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If you don’t have a 20% down payment on a home, that’s OK. Most buyers don’t. But if you’re in that league and acquire a conventional mortgage, the lender will want extra assurance — insurance, actually — that you’ll pay the loan back. Private mortgage insurance (PMI) is usually the price to pay until you reach 20% equity or, as lenders say, 80% loan-to-value.

In an effort to help low- and middle-income borrowers, the Biden-Harris Administration reduced monthly mortgage insurance premiums for new FHA loans — that is, loans backed by the Federal Housing Administration. However, those cuts do not affect homebuyers with conventional loans and PMI.

Can you avoid PMI? It’s tough. Below, we’ll take a closer look at PMI, strategies to avoid it, and how to know when you can get rid of it.

What Is PMI?

Private mortgage insurance is charged by lenders of conventional home mortgage loans, which are loans not insured by a government agency. FHA, VA (Veterans Administration), and USDA (U.S. Department of Agriculture) loans are government-insured loans.

The 30-year conventional home loan is the most common mortgage, and 20% down is ideal. But…

You’ve seen home prices lately. Twenty percent down on a $250,000 or $400,000 or $750,000 home is just not doable for everyone. In 2024, the median down payment for buyers was 18%, but for first-time homebuyers, it was nine percent, according to the National Association of Realtors.®

PMI is meant to protect the lender from risk. The premiums help the lender recoup its losses if a borrower can’t make the mortgage payments and goes into default.

How Much Does PMI Cost?

PMI is often 0.5% to 1.5% of the total loan amount per year, but can range up to 2.25%.

The cost of PMI depends on the type of mortgage you get, how much your down payment is, your credit score, the type of property, the loan term, and the level of PMI coverage required by your lender.

If you’re shopping for a mortgage and you apply for one or more, the premium will be shown on your loan estimate. If you go forward with a home loan, the premium will be shown on the closing disclosure.

Estimate PMI Costs

Use this calculator to estimate PMI based on how much home you can afford.

How to Pay PMI

Most borrowers pay PMI monthly as a premium added to the mortgage payment.

Another option is to pay PMI with a one-time upfront premium at closing.

Yet another is to pay a portion of PMI up front and the remainder monthly.

How to Avoid PMI Without 20% Down

One way to avoid PMI is to make use of a piggyback mortgage. Another is to seek out lender-paid mortgage insurance.

Piggyback Loan

With a piggyback loan, typically an 80/10/10 mortgage, you’d take out two loans at the same time, a first mortgage for 80% of the home price and a second mortgage for 10% of the home value, and put 10% down. Note: SoFi does not offer piggyback loans. SoFi does offer fixed-rate and adjustable-rate first mortgages, as well as VA and FHA loans.

The 80% loan is usually a 30-year fixed-rate mortgage, and the 10% loan is typically a home equity line of credit that “piggybacks” on the first mortgage.

A 75/15/10 piggyback loan is more commonly used for a condo purchase because mortgage rates for condos are higher when the loan-to-value ratio (LTV) exceeds 75%.

Both loans do not have to come from the same lender. Borrowers can tell their primary mortgage lender that they plan to use a piggyback loan and be referred to a second lender for the additional financing.

Because you’d be taking out two loans, your debt-to-income ratio (monthly debts / gross monthly income x 100) will fall under more scrutiny. Mortgage lenders typically want to see a DTI ratio of no more than 36%, but that is not necessarily the maximum.

Piggybackers will need to be prepared to make two mortgage payments. They will want to examine whether that secondary loan payment will be higher than PMI would be.

Lender-Paid Mortgage Insurance

In most cases with lender-paid mortgage insurance (LPMI), the lender pays the PMI on your behalf but bumps up your mortgage interest rate slightly. A 0.25% rate increase is common.

Monthly payments could be more affordable because the cost of the PMI is spread out over the whole loan term rather than bunched into the first several years. But the loan rate will never change unless you refinance.

Borrowers will want to look at how long they expect to hold the mortgage when comparing PMI and LPMI. If you need a short-term mortgage, plan to refinance in a few years, or want the lowest monthly payment possible, LPMI could be the way to go. Note: SoFi does not offer LPMI.

When PMI Is No Longer Required

Borrowers generally need to have 20% equity in their home to drop PMI.

The Homeowners Protection Act was put in place to protect consumers from paying more PMI than they are required to. Specifically for single-family principal mortgages closed on or after July 29, 1999, the law covers two scenarios: borrower-requested PMI termination and automatic PMI termination.

