Looking for a relatively affordable property? Let’s hit the town. For many buyers, a townhouse is the sweet spot in real estate. But what is a townhouse? It’s not a detached single-family home, but it isn’t a condo, either. Let’s see how townhomes stack up.
What is a Townhouse?
A townhouse, or townhome, is distinct among the different types of homes. It is defined as a single-family unit that has:
• Two or more floors
• A shared wall with at least one other home
• Ownership that differs from a condo: You own the inside and outside of your unit and the land it sits on, whereas a condo owner owns the interior of the condo
The meaning of the word townhouse can be traced back to 19th century England. The rich and royalty would have a large manor in the country but also a home “in town.” The definition has evolved over the years. A townhome doesn’t need to be a second home, and it doesn’t even need to be in the city. In some parts of the U.S., townhouses with a similar design and facade are also called row houses.
💡 Quick Tip: When house hunting, don’t forget to lock in your home 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.
Pros and Cons of a Townhouse
Townhouses come with a fair share of benefits, but like any home, it’s not one size fits all. Consider these pros and cons of buying a townhouse.
Pros
• Makes the most of space. As townhomes share a wall or two with neighbors, and are often in densely populated areas, they use space efficiently.
• Affordability. Because of their shared walls and space-saving layout, townhomes are often more affordable than single-family homes in the area.
• Independence, with less maintenance. Townhouses usually have less upkeep than single-family homes. There might be a small yard, and your own roof, to maintain.
• Lower property taxes. A townhome owner may pay less in property taxes than the owner of a standalone home.
• HOA perks. Some townhomes are part of homeowners associations. If amenities like a pool, gym, and maintenance of common areas and possibly your own little yard are a priority, a townhome with an HOA could be a good fit.
• Looser rules. The HOA rules may not be as strict as those for a condo.
Cons
• Limited landscape options. Townhouse lots are small. If you want space for landscaping, it’s unlikely you’ll find much with a townhouse.
• Uncreative exteriors. If the townhome is part of an HOA, the ability to decorate the exterior of the unit could be limited. Townhomes typically look very similar to their neighboring units as well, so standing out could be a no-no.
• Stairs, stairs, and more stairs. Townhomes have an efficient build for spaces where land is at a premium. That means building up, not out. A townhome may have three (or more) floors, meaning climbing stairs repeatedly.
• Less privacy. Townhouses have at least one “party wall,” or wall shared with another property. That could be a problem for buyers who prioritize peace and quiet if the neighbors are loud.
• Less appreciation. As a rule of thumb, townhomes don’t gain as much value as single-family homes do.
• HOA fees. If the community has an HOA, it will charge a monthly or quarterly fee to cover communal perks. The fees usually rise over time, and can be high at a complex full of amenities.
Finding a Townhouse
Finding a townhouse will depend on where a buyer is looking. Most commonly, they’re encountered in densely populated areas where land might be pricey and scarce. The search may be more restricted if a buyer wants to purchase a townhome in an HOA community. One place buyers typically won’t find townhomes is in rural or secluded areas. Land may be more affordable and plentiful, which means properties don’t need to be condensed.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Who Should Get a Townhouse?
A townhome might be the right option if the buyer:
• Isn’t interested in much maintenance. Maintaining your unit and your parcel of land will almost always be less intensive than maintaining a detached single-family home and yard. If there are HOA fees, they might include landscaping services.
• Is a first-time buyer. The lower cost and maintenance of a townhouse might be the right fit as a first-time homebuyer learns the ropes of homeownership and looks into homeowner resources.
• Is on a budget. Generally, a townhouse will cost less than a single-family home in the same area. Buyers could live in a desirable area without paying top dollar. (A calculator for mortgage payments helps buyers see the effect of different down payments.)
• Wants to live in an urban or suburban area. Because townhomes are built in areas where space is at a premium and the cost of living is high, a townhouse could be the right fit.
