credit reports. There are also existing rent-reporting services that can report your on-time rent payments to the credit bureaus.

•   Ask the lender to increase your credit limit. Having access to more available credit without increasing your balance can lower your credit utilization — and potentially increase your credit score. When you make the request, ask the creditor if it’s possible to avoid a hard inquiry, which could cause your score to dip a few points.

Allow Some Time Before Checking Your Score

It can help to think of your higher credit score journey as a marathon, not a sprint. Credit reports are updated when credit issuers send new information to the credit reporting agencies. Typically, this occurs every 30 to 45 days. So if you’re working to correct or dispute errors, or taking other steps to improve your credit score, you may not see an improvement right away.

Similarly, if you open a new credit card, it can take a few months before you see any credit score updates.

Recommended: How Long Does It Take to Build Credit?

Pros and Cons of Tracking Your Credit Score

There are several benefits to tracking your credit score — and some drawbacks to consider, too.

Pros:

•   You can spot mistakes early on.

•   Checking your score won’t hurt your credit because it’s a soft credit inquiry.

•   You can see where you stand financially and how you can improve your score.

Cons:

•   You may be charged monthly or annual fees.

•   You may be frustrated or discouraged with your current score.

•   You could still become a victim of identity theft or fraud.

How to Monitor Your Credit Score

There are a few different ways to check your credit score without paying, although you could pay for the service.

Some companies, including SoFi, Experian, and Capital One, offer a complimentary credit monitoring service. Certain credit card companies and banks also provide customers with their credit score. Another option is to track your FICO score for free at myFICO.com.

The Takeaway

Seeing a 60-point drop in your credit score out of nowhere can be upsetting. But take heart: There are steps you can take to help reverse that decline. By staying on top of your monthly payments, monitoring your credit reports, and keeping credit utilization low, you can help put yourself — and your credit score — back on firm footing.

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

FAQ

Why has my credit score dropped 60 points out of nowhere?

Your credit score could have taken a dip of 60 points for a number of reasons, including missing one or more payments, having a high credit utilization, paying off a loan, incorrect information on your credit report, or being the victim of identity theft.

Why is my credit score going down when I pay on time?

Although making timely payments makes up the biggest part of your score, it’s not the only factor. You could be great about paying your credit cards or loans on time, but other issues could be responsible for your score going down. For example, if you’ve closed out a credit card account, that can affect your credit history and credit mix — both of which can impact your credit score.

How to dispute a credit score drop?

Contact the credit reporting company that’s showing inaccurate information on your credit report. Let them know about the error and be prepared to show documentation to back up your claim.

Photo credit: iStock/Neustockimages

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

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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 .


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.

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

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

SORL-Q324-013

Many homeowners are flush with equity, and tapping it can be tempting. Some lenders will let you borrow as much as 100% of your home equity — the home’s current value minus the mortgage balance — for any purpose. Your house, though, will be on the line.

Here are things to know before applying for a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance.

What’s the Most You Can Borrow With a Home Equity Loan?

To determine how much you can borrow with a home equity loan, lenders will calculate the combined loan-to-value ratio: your mortgage balance plus the amount you’d like to borrow compared with the appraised value of your home.

Most lenders will require your combined loan-to-value ratio (CLTV) to be 90% or less for a home equity loan or HELOC (although some will allow you to borrow 100% of your home’s value).

combined loan balance ÷ appraised home value = CLTV

Let’s say you have a mortgage balance of $150,000 and you want to borrow $50,000 of home equity. Your combined loan balance would be $200,000. Your home appraises for $300,000. (An appraiser from the lending institution determines your property value.) The math would look like this:

$200,000 ÷ $300,000 = 0.666

Your CLTV is 67%.

If a lender allowed you to borrow 90% of CLTV in this scenario, you would have a loan of $120,000:

($150,000 + $120,000) ÷ $300,000 = 0.900

But just because you might qualify for a loan or line of credit of this amount doesn’t mean it’s a good idea for your personal situation. Consider what the payments, which include interest, would look like and whether your financial situation is secure enough for you to afford them if you suffer a setback.