Once you’ve built 20% equity in your home, meaning you’re at an 80% LTV based on the home’s original value (the sales price or the original appraised value, whichever is lower), you can ask your mortgage loan servicer — in writing — to cancel your PMI if you’re current on all payments. Your monthly mortgage statement shows your loan servicer information.

The very date of this occurrence, barring no extra payments, should have been given to you in a PMI disclosure form when you received your mortgage. It’s based on your loan’s amortization schedule.

As long as you’re current on all payments, PMI will automatically terminate on the date when your principal mortgage balance reaches 78% of the original value of your home.

If that LTV ratio is not reached by the midpoint of the mortgage amortization period, PMI must end the month after that midpoint.

PMI vs. MIP vs. Funding Fees

The upside of PMI is that it unlocks the door to homeownership for many who otherwise would still be renting. The downside is, it adds up.

If you’re tempted to go with an FHA mortgage, realize that this type of loan requires up front and annual mortgage insurance premiums (MIP) that go on for the life of the loan if the down payment was less than 10%.

Mortgages insured by the Department of Veterans Affairs come with a sizable funding fee, with a few exceptions, and loans backed by the Department of Agriculture come with up front and annual guarantee fees.

Ways to Boost a Down Payment

A bigger down payment not only may allow a borrower to avoid PMI but usually will afford a better loan rate and provide more equity from the get-go, which translates to less total loan interest paid.

So how to afford a down payment? You could shake down Dad or Granny (just kidding; Grandma responds better to sweet talk than coercion). For a conventional loan, gift funds from a relative or from a domestic partner or fiance count toward a down payment. There’s no limit to the gift, but you may be expected to come up with part of the down payment. You’ll also need to present a formal gift letter to validate the funds given to you.

A gift of equity is a wonderful thing indeed. When a seller gives a portion of the home’s equity to the buyer, it is shown as a credit in the transaction and may be used to fund the down payment on principal or second homes.

You could look into down payment assistance from state, county, and city governments and nonprofit organizations, which usually cater to first-time homebuyers. And home listings on Zillow now include information about down payment assistance programs that might be available to buyers searching for homes on the platform.

Even if you can’t come up with 20%, it’s all good because PMI doesn’t last forever, and real estate is one of the key ways to build generational wealth.

The Takeaway

What is PMI? Private mortgage insurance typically goes along for the ride when a borrower puts less than 20% down on a conventional mortgage. A gift or other down payment assistance can fatten the down payment and help you avoid PMI. If you do end up paying, you can step away from PMI once your equity reaches 20%.

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

Is it better to put down 20% or pay PMI?

It would be great to make a down payment of 20% and avoid private mortgage insurance (PMI) but not everyone can afford it. It’s particularly hard for first-time homebuyers, who often don’t have income from the sale of another residence to fund their next home. Use a home affordability calculator to look carefully at monthly mortgage payment amounts for different home prices and interest rates. Then put down what you feel you can afford without compromising your ability to cover other bills.

How long do I have to pay PMI?

If you are paying private mortgage insurance, you’ll need to pay until you have built up 20% equity in your home (based on the original sale price of the home). At this point, you can request in writing that your loan servicer cancel PMI if you are current on your payments.

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.

SOHL-Q125-041

If you’re interested in living on a houseboat or just pleasure cruising, you’ll want to know the advantages and disadvantages of owning a houseboat.

Here’s a deep dive into the world of houseboats to help you understand what they are, how they work, and whether buying one is the right choice for you.

What Is a Houseboat?

A houseboat is a vessel built or modified to function primarily as a dwelling rather than just transportation.
When comparing houseboats to traditional boats, you can expect houseboats to have the features of a home, including one or more bathrooms, sleeping quarters, and a kitchen.

Houseboats, among the less common types of homes, are distinguished from other boats by their intended use as a dwelling.

Depending on how large the houseboat is and how much the owner is willing to invest, houseboats can range from barebones to luxurious.

Characteristics of a Houseboat

A houseboat stands out in the fleet of traditional boats.

Expect houseboats to be less seaworthy than boats specifically designed for transportation. The vast majority of houseboats are intended to be confined to lakes, rivers, and small bodies of water, not the open seas.

Houseboat vs. Floating Home

A houseboat and a “floating home” are different. Floating homes are meant to stay in one place, lacking an engine or navigation system. They usually have a floating concrete foundation.They’re generally much bigger than houseboats and cost more.

Even though some houseboats also dock in one place, most can motor to another location when needed or desired.

Houseboat Design

Houseboats may stretch from 20 feet to over 90 feet. A veranda or flybridge may help occupants make the most of outdoor views.

Hull design and materials vary. Here are some styles.