The Takeaway
With less maintenance (and potentially a lower price tag) than a detached single-family home, a townhome can be a great opportunity for buyers. Townhomes qualify for the same kind of mortgages that detached single-family homes do, and they require less exterior maintenance than a detached home. So there’s a lot to love about living in a townhouse.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How is a townhouse different from a house?
The biggest difference between a townhouse and a detached single-family house is the shared walls. A townhome may have one or more “party walls” with the properties adjacent to it.
Do townhouses have backyards?
Some townhomes may have a small backyard or patio, but that’s not a requirement for a home to be considered a townhouse.
Can you get a loan to buy a townhouse?
Yes. Similar to purchasing a traditional single-family home, townhouse buyers can use a home loan to purchase the property.
Photo credit: iStock/JARAMA
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Historically speaking, mortgage rates have remained relatively low since the Great Recession, with some fluctuation at times due to market conditions. As a result, a generation of homebuyers has become accustomed to a low 30-year fixed-rate mortgage.
But with mortgage rates on the rise, it can put a sour taste in the mouths of people trying to join the ranks of homeowners in the country. They may be thinking that they missed an opportunity to buy a home. However, it’s important to look at the history of mortgages and mortgage rates to put the current conditions into context.
• Historical mortgage rates have been relatively low since the Great Recession, encouraging a generation of homebuyers.
• The Federal Housing Administration initiated modern mortgage lending in the U.S. during the 1930s.
• Mortgage rates peaked at 18.63% in October 1981 due to tight monetary policies.
• Post-2007, rates dropped significantly, influenced by the Federal Reserve’s efforts to stimulate the economy.
• Recent trends show a rise in mortgage rates, reaching 7.79% in October 2023 before slightly decreasing.
The History of Mortgage Rates
The modern history of mortgage lending in the U.S. began in the 1930s with the creation of the Federal Housing Administration. From the 1930s through the 1960s, a combination of government policy and demographic changes made owning a home a normal part of American life. During this time, the 30-year fixed-rate mortgage became the standard for home mortgage loans.
When discussing the fluctuation of mortgage rate trends, analysts usually refer to the average 30-year fixed-rate mortgage. Here’s a look at the trend of these mortgage rates since the 1970s.
The 1970s
Throughout the 1970s, mortgage rates rose steadily, moving from the 7% range into the 13% range. This uptick in rates was due, in part, to the Arab oil embargo, which significantly reduced the oil supply and sent the U.S. into a recession with high inflation — known as stagflation.
As a result, Federal Reserve Chairman Paul Volcker made a bold change in monetary policy by the end of the decade, raising the federal funds rate to combat inflation. Though the Federal Reserve doesn’t directly set mortgage rates, its monetary policy decisions can still impact many financial products, including mortgages.
The 1980s
The average 30-year fixed-rate mortgage hit an all-time high in October 1981 when the rates reached 18.63%. The Federal Reserve’s tight monetary policy affected this high borrowing cost and put the economy into a recession. However, inflation was under control by the end of the 1980s, and the economy recovered; mortgage rates moved down to around 10%.
The 1990s and 2000s
Mortgage rates continued a downward trend throughout the 1990s, ending the decade at around 8%. At the same time, the homeownership rate in the U.S. increased, rising from 63.9% in 1994 to 67.1% in early 2000.
Several factors led to a housing crash in the latter part of the 2000s, including a rise in subprime mortgages and risky mortgage-backed securities.
The housing crash led to the Great Recession. To boost the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Mortgage rates dropped from just below 7% in 2007 to below 5% in 2009.
Mortgage rates steadily decreased throughout most of the 2010s, staying below 5% for the most part. The Federal Reserve enacted a zero-interest-rate policy and a quantitative easing program to prop up the economy during this time following the Great Recession. This helped keep mortgage rates historically low.
The 2020s
The Federal Reserve reduced the federal funds rate to near-zero levels in March 2020, causing a drop in rates of various financial products. The effects of the fallout from the Covid-19 pandemic pushed mortgage rates below previous historic lows. The average 30-year fixed-rate mortgage hit 2.77% in August 2021.