Three Ways to Tap Home Equity

You paid off a chunk of your mortgage or all of it, or your home value soared along with the market, but now a wedding, college, remodel, or something else has you wanting to put that home equity to use. Here are three ways to do that.

Remember that converting home equity to cash means you’ll be using your home as collateral.

Home Equity Loan

Home equity loans come in a lump sum. They are often useful for big one-time expenses like a new car or swimming pool and for borrowers who know how much they need and who want fixed payments.

Some lenders waive or reduce closing costs of 2% to 5%, but if you pay off and close the loan within a certain period of time — often three years — you may have to repay some of those costs.

HELOC

A HELOC may be helpful for long-term needs such as home renovations, college tuition, or medical bills.

Borrowers who want flexibility when dealing with, say, a home addition may favor a revolving line of credit over a lump-sum loan.

Again, some lenders waive the closing costs for a HELOC if you keep it open for a predetermined period.

Recommended: How Do Home Equity Lines of Credit Work?

Cash-Out Refinance

A cash-out refinance might be a good choice if you want to borrow more than you’d qualify for with a home equity loan or HELOC. A cash-out refi replaces your existing mortgage with a new mortgage for more than the previous balance. You receive the difference in cash.

Homeowners will often need to have 20% equity left in the home after refinancing. Some lenders will let them dip below that minimum but pay for private mortgage insurance on the new loan.

Some HELOC borrowers refinance before the draw period ends. In that case, the cash can be used to pay off the HELOC.

You can change the mortgage term and aim for a reduced interest rate with a cash-out refi. Closing costs will be required; it’s a new loan.

Recommended: Cash-Out Refinance vs HELOC

What’s the Difference Between a Home Equity Loan and a HELOC?

A home equity loan, also known as a second mortgage, comes in a lump sum with a repayment term of 10 to 30 years. It typically has a fixed interest rate.

A HELOC is a revolving line of credit that lets a homeowner borrow money as needed, up to the approved credit limit. The credit line has two periods:

•   The draw period, when you can use the line of credit. It’s often 10 years. Minimum monthly payments usually will be interest only on the amount withdrawn.

•   The repayment period, often 20 years, when principal and interest payments are due.

Most HELOCs have a variable interest rate but cap how much the rate can rise at one time and over the loan term. (Some lenders, though, offer fixed-rate HELOCs or allow the borrower to fix the rate on a balance partway through the loan.)

Some HELOCs require you to draw a minimum amount upfront. Some have a balloon payment at the end of the draw period, when the loan principal and interest are due. Ensure that you understand your HELOC’s terms, and when the draw period ends and the credit line is closed.

How Is a HELOC Calculated?

Qualified borrowers are often able to access as much as 90% of their equity with a HELOC.

Some HELOC lenders require that the homeowner retain at least 20% equity in the home, but a few are more generous.

Is Taking Out Home Equity Right for You?

If you’re aware of the risk, you’ve read all the fine print, and you forecast no job or income loss, tapping home equity can be extremely useful.

HELOCs usually have lower interest rates than home equity loans, but some people prefer the fixed rate and payments of the latter. HELOC rates tend to be a tad higher than mortgage rates, but you only have to pay interest on what you borrow during the draw period.

Most cash-out refinances result in a new 30-year fixed-rate mortgage.

Approval for a home equity product and the rate you’re offered will depend on your credit score, debt-to-income ratio, home equity, and home value.

Shopping around can yield the best offer.

Recommended: Home Improvement Cost Calculator

The Takeaway

How much equity can you borrow from your home? Homeowners who meet credit and income requirements are often able to tap up to 90% of equity and sometimes more with a home equity loan or HELOC. A cash-out refi is another way to make use of home equity.

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

FAQ

How can I increase my home equity?

Paying off your mortgage faster, refinancing to a shorter loan term, and making home improvements are some of the ways to boost home equity. In a competitive market, your home value may just naturally rise.

How quickly can I get cash from my home equity?

It depends on the product, but closing can take place in as little as two to four weeks.

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.

SOHL-Q324-045

Buying a home with a significant other is a big investment and commitment, but having two incomes can more easily open the door to homeownership.