Pontoon: Flat-bottomed boat that’s supported by two to three floats, or pontoons, for buoyancy. This is common houseboat construction.

Full hull: Conventional boat hull with a large bilge that sits partly in the water and offers more space below deck.

Planing hull: Similar design to full hull but is designed to glide on top of the water at speed.

Catamaran hull: Parallel twin-hulled design that joins two hulls of equal size with a solid frame. The wide beam gives it better stability and handling.

Barge: Large flat-bottomed boat designed to handle heavy loads and operate in rivers and canals.

When researching the type of houseboat you want, you’ll want to make an informed choice when weighing livability and seaworthiness.

Pros and Cons of a Houseboat

It takes a special type of person to live on a houseboat. Here are some of the pros and cons of houseboat living to help you decide if you fall into this category.

Pros

•   Reduced living costs: The lack of land to maintain means you won’t have to worry about shoveling snow or mowing the lawn. You can also expect lower utility costs due to the square footage, which could be enticing to people wanting to downsize their home.

•   Nice views: You can’t get closer to waterfront living. Houseboat living offers the possibility of gorgeous lakeside or riverside views every day you wake up and go to bed.

•   Water activities: Depending on the season and local ordinances, you may be able to fish, canoe, and enjoy all the perks of life on the water without having to take extra time off for a vacation.

•   Lower rent or mortgage: Compared with the average stand-alone house, a houseboat may cost less to buy or rent.

•   Possible tax advantages: Houseboat owners may not have to pay property taxes (although a deeded slip in some areas is considered real property), but they may live in a state, county, or city that imposes personal-property taxes. Also, the IRS says a boat can be your main or secondary residence, entitling you to take advantage of the same tax deductions as the owner of a typical house.

Cons

•   Reduced living space: A modest houseboat may be smaller than most traditional homes.

•   Marina or HOA fees: If you want to remain moored and plugged into the grid, you’ll need to pay slip fees or homeowners association fees.

•   Maintenance: Expect to trade land maintenance expenses for boat maintenance costs. In some cases, you’ll need to find a contractor for repairs or an inspection.

•   Lack of permanence: If you intend to sail from dock to dock, you’ll need to make compromises when it comes to having a permanent mailing address or regular friends and neighbors.

How to Finance a Houseboat

Used houseboats start at a few thousand dollars. New houseboats may range from $250,000 to $750,000.

Can you get a mortgage loan for a houseboat? No. But you may be able to get another kind of loan if you have a credit score in at least the “good” range on the FICO® credit rating scale and meet other lender criteria.

Some banks, credit unions, and online lenders offer boat loans. A marine loan broker can help you find and negotiate a boat loan, but the broker fee is often 10% or more of the houseboat purchase price. The loan might require 10% to 20% down. Note: SoFi does not offer boat loans, although it does offer personal loans, which are another financing option. Most personal loans are unsecured, meaning no collateral is needed.

A personal loan is another option. Personal loans of up to $100,000 are offered by a few lenders. Most are unsecured, meaning no collateral is needed.

A marine loan broker can help you find and negotiate financing, but the broker fee is often 10% or more of the houseboat purchase price. The loan might require 10% to 20% down.

If mortgage rates are ebbing, a cash-out refinance can work for some homeowners.

Other homeowners with sufficient home equity can apply for a home equity line of credit (HELOC) or home equity loan and use that money to buy a houseboat. The rate will typically be lower for an equity product using your home as collateral than that for an unsecured personal loan.

What if your credit isn’t good? So-called bad credit boat loans are afloat out there. They come with a high interest rate. Note: SoFi does not offer bad credit boat loans.

Just as you would shop around for the best mortgage loan offer, you will want to compare a number of houseboat financing options.

Finding a Houseboat to Buy vs. Building One

The cost of buying vs. building a house depends on size, location, the cost of labor and materials, and your taste, and the same holds true of houseboats.

Clearly, buying a used houseboat is almost always quicker and more convenient than trying to build one from scratch. However, if you have the knowhow to build your own houseboat, you’ll have much more freedom when it comes to how you want to design things.

If you’re deciding whether to buy or build a houseboat, you’ll want to consider your budget, time, availability, expertise, facilities, and tools.

Also consider how you would transport the houseboat from land to water when it’s done.

As for the question of time, most custom houseboat builds take months, if not more than a year, to complete. It’ll be much faster and easier to jump into houseboat living with an existing houseboat.

The Takeaway

Houseboats are a novel option for water lovers, including downsizers, retirees, and free spirits. Living on a houseboat can be cheaper than in a traditional home, but you’ll want to make sure you understand the advantages and disadvantages of living on a houseboat before committing. If you are ready to take the plunge, two options for financing your houseboat include a personal loan or a HELOC.