However, with inflation reaching levels not experienced since the early 1980s, the Federal Reserve reversed course. The central bank started to tighten monetary policy in late 2021 and early 2022, which led to a rapid increase in mortgage rates. In May 2022, the average mortgage rate was above 5%. While this was below historical trends, it was the highest rate since 2018. From there, the 30-year fixed rate mortgage crept upward, reaching a high of 7.79% in October 2023 before declining to 7.1% in April 2024.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Why Do Mortgage Rates Change?
As we can see from looking at interest rate fluctuations, major economic events can significantly impact mortgage rates both in the short and long term. As noted above, this has to do primarily with the Federal Reserve.
Federal Reserve actions influence nearly all interest rates, including mortgages through the prime rate, long-term treasury yields, and mortgage-backed securities. The Federal Reserve sets the federal funds benchmark rate, the overnight rate at which banks lend money to each other.
This rate impacts the prime rate, which is the rate banks use to lend money to borrowers with good credit. Most adjustable short-term rate loans and mortgages use the prime rate to set the base interest rates they can offer to borrowers. So, after the Federal Reserve raises or lowers rates, adjustable short-term mortgage loan rates are likely to follow suit.
Longer-term mortgage rates have also risen and fallen alongside economic and political events with movement in long-term treasury bond yields. In the short term, a Federal Reserve interest rate change can affect mortgage markets as money moves between stocks and bonds, affecting mortgage rates. Longer-term mortgage rates are influenced by Fed rate changes but don’t have as direct an effect as short-term rates.
If you have a mortgage with a variable interest rate, known as an adjustable-rate mortgage, changing rates can affect your loan payments. With this type of home loan, you may have started with an interest rate lower than many fixed-rate mortgages. That introductory rate is often locked in for an initial period of several months or years.
After that, your interest rate is subject to change — how high and how often depends on the terms of your loan and interest rate fluctuations. These changes are generally tied to the movement of interest rates, but more specifically, which index your adjustable-rate mortgage is linked to, which can be affected by the Fed’s actions.
However, most adjustable-rate mortgages have annual and lifetime rate caps limiting how high your interest rate and payments can change.
If you took out a fixed-rate mortgage, your initial interest rate is locked in for the entire time you have the home loan, even if it takes you 30 years to pay it off.
If you are in the market to buy a home, it might be tempting to rush and buy when mortgage rates drop a bit, or to put off buying until rates hopefully decrease in the future. However, choosing the perfect time to buy a home based on the ideal rate can be difficult. You’re probably better off letting your need for a home and your personal financial situation drive your decision making. (Do you have a down payment saved up? Is your debt under control?) When it’s time to buy, do your research and choose the best mortgage available for your personal situation.
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 Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Open houses, mortgage paperwork, bidding wars: Buying a home can take a lot of effort these days. Some in-the-know prospective buyers, though, may have a special perk: access to properties before they even hit the market.
The practice, known as pocket listings or whisper listings, has become more common in real estate recently, as the market hit full boil during the pandemic.
While this insider access may sound enticing, you may wonder if these listings are legal and have financial implications. Read on to learn the scoop and see whether these listings might help you land your dream home.
What Are Whisper Listings?
Whisper listings are properties that are promoted by a real estate broker to an exclusive group of trusted agents to find a buyer who can pay the desired asking price. In other words, agents utilize their professional networks to sell a property rather than putting it on the market. Prospective buyers outside an agent’s inner circle will likely never know the property was for sale.
A little more detail may help clarify the whisper listings definition:
• Whisper or pocket listings are not listed on a multiple listing service (MLS) — the databases real estate professionals use to help clients buy and sell property — even though they’re technically for sale. Popular listing websites like Zillow and Realtor.com source many of their listings from MLS feeds.
• You also won’t find a “For Sale” sign in the front yard of a secret real estate listing.
Overall, whisper listings tend to make up a small percentage of real estate sales, but when focusing on top-tier properties, the numbers can rise significantly. Those who are selling their high-priced homes often don’t want to do open houses or otherwise have a lot of people walking through their property. Estimates run as high as 50% to 75% of homes in the highest-price bracket never hitting the market.
💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Are Pocket Listings Legal?
Yes, although there are consumer rights and laws that offer some protection to prospective homebuyers. For example, the Fair Housing Act gives buyers the right to be free from housing discrimination during the sale, financing, or rental of a property.
Because of their exclusivity, whisper listings have been criticized as discriminatory. In fact, the National Association of Realtors® established a clear cooperation policy in 2019 with the goal of reinforcing consumer benefits and competition in the housing market.
The new policy requires Realtors to list any property they are marketing to buyers on association-owned MLSs. New listings must be submitted within one business day of any public marketing, meaning other agents should be aware of and able to see the property the following day.
There are some loopholes in the policy that allow whisper listings to continue in specific circumstances. Namely, Realtors can still take advantage of “office exclusives,” which are listings shielded from the public and marketed to their internal agency network. The agents in those offices can then share the property information with their clients.
Listing agents can also take advantage of the one-business-day grace period to promote the property to a select clientele. The policy is that “within one business day of marketing a property to the public,” which can include yard signs and flyers displayed in windows, “the listing broker must submit the listing to the MLS for cooperation with other MLS participants.” Since business days exclude weekends and holidays, the exclusive group of buyers can get a jump on the competition for putting in an offer.
How to Find Whisper Listings
By definition, pocket listings are about connections and insider knowledge. A useful place to start is by finding a real estate agent with a strong professional network and familiarity with the neighborhood you’re hoping to buy in.
Experienced agents may be more prepared to figure out how to find pocket listings thanks to a larger client base, too. Having handled numerous real estate transactions in the community, they could have insight into when former clients want to put their homes back on the market.
They may also know the prices and terms that prior clients would be willing to part with their homes for. Essentially any property can be treated as a whisper listing if you’re able to make an offer on a house that is attractive to the owners — even if they weren’t considering selling.
Is It a Smart Approach to Home Buying?
Real estate whisper listings may be advantageous for buyers for several reasons.
• First, there is generally less competition for off-market homes than those listed widely on an MLS, helping buyers purchase a home at or below asking price. This can be especially valuable in a tight or hot housing market.
• Given the word-of-mouth nature of pocket listings, potential buyers are generally hand-picked by listing agents based on both their qualifications and the type of property they’re looking for. This approach can cut down on the number of showings in the home buying process, which may be important for some buyers due to privacy and time.
Before committing to this strategy, there are some additional benefits and drawbacks to consider.
Pros of Secret Real Estate Listings
A secret real estate listing can offer advantages to sellers and buyers alike.
• For sellers, a pocket listing affords considerable privacy — both in terms of keeping the sale status under wraps and reducing foot traffic at a property. By focusing on qualified buyers in the listing agent’s network, the sale process could be expedited without the hassle of negotiations and contract contingencies.
• Sellers may opt for a pocket listing to test out an asking price and gauge interest. If the whisper listing doesn’t secure a full-price offer, sellers can reconsider the price before putting the property on the open market to attract new buyers without any record of a price change. This is helpful since prospective buyers may view a price cut as an opportunity to make an offer under the asking price.
• The primary benefit for buyers is reduced competition on a property. Since the listing has only been shared with a select group, it’s less likely that a listing will go into the realm of counter offers and bidding wars.
• Whisper listings are often pursued in the hope of fetching top dollar from buyers. From a buyer’s perspective, the perk of first dibs on a property may come at the expense of an accurate assessment of its value and the ability to negotiate a house price. Putting aside the allure of exclusive access is important to ensure that the property fits your needs and makes financial sense.
• For sellers, a secret real estate listing limits the potential pool of buyers instead of promoting the property on any of the hundreds of multiple listing services and across major real estate sites. Opening a property to the market can increase your chances of a multiple-offer situation and getting bids over the asking price.
• While a pocket listing may reduce the hassle of multiple showings, the approach could extend how long it takes to find a buyer for the price you want.