If you’re buying a house with a lover (or with a friend, parent, or sibling), here are a few things to know.

What You Should Know When Buying a House Unmarried

Before sharing a mortgage and house, a few heart-to-hearts about your purchase partner’s financial health and yours are in order. Being frank about debts, income, and projected job security is important. It’s a good idea to explore what-ifs as well.

Here’s a list of suggested questions to answer before sharing a deed or a home mortgage loan:

•   Is the down payment to be evenly divided?

•   Will mortgage payments, insurance, property taxes, any mortgage insurance and homeowners association dues, repairs, and utilities be split evenly? If not, how will they be divided up?

•   What will happen if one person is unable to make their portion of the mortgage payments for a while?

•   What will happen if one homeowner dies?

•   If one person leaves and the mortgage is refinanced to remove one of the signers, who pays for the refinancing?

Most lenders underwrite each individual on the home loan. The weaker link will most likely determine the rate at which you can borrow money as a duo — or whether you can get a loan at all. When lenders pull credit scores from the three main credit reporting agencies, they usually focus on the middle score. Let’s say your middle score is 720, and your co-borrower’s is 650. Lenders will use the lower of the two for the application. Even a small change in interest rate can result in significantly more money paid over time. (See for yourself with this online mortgage calculator.)

Loans underwritten by Fannie Mae do have one exception to this rule. To determine whether an unmarried couple is eligible for a loan underwritten by Fannie Mae, a lender will look at the average of their credit scores. As long as the average tops 620, the loan will be considered even if one borrower’s credit score is below 620 (in the past, if either borrower had a score below 620 they would not have been considered for the loan).

Buying a Home Married vs Unmarried

Married couples often merge their finances and operate as a single unit. If spouses are pulling from the same pool of money, they don’t generally mind shortages from a partner when the mortgage payment is due.

Unmarried co-borrowers going in on a house together may need each party to pull its weight each and every month.

Then there’s this: What if a co-owner dies?

For the most part, a spouse has the legal right to inherit property from their partner whether or not the deceased spouse had a will. Domestic couples may have no automatic right to inheritance if a co-owner dies without a will in place (this is known as dying intestate).

Additionally, depending on the state and the way the married couple holds title, the surviving spouse will receive a partial or full step-up in basis upon the first title owner’s death, meaning the property’s cost basis will be reset to fair market value when one spouse dies. If the inheriting spouse decides to sell the property, the stepped-up basis will greatly minimize capital gains taxes owed or translate to none owed at all.

The step-up in basis is one way that some families harness generational wealth through homeownership. Unmarried co-owners should be clear about how they hold title and what that means in case one partner dies.

How to Handle the Title

Two or more unmarried people can take title to a house. The main two forms are:

Tenancy in common. This arrangement allows equal or unequal ownership; that is, one person may own 60% of the property and the other person, 40%. If one owner dies, their share of the property passes to their heirs. It does not pass automatically to the surviving co-owner.

Tenancy in common allows one owner to transfer their interest to another buyer or use their share as collateral for financial transactions. And creditors may place liens on that person’s share of the property.

Joint tenancy with right of survivorship. Each person owns 50% of the house. Upon the death of one of the joint tenants, the property passes automatically to the surviving owner.

If you want to sell your share, you don’t have to ask for permission to do so. Any financing involving the property must be approved by both parties. Creditors trying to collect a debt from one of the homeowners may petition the court to force a sale in order to collect.

A third option is sole ownership, when only one person is on the title. The person left off the title risks walking away with nothing if the relationship sours.

Preparing for the Mortgage Application

The mortgage process is mostly the same whether applying solo or with a co-borrower.

It begins by getting a feel for how much house both of you can afford. Getting prequalified and using a home affordability calculator are quick ways to estimate your maximum budget. Then talk about these questions:

Are you aware of each other’s credit scores, incomes, and debt burdens?

Is each of your debt-to-income ratios around 36%, max? If so, good, because this is a team effort.

Have you agreed on the type of loan that fits your needs? If not, a mortgage broker or direct lender can guide you.