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

Can you live on a houseboat year-round?

Yes, but you’ll need to compensate for changes in the weather, particularly if the waters where you’re docked tend to freeze during the winter months. This includes ensuring that your houseboat is insulated and heated through the winter.

How long does it take to build a houseboat?

Construction could take 12 to 18 months to complete, depending on whether you’re building a custom houseboat on your own or enlisting the help of professionals.

Can you get a loan for a houseboat?

Yes, but not a traditional mortgage. Options include a boat loan, a personal loan, a home equity loan, and a HELOC.

How does a toilet work on a houseboat?

A marine toilet usually empties into a black-water holding tank until the boat reaches a marina pumping station, or the tank treats the waste and it’s eventually released in a designated discharge area. Noncruising houseboats usually have a hookup that takes out waste through a sewage line.

Photo credit: iStock/wayra

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.

SOHL-Q125-039

For many, age 62 is an appealing time to step away from the workforce. You’re old enough to start claiming Social Security benefits, yet still young enough to enjoy pursuing hobbies, travel, and spending time with family. But deciding to retire at 62 is a complicated choice that requires looking carefully at your financial situation, health care needs, and lifestyle goals. Below are some guidelines that help you decide whether you can (or should) retire at 62, plus a look at the pros and cons of retiring on the early side.

Factors to Consider Before Retiring at 62

If you’re thinking about retiring at 62, you’ll want to explore how it will impact your Social Security benefits, health care costs, living expenses, and lifestyle. Let’s look at each factor in more detail.

Social Security

At 62, you’re eligible to start claiming Social Security benefits, but doing so comes with a caveat. Opting for early benefits reduces your monthly payments compared to waiting until your full retirement age, which is between 66 and 67, depending on your birth year. Claiming benefits at age 62 can permanently reduce your monthly payments by up to 30%, which can significantly impact your long-term financial security.

You can check your Social Security account to see how much you’ll get when you apply at different times between age 62 and 70. If you don’t already have an account, you can create one at Login.gov.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

Health Care

Health care is a major consideration for anyone looking to retire at 62. Medicare eligibility starts at 65, leaving a potential three-year gap in coverage. That means you’ll need to secure health insurance, which can be costly. Options include purchasing private insurance, relying on a spouse’s employer-sponsored plan, or exploring coverage through the Affordable Care Act marketplace. Evaluating your health care needs and the associated costs is crucial before deciding to retire early.

Expenses

To determine if you can retire at 62, you’ll need to understand your post-retirement expenses, so that you can identify how much you may need in retirement savings. While some costs may decrease, such as commuting or work-related expenses, others may increase, like travel, hobbies, and medical care. Creating a detailed budget can help you estimate your monthly expenses and determine if your savings and income streams will be sufficient to cover them. When projecting your annual expenses, keep in mind that many expenses will go up over time due to inflation.

Recommended: How Much Do You Need to Retire? 3 Rules of Thumb to Consider

Lifestyle Change

Retiring at 62 isn’t just a financial decision; it’s a lifestyle shift. Leaving the workforce means more time for hobbies, travel, and family, but it can also mean a loss of routine, purpose, and regular social interaction. Many retirees struggle with the psychological transition and find themselves missing the structure and camaraderie of the workplace. It’s wise to think about how you’ll fill your days and stay engaged without your old routine. You’ll also want to make sure that your financial resources will support your desired post-retirement lifestyle.

Are You Financially Ready to Retire at 62?

To figure out if you can retire at 61, you’ll need to assess your assets and how far they will take you. Here’s how.

Savings and Investments

The earlier you retire, the longer your nest egg needs to last. Do you have enough money set aside in savings and investments to support your desired lifestyle for 30-plus years? As a general rule of thumb, experts recommend having eight to 10 times your annual income saved by the time you retire. For example, if you earn $60,000 annually, you should have $480,000 to $600,000 saved. If you’re looking to retire at 62, it can be wise to shoot for the higher end of that range or even beyond that. This can help make up for fewer earning years and (likely) more years to spend your savings.

If your savings aren’t quite where you’d like them to be, there are ways to catch up, such as working a bit longer or adjusting your investment strategy.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Retirement Withdrawals

Understanding how much you can withdraw from your retirement savings each year is crucial to avoid outliving your money. One guideline to consider is the 4% withdrawal rule. This rule suggests withdrawing 4% of your retirement investments (such as a 401k or an online Roth IRA) annually, adjusting that percentage each year for inflation, to fund a 30-year retirement.