The Takeaway
A whisper listing, also known as a pocket listing, is shared only with an exclusive group of an agent’s inner circles. Secret real estate listings can offer advantages to both sellers and buyers: The seller has privacy and perhaps a better-qualified pool of prospects, while buyers may face less competition. There are also drawbacks, however, as these listings may present pricing and timing challenges.
Here’s something that isn’t a secret: If you’re house hunting and need financing, getting prequalified is a useful first step to show you’re a serious buyer and can afford the property.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
Photo credit: iStock/archigram
*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.
‡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. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
If you need expensive dental work, you’re likely wondering how to pay for it. After getting a quote from your dentist and learning how little your insurance will cover, you may be thinking, I must be missing a way to afford this.
There’s good news and bad news when it comes to how to finance expensive dental work. Bad news first: Despite insurance, dental work can cost a lot out-of-pocket. The good news: While there’s probably not an easy solution to covering the whole bill, there are many tricks you can use to make your dollar stretch farther (and possibly even get a tax break while you’re at it).
Here, learn smart strategies about how to pay for dental work. Altogether, these ideas can add up to quite a discount off your dentist’s quote.
Key Points
• Dental care can be very expensive, but there are strategies to help you pay for large bills.
• Dental insurance can significantly lower costs when using in-network providers.
• Payment plans from dentists or third parties help manage large payments over time, and some dentists will negotiate their fees.
• FSAs and HSAs can provide tax-free savings for dental expenses, enhancing affordability.
• Other sources of funding for dental bills include credit cards, emergency funds, and personal loans.
10 Ways to Pay for Dental Work
Many people cover their dental work by combining several of the strategies below. It’s tough to avoid paying out-of-pocket entirely, but you can often get a hefty discount off the original quote. Here, how to pay for dental work:
1. Dental Insurance
You should know that there’s a difference between a dental office that takes your insurance and a dental office that is in-network. A dentist may take your insurance even though they are out-of-network.
When a dentist says that they take your insurance, that likely means that they will file an insurance claim for you. But if your insurance doesn’t cover a procedure or service, the price will generally be set at your dentist’s discretion — and you’ll typically be responsible for paying the costs out-of-pocket.
Generally, using an out-of-network dentist means your insurance will cover less so you’ll pay more. Being in-network, on the other hand, usually means that your insurance company has prenegotiated the fees with the dentist, and they generally can’t charge more than that. So you’ll usually pay less with an in-network dentist.
Dental work isn’t typically covered by medical insurance, but certain procedures may be covered if they’re deemed medically necessary. For instance, some kinds of oral surgery potentially can be billed as a medical procedure. Before you move forward with any dental work, it’s a smart idea to talk to your medical insurance company to find out what may be covered. This could help you afford a major dental bill.
Paying a bill on a weekly or monthly basis can be much more manageable than paying it in a lump sum. That’s why many dental offices offer payment plans for procedures not covered by insurance.
Payment plans can be offered directly through your dentist’s office, or by third-party services like CareCredit. Ask about the specific terms of any payment plan offered. For example:
• What procedures qualify for a payment plan?
• Will they charge interest? And if so, how much?
• Are other fees involved?
• Do they have to check your credit first? If so, will it be a hard or soft inquiry?
Asking these questions beforehand can help keep you from getting blindsided by unexpected costs.
4. Flexible Spending Account
A Flexible Spending Account (FSA) is a special savings account offered through some employer benefit plans. FSAs allow employees to pay for certain out-of-pocket medical and dental costs with tax-free money.
The typical taxpayer saves about 30% in federal, state, Social Security, Medicare, and Unemployment taxes. That translates to a 30% discount off all eligible medical and dental expenses, which could be an idea for how to pay for expensive dental work.
FSA rules cap the amount of money that can be placed in the account each year ($3,300 for 2025 per the Internal Revenue Service, or IRS) and also dictate which types of expenses are FSA-eligible. Most routine dental work and orthodontia qualify: cleanings, X-rays, fillings, crowns, extractions, implants, and Invisalign.