Do you want the standard 30-year mortgage term, or is it in the budget to seek a shorter term, which will mean higher monthly payments but less interest paid?

Combining forces can make homeownership possible, especially for first-time homebuyers and anyone in a hot market. That’s exciting.

How to Make the Property Purchase 50/50

When each co-owner has a 50% share of the property, the status is joint tenants with right of survivorship.

Your real estate agent or attorney will need to be careful about the wording in the deed. It should reflect the desire to create joint tenancy, not tenancy in common.

What Happens If You Part Ways?

It’s a good idea to go into the deal with a written buyout agreement, just in case.

But if a pact is not in place, here are steps you could take to acquire the co-borrower’s share:

1.    Hire an independent appraiser to determine the property value.

2.    Find the difference between the mortgage balance and appraised value. That’s the equity in the house. If you each have a 50% share in the house, divide equity by two.

3.    Negotiate the buyout price. If you can’t come up with cash, take any refinancing costs into consideration and …

4.    Apply for a cash-out refinance. You’ll need to qualify on your own.

5.    Have a real estate agent create a detailed purchase agreement. You are the buyer, and the co-owner is the seller.

6.    If your refinance is approved, you will sign a deed transferring the seller’s interest in the property to you. The cash-out refi loan will pay off the original loan and, with luck, will provide the cash you need to pay your former co-borrower.

7.    The former co-owner signs a certificate of title, deed of sale, loan payoff, and statement of closing costs to make you the sole owner.

If that route is not viable, you may need to get the co-borrower to agree to sell the house. If yours is an assumable mortgage, good. They’re in demand.

The Takeaway

Buying a house with someone you are not married to works similarly to purchasing a property when married, but there are some important conversations to have about how ownership is structured and what might happen if one of you dies or wants to sell. The more solid each buyer is financially, the better the chances of a good mortgage rate.

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.

FAQ

What happens if one of us is not on the mortgage?

If two people’s names are on the deed but just one is on the mortgage, both are owners of the home but only one is liable for repaying the mortgage loan.

What needs to change if I get married?

If co-borrowers marry, the deed will need to be updated.

To add a spouse’s name to the deed, you must file a quitclaim deed. You can transfer the ownership rights from yourself to yourself as well as other people. Once a couple marries, they may want to hold title with rights of survivorship if they do not already.

Can I add my partner’s name to the mortgage after buying the house?

No. You’ll need to refinance your mortgage.

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SOHL-Q324-055

The Presidential Election Cycle Theory suggests that the stock market follows a pattern that correlates with a U.S. president’s four-year term.

The first two years of a term tend to be the weakest for stocks, according to the theory, as the president focuses on fulfilling campaign promises, but the market improves in the latter half of a term as the president pumps up the economy ahead of a new election.

Some historical stock market data does tend to sync up with the Presidential Election Cycle Theory, but past performance is not indicative of future results.

And market researchers and investors tend to be doubtful of the strategy, chalking it up to statistical coincidence as opposed to a real sign of a U.S. president’s power over the market.

They argue that company earnings, global economic data, and Federal Reserve monetary policy tend to be bigger influences on stock prices.

What Is the Election Cycle Theory?

Yale Hirsch’s Stock Trader’s Almanac has data going back to 1833 in order to study the Presidential Election Cycle Theory. Below are the average stock market percentage gains in the four calendar years after a presidential election, according to the almanac’s 2020 edition.

Hirsch used the Dow Jones Industrial Average to track stock market performance after 1896 and other stock gauges for the years prior:

Postelection year: 3%
Midterm year: 4%
Preelection year: 10.2%
Election year: 6%

In a Wall Street Journal interview in November 2019, however, Jeffrey Hirsch, the son of Yale Hirsch, said that not all the historical data is relevant. Market observers have argued that going further back in history, U.S. presidents had even less sway over the stock market than in current times.

But according to Hirsch, the theory that the stock market is strongest in the third year of a presidential term has held up.

The almanac states that since 1943, in the third year of the presidential election cycle, both the Dow and S&P 500 have been up 15% on average. Meanwhile, since 1971, the Nasdaq indices have climbed 28.8% on average in the third year.