As an example, let’s say you want to retire at 62 with $500,000 saved. If you follow the 4% rule, you’d only be able to withdraw $20,000 your first year in retirement, or just under $1,700 per month. That could constrain your lifestyle, though it doesn’t include what you may get from Social Security.

When calculating your annual retirement withdrawals, keep in mind that the 4% rule isn’t foolproof, especially during market downturns. You may need to adjust withdrawals based on your expenses and the performance of your investments.

Pros and Cons of Retiring at 62

To decide if you should retire at 62, it’s a good idea to weigh both the advantages and disadvantages of early retirement. Here’s how they stack up.

Benefits of Retiring at 62

•   More time for personal goals: Retiring early gives you extra time to pursue passions, hobbies, or travel while you’re still relatively young.

•   Less work-related stress: Exiting the workforce can alleviate stress and allow you to focus on your well-being.

•   Family time: Retiring early lets you spend more quality time with loved ones, which might include helping with grandchildren or caregiving for aging parents.

•   Opportunities for a second act: Early retirement can free up time to start a small business, volunteer, or explore a new career on your terms.

Drawbacks of Retiring at 62

•   Reduced Social Security benefits: Claiming Social Security at 62 permanently reduces your monthly benefits.

•   Health care costs: Without Medicare coverage, health insurance expenses can take a significant bite out of your savings.

•   Longevity risk: Retiring early increases the risk of outliving your savings, particularly if you live well into your 80s or 90s.

•   Missed earnings: Leaving the workforce early means missing out on additional income, savings, and potential employer contributions to retirement accounts.

Tips to Live Comfortably If You Decide to Retire at 62

If you’re looking to retire at 62, keep these retirement planning strategies in mind.

•   Create a budget: Before you leave the workforce, it’s a good idea to track your expenses and come up with a realistic budget for your retirement years. Keep in mind that some expenses (like commuting to work) will go down, while others (like health care and discretionary spending) will likely go up once you retire.

•   Consider downsizing: To make your retirement savings go further, you might look into moving to a smaller home or a more affordable area to reduce housing costs.

•   Explore part-time work: Even if you choose to retire from your full-time job, you don’t have to fully exit the workforce. You might explore part-time work or consulting to supplement income while maintaining flexibility.

•   Delay Social Security (if possible): Consider using savings to bridge the gap and delay claiming Social Security benefits for a higher payout. The amount you can receive will be higher the longer you wait to apply, up until age 70.

•   Stay healthy: Prioritizing preventive health care and maintaining an active lifestyle can help minimize medical expenses.

•   Maximize investments: It’s a good idea to keep your investments diversified and regularly review your portfolio with a financial advisor.

The Takeaway

Retiring at 62, the earliest age you can receive Social Security benefits, may be a viable option. But it’s important to look before you leap. To determine if you can realistically retire at 62, assess your current assets, estimate future income, consider your preferred lifestyle, and determine how you’ll pay for health care until Medicare starts. You’ll also want to weigh the benefits of retiring early (such as reduced stress and more personal time) against the potential drawbacks (like reduced income and less social interaction).

If your dream is to retire early, you’ll want to implement strategies that can help you achieve your goal. With the right preparation, retiring at 62 can be a rewarding new chapter of life.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

FAQ

How much money do you need to retire at 62?

The amount you need to retire at 62 depends on your lifestyle, health care costs, and expected longevity. As a general rule of thumb, financial experts recommend having eight to 10 times your annual income saved before retiring. For example, if you earn $70,000 annually, you’ll need at least $560,000 to $700,000. To retire at 62, you generally want to aim for the higher end of that spectrum to make up for fewer working years and, presumably, more years to spend your savings.

How much social security will you get if you retire early at 62?

If you retire at 62, you can claim Social Security benefits, but your payments will be reduced by as much as 30%. The exact reduction will depend on your full retirement age (FRA), which is somewhere between age 66 and 67, depending on your birth year. You can see how much you’ll get when you apply at different times between age 62 and 70 by logging into your Social Security account (if you don’t have one, you can create one at SSA.gov).

Is retiring at 62 a good idea?

Retiring at 62 can be a good idea if you’re financially prepared and eager to enjoy more leisure time. It allows for early access to Social Security benefits and freedom from work-related stress. However, early retirement also comes with challenges, which include reduced Social Security benefits, a health insurance gap before Medicare eligibility at 65, and a longer retirement period to fund.
To determine if you should retire at 62, it’s important to consider your savings, expenses, and desired lifestyle. If you have sufficient resources to fund early retirement, retiring at 62 can be rewarding. Otherwise, waiting may offer greater financial stability.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

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