FSAs can’t be used for any procedure that is considered cosmetic, including teeth whitening and veneers. But in some instances, if a typically cosmetic procedure is deemed medically necessary — as with some veneers — you may be able to use your FSA. Talk to your dental insurance company for more information.
One drawback of FSAs is that any funds that are unused at the end of the plan year are forfeited — so make sure you don’t leave any money on the table. In the plus column, because FSAs are funded with pretax dollars, they reduce your taxable income, which is always nice.
5. Health Savings Account
A Health Savings Account (HSA) is similar to an FSA in several ways:
• Both are funded with pretax dollars
• Both are used to cover health care expenses
• Both can be established through your employer, and funded with payroll deductions
• HSAs must be used with a High Deductible Health Plan (HDHP)
• The 2025 HSA funding cap is $4,300 for individuals, $8,550 for families
• HSA funds roll over from year to year
• You can set up an HSA through some health insurance companies and banks, making them a good option for the self-employed
If you don’t have access to an FSA — and you are currently covered by a high-deductible health plan — you can open an HSA at any time.
6. Negotiate With Your Dentist
The cost of dental work can actually be negotiable, depending on your dentist and your situation. First, have your dentist walk you through the treatment plan. Ask lots of questions, including:
• Are all the procedures they’re suggesting equally urgent? Can some be postponed?
• Can you get a discount by paying cash or the entire cost upfront? Some dentists give a percentage off for this.
• If you don’t have insurance, ask if you can score an uninsured rate.
Some dentists will be flexible, and the worst that can happen is they say no. Another thing you can do is to have an honest conversation with your dentist about your financial situation. If your budget has no breathing room, see if they are open to giving you a discount or if they are willing to push out your bill for a few months.
If the planned dental work is important but not super urgent, you may be able to schedule your appointments so they straddle two plan years. For example, if your plan year is January-December, you might schedule half the appointments for December, and half for the following January. That way, you can take advantage of two annual benefit maximums for insurance and two years’ worth of FSA or HSA funds.
7. Get Work Done at a Dental School
Having work done at a well-regarded dental school may be an option to make expensive dental work more affordable. Search online to see if you live within easy distance of a dental school that offers discounted services. Some schools may provide lower-cost exams and procedures as a way of training their students and giving them real-world experience, under the supervision of skilled, highly trained dentists. The cost can be up to 50% lower than what you might find elsewhere.
If you have access to this and want to go this route, it can be wise to carefully check online reviews to hear how others’ experiences went and feel confident in your decision.
In some circumstances, a credit card can be a suitable payment option for dental bills. If you have a card that offers rewards or cash back, it can also provide some benefits in return.
You might also consider looking for a medical credit card. These cards are issued by banks, credit unions, and other lenders and can only be used for health care and within a specific provider network.
Some medical credit cards defer interest for a period of time after your health care charges are incurred — much like 0%-interest cards. No interest is charged so long as those charges are paid off in full before the interest-free period expires. Late payments or balances that have not been fully paid before the deferment period ends can incur interest charges. Make sure you read the fine print and are comfortable with the fees involved before signing up for one of these cards.
Speaking of 0%-interest cards, they’re another option to finance expensive dental work. By law, these interest-free promotional financing offers must last at least six months. But the most competitive offers go well beyond this to offer 0% introductory APR financing for 18 months or longer.
Before you commit to a new card, it’s a good idea to shop around for the best terms and make sure dental work meets the requirements for any rewards. Credit card debt can be a significant financial issue, so it’s wise to know the exact benefits and downsides of this kind of card. You might want to consider getting a personal loan or borrowing from family instead.
9. Personal Loan
Because of this flexibility, many people use personal loans to pay for out-of-pocket medical expenses or to consolidate high-interest debts through a debt consolidation loan
Using a personal loan to finance dental work might be a better option than a credit card. The lower the interest rate, the lower your monthly payment. And personal loans tend to have lower interest rates than credit cards. As of December 2024, credit cards have an average interest rate of more than 20%, but online lenders may offer significantly lower personal loan interest rates (even less than half that percentage) to qualified borrowers.