That’s because “incumbent administrations shamelessly attempt to massage the economy so voters will keep them in power,” the almanac states.

Stimulative fiscal measures designed to increase disposable income and a sense of well-being in the voting public have included:

•   Increases in federal budget deficits, government spending, and Social Security benefits

•   Interest rate cuts on government loans

•   Speedups of projected funding

Other points in the Presidential Election Cycle Theory:

•   Wars, recessions, and bear markets tend to occur in first two years; prosperity and bull markets in the second two years

•   The market performed better in election years when a sitting president is running. Since 1949, the Dow climbed 10.1% during election years when the incumbent is up for reelection vs. 5.3% in all election years and 1.6% in years with an open field

•   Times when the stock market rose between August and October in a presidential election year, the incumbent political party has retained power 85% of the time since 1936

•   Markets tend to be stronger when the incumbent party in power wins

Does History Back Up the Presidential Election Cycle Theory?

The Presidential Election Cycle Theory hasn’t held up well in recent presidential administrations. The S&P 500 posted a strong gain of 19% in 2017, the first year of President Donald Trump’s term. The market also surged 29% in 2019, Trump’s third year and the best annual performance of his administration.

In each of President Barack Obama’s two terms, the first year saw the best annual performance, with the S&P 500 rallying 23% in 2009 and 30% in 2013.

Separately, the stock market has tended to rise more than fall, making the case that charting patterns with the election cycle may have more to do with coincidence. Since 1833, equity prices have risen in 115 calendar years and fallen in 70, data from the Stock Trader’s Almanac shows.

Barron’s also noted in November 2019, citing data from Ned Davis Research, that the weakest time in a four-year presidential cycle has historically actually been September of the pre-election year to May of the election year. Once the winner is determined, the market tends to rally regardless of political party.

Other political factors could also be in play, such as midterm elections. Barron’s also wrote in 2018 that the stock market’s performance during midterm election years hasn’t been stellar. Since 1942, the S&P 500 has gained 6% on average in midterm years, compared with 9.1% during the average year, the article stated, citing Ned Davis Research.

What About This Time Around?

Election Day is November 5, 2024, and the new four-year presidential term will start on January 20, 2025.

In the past, uncertainty over the outcome of a presidential election has led to declines in the stock market. In 2000, confusion over hanging chads in the Florida ballot count meant the race between George W. Bush and Al Gore didn’t come to a swift conclusion.

Investor uncertainty over the outcome caused the stock market to plummet. Markets rebounded after the Supreme Court decision that ultimately resulted in a Bush win.

The conventional wisdom on Wall Street has been that a split government usually leads to strength in the stock market, as the division in power will lead to less ambitious policy changes.

So the potential outcome of a Democrat in the White House and both parties splitting Congress could lead to gains for the Dow and S&P 500. That said, business publications have reported that there is little evidence to back this idea up.

In the 45 years that the same party controlled Congress and the presidency, the S&P 500’s average return was 7.45%, the Wall Street Journal found. In the 46 years power was split, the average return was 7.26%. The index actually slightly outperformed when control of the presidency and Congress was unified under one party.

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What Does The Presidential Election Cycle Mean for Investors?

The history of U.S. presidential elections may not be a big enough sample set for making investment decisions.

An array of factors beyond presidential election cycles influences share prices. Investors typically monitor company earnings, global and U.S. economic data, events like natural disasters and pandemics, and Federal Reserve monetary policy. Separately, periods of uncertainty—whether in monetary or fiscal policy—can also shape market performance.

Annual returns also don’t capture the stock volatility that could have happened during the year. For instance, the stock market rallied in 2020, but it also entered into a bear market, a drop of 20% or more, in the first half amid investor worries over the COVID-19 pandemic’s impact on the global economy.

The Takeaway

The Presidential Election Cycle Theory states that the stock market’s performance improves in the four-year terms of US presidents as they gear up for reelection. Some investors say, however, that other factors, like corporate earnings and central bank policy, are bigger influences on share prices.

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