By using a personal loan calculator, you can compare this option to, say, using a credit card or dipping into your savings.
How much you can borrow is also flexible, and getting approved for a personal loan can be done entirely online. In short, a dental loan might be a good option to cover additional dental needs, from basic fillings to more complex, high-cost procedures.
10. Emergency Fund
Tapping your emergency fund won’t offer a discount on your dental bill, but it can provide a way to pay it. One of the cornerstones of good financial management is to build an emergency fund, typically holding three to six months’ worth of living expenses. The typical scenarios for withdrawing funds from your emergency savings account include paying bills if you lose your income or taking care of an unexpected large medical, dental, or car repair bill. So if you receive a major dental bill and need cash, your emergency fund could be an answer.
Remember, emergency funds aren’t built in a day. Setting up automatic payments into this account from your checking can be a smart move; it’s fine if it’s a small sum like $25 per paycheck to start. And don’t forget to keep the money in a high-yield savings account so it can grow until you need to use it.
The Takeaway
When it comes to how to pay for expensive dental work, there is no one perfect solution. But there are a number of resources and tricks you can call upon to stretch your dollar. Discuss your options with your dentist to find out what discounts and payment plans they may offer. Avail yourself of an FSA or HSA to pay with pretax dollars, if possible, or pay your bill with a 0% interest credit card, rewards card, or medical credit card, among other tactics.
Another option is to finance your dental work with a personal loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.
FAQ
What can I use as financial assistance for dental work?
To finance expensive dental work, you may have to employ a few different tricks. First, if you have an FSA or HSA, paying your bills with pretax funds will net you an effective 30% discount. You can also schedule work to straddle two plan years so that your dental insurance and FSA/HSA cover twice the annual amount. If you’re uninsured, explain your financial situation to your dentist to see if they’ll offer a discount. And consider taking out an unsecured personal loan.
Can I use a personal loan as financial assistance for dental work?
Yes, a personal loan can be a great option for covering expensive dental work, compared to high-interest revolving credit. Shop around for the best rate and terms, and read the fine print to make sure you fully understand the fees involved for any option you are considering.
Is it hard to get financial assistance for dental work?
It will take some work on your part, but financial assistance is available for low-income patients through dental schools, clinical trials, United Way, Medicare, and Medicaid. Find out what kind of assistance you may be eligible for on the U.S. Department Health & Human Services website at HHS.gov.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This content is provided for informational and educational purposes only and should not be construed as financial advice.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
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.
When you close on a home, one of the most important documents you’ll review and sign is your mortgage note. It’s an agreement between you and the lender that outlines the terms and conditions of the mortgage. The document tells you how much and when to pay, and spells out the consequences if you don’t.
What Is a Mortgage Note?
A mortgage note, often referred to as a promissory note, is what you sign when you agree to take on the responsibility of a mortgage. The note outlines:
It’s one of the key documents you’ll sign at closing.
Promissory notes also may be used in owner-financed home sales. The buyer and seller sign the document, which contains the loan terms. When a borrower pays the seller directly, the promissory note gives the lender the ability to enforce their rights through a mortgage lien, foreclosure, or eviction.
💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
What Is Included in a Mortgage Note?
The mortgage note outlines the conditions and responsibilities of the buyer. You’ll see sections like these in a mortgage note:
• Borrower’s promise to pay. This section includes the total amount of money you’re borrowing and the name of the lender to whom you will remit payment.
• Interest. The interest rate charged on the unpaid principal is listed here.
• Payments. Borrowers agree to pay a monthly amount before or on a specific date. The place where borrowers can remit payment is also listed.
• Borrower’s right to prepay. This section specifies a borrower’s ability to pay toward the mortgage principal without penalty. (Some lenders charge a fee if you pay off some or all of the principal early. Make sure you understand whether you have the right to prepay without a penalty before you get to the closing table.)
• Loan charges. All charges by the lender must be legal. Any amounts over the legal limit will be refunded to the buyer or applied to the principal.
• Borrower’s failure to pay as required. Default is clearly defined for the buyer, as are late charges and what happens in the event of default.
• Giving of notices. Borrower and lender will have the details of how to contact each other for legal purposes.
• Obligations of persons under this note. All people listed on the mortgage note are equally responsible for repayment of the loan.
• Uniform secured note. Buyers are advised that a security instrument is signed in addition to the note that protects the note holder from potential losses by giving them the ability to foreclose in case of default.
How Does a Mortgage Note Work?
A mortgage or promissory note is drawn up by the lender when preparing your mortgage for closing during the underwriting process. This document is what makes the terms and conditions of the mortgage legally binding.
Borrowers will see the mortgage note at closing, though the terms and conditions will be outlined in a closing disclosure provided at least three business days before the closing date. The closing disclosure document can be compared with the loan estimate that was provided at the beginning of the mortgage application process. (This help center for mortgages is useful if you want to understand the entire mortgage process.)
A mortgage note is accompanied by another document, called the mortgage, security instrument, or deed of trust. It restates the terms of the mortgage note and outlines the rights and responsibilities you have as a borrower. As a security instrument, the document specifically gives the lender the right to foreclose on your property if you fail to make payments. Having this right reduces the risk to the lender, which can offer more competitive terms to the borrower in return.
Who Holds the Mortgage Note?
A mortgage note isn’t usually held by the lending institution that originated your loan. Mortgage notes are often sold, and it’s not easy to tell who holds your mortgage note. This is because the loan servicer (the company that sends your mortgage statements and handles day-to-day management of the loan) is usually different from the note holder.
Selling a Mortgage Note
You’ll see in your closing documents a provision that allows the lender to sell the mortgage note. This is common and legal in home contracts and typically occurs soon after the property closes. Lenders sell mortgages on the secondary mortgage market, usually to one of the large federally backed mortgage companies, Fannie Mae or Freddie Mac. When the mortgages are sold, the lender doesn’t have to keep the mortgage on their balance sheet, which, in turn, allows them to originate more mortgages for other borrowers.
Fannie Mae and Freddie Mac then bundle mortgages into what is called a mortgage-backed security. Investors around the world (think pension funds, mutual funds, insurance companies, and banks) can buy shares of mortgage-backed securities. The investors will receive steady returns as the mortgages are repaid by individual borrowers.
The loan servicer (which may be your original lender or a separate company) typically continues to service your loan, meaning you’ll send your payment to them. They’ll keep a small portion of your mortgage to cover their costs for servicing your loan while sending the rest to the buyer of your note.
When your mortgage note is sold, the terms of your mortgage won’t change. Your payment, interest rate, and due date will remain the same. If your servicer changes for any reason, you’ll be notified of the new servicer and the new way to remit your mortgage payment.
Different Kinds of Mortgage Notes
There are different types of mortgage loans and different kinds of mortgage notes to accompany them.
Secured Loans
With a secured mortgage note, the mortgage uses collateral to secure the property. The collateral is usually the property itself. A secured loan is usually accompanied by better terms, such as a lower interest rate and a longer repayment period.
Private Loans
Private mortgage notes are secured by private lenders. A seller may own the property outright and act as a private lender, setting their own terms for mortgage loans.
Institutional Loans
Institutional notes are mortgage notes issued by traditional lenders, such as financial institutions or banks. They’re highly regulated. Buyers must meet specific criteria, and the loans must have standard interest rates and repayment terms.
💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.
The Takeaway
Understanding your mortgage note and how it works is a critical step in buying and financing a home. You should review the terms of your mortgage well before you arrive at the closing, and it may be helpful to review the details of the mortgage note with a professional, as the note can protect the buyer just as much as the seller.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
Photo credit: iStock/Chinnapong
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
+Lock and Look program: Terms and conditions apply. Applies to conforming, FHA, and VA purchase loans only. Rate will lock for 91 calendar days at the time of pre-approval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.
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.
