If you’re thinking about refinancing your home loan or paying off your mortgage early, you might request a mortgage payoff statement. The amount due on this document is likely to be different from your current balance because it includes interest owed until the payoff date and any fees due.
Read on to learn more about what a mortgage payoff statement or letter is and when you might need one.
• A mortgage payoff statement details the total amount needed to fully pay off a loan as of a specific date.
• This statement includes the principal balance, accrued interest, and any applicable fees.
• Homeowners often request this document when considering refinancing or paying off their mortgage early.
• The statement is provided by the mortgage servicer and can be requested at any time.
• Accurate payoff information is crucial for managing financial decisions related to property ownership.
What Is a Mortgage Payoff Statement?
Starting with mortgage basics, a mortgage is a loan used to purchase different types of real estate, including a primary home. A bank or other lender agrees to lend money, which the borrower commits to pay back monthly for a set period of time and with interest.
There are jumbo loans, which exceed the dollar limits set by the Federal Housing Finance Agency, and home equity loans.
Say you have a mortgage and want to know exactly how much you’d need to pay to satisfy the loan. A mortgage payoff letter will tell you that magic number. Unlike your current balance, the payoff amount includes interest owed up to the day you intend to pay off the loan. It may also include fees that you’re on the hook for and haven’t paid yet.
Your monthly mortgage statement, on the other hand, only shows your loan balance and the amount due for your next monthly payment.
💡 Quick Tip: You’ve found an award-winning home. Enjoy an award-winning mortgage experience, too. SoFi has knowledgeable Mortgage Loan Officers to guide you through the process.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
How Does a Mortgage Payoff Statement Work?
You can request a payoff statement from your loan servicer at any time. Note: Your mortgage servicer may be different from your lender. The company that manages your loan handles billing, accepts loan payments, keeps track of your principal and interest, and fields questions from borrowers.
You may request a payoff statement for any type of loan, including mortgages, student loans, personal loans, and auto loans. However, if you need your mortgage payoff statement, go to your mortgage servicer directly. The name and contact information of your mortgage servicer is included in your monthly statements.
When you make the request from the company that handles your mortgage servicing, you’ll need to provide the following details:
• Your name
• Address
• Phone number
• Your loan number
• The date you want your payoff to be effective if you’re seeking to pay off your mortgage early.
Asking for a payoff statement does not necessarily mean that you intend to pay off your loan immediately. You may simply be determining whether or not paying off your mortgage early is feasible, for example. The request itself does not initiate the prepayment process.
Traditional lenders, such as brick-and-mortar banks, may mail you a paper mortgage payoff statement. Online lenders may send a payoff statement online.
What Information Do Mortgage Payoff Letters Contain?
All mortgage payoff letters tend to contain similar information, including:
• Payoff amount: The amount of money that would satisfy the loan.
• Expiration date: The date through which the payoff amount is valid. The letter may also include an adjusted amount should you pay before or after the expiration date.
• Payment information: The letter will also usually tell you who to make the final check out to and where to mail it.
• Additional charges: You will be alerted to any additional fees and charges that you’ll need to include.
💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.
Do You Need a Mortgage Payoff Statement?
There are a few common situations in which you might need a payoff statement.
• Refinancing a mortgage: When you refinance your mortgage, your chosen lender pays off your old home loan with a new one, preferably with a lower interest rate and possibly a new term. When you seek to refinance, your new lender may ask you to provide a payoff statement on your current loan.
• Prepaying a mortgage: It’s possible to pay off a mortgage early. A payoff statement will show you exactly how much you’d need to pay to do so. Most prepayment penalties for residential home loans that originated after January 10, 2014, are prohibited. Still, check before you decide to prepay.
• Working with a debt relief company: If you’re having trouble managing your debts, you’ve fallen behind on payments, or you otherwise need mortgage relief, you may choose to work with a debt relief company that can help negotiate with your lenders. The company will need to see payoff statements to get an idea of the scope of your debt.
“No matter what method works best for you, it’s important to cut spending as much as you can while you’re tackling your debts,” said Kendall Meade, a Certified Financial Planner at SoFi.
• Collections and liens: A lender might send you a payoff statement if you’ve fallen behind on your payments and they are sending your debt to a collection agency. In this case, the payoff statement may tell you how much you need to pay to stop the collection action.
If your lender decides to seize your home to recoup unpaid mortgage payments, they may place a lien on the property. They may send a payoff statement that alerts you that your property will be seized if the specified amount isn’t paid in full.
There are other ways to figure out how much you owe on your mortgage loan. You can talk to your lender and ask for a verbal payoff quote. This will provide an estimate, but understand that it is not a legal agreement and isn’t binding.
The Takeaway
If you have a home loan, you may want to request a mortgage payoff statement, especially if you’re thinking about refinancing or paying off your mortgage early. Requesting the mortgage payoff letter does not initiate any formal processes, so it’s fine to think of it as an information-gathering exercise.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How do I get my mortgage payoff statement?
Contact your loan servicer to request your mortgage payoff statement.
When should I get my mortgage payoff statement?
Request your mortgage payoff statement when planning to prepay your mortgage, refinance, or consolidate debt.
How long does it take to get a mortgage payoff statement?
Generally speaking, you should receive your mortgage payoff statement within seven business days of your request.
Photo credit: iStock/Vadym Pastukh
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
You’re ready to make home improvements. When looking for a trustworthy pro, it’s a good idea to get referrals, check references, get multiple bids, and nail down your financing. Let’s drill down to the details on how to find a good contractor for remodeling and what you need to ask as you move through the process.
💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.
Ask for Referrals
Often the easiest way to find a reputable contractor for your project is through word-of-mouth referrals, whether from a friend, neighbor, family member, or colleague. Maybe you’ve watched your friend remodel the kitchen on social media; you may want to ask for the name of the contractor behind the job. Likewise, if you see a big construction project going up in your neighborhood, you can ask the homeowner for insight on the contractor behind it.
You might also want to ask owners of local lumber yards, where contractors do their bulk business, who’s reliable.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Search Online for the Top-Reviewed Contractors
Before hiring a contractor to renovate or remodel your home, it’s smart to do your due diligence and collect as many references as possible. But if you’re new to a town or neighborhood, for example, you may wonder how to find a contractor who works in your area.
This is where online reviews come in handy. There are many websites out there that offer lists of licensed contractors with accompanying reviews.
Look at Credentials and Portfolio
As you begin speaking with each potential contractor, ask to see a copy of their contractor’s license and insurance policy, and ask about any specialty certifications or membership to any professional organizations like the National Association of Home Builders, the National Association of the Remodeling Industry, or the National Kitchen & Bath Association.
Be aware that some states require contractor licensing; others, certification or registration. Registration doesn’t guarantee expertise; it’s merely a written record of who is performing the work. Many but not all states have websites where you can verify your pro’s license number. If your property is governed by a homeowners association or condo association, remember that the association may require proof of licensing.
Most reputable builders or contractors should have a website or basic social media presence, but if you can’t find one, request an email link to the contractor’s portfolio to see examples of past projects, from countertop replacement to closet remodels, as well as before and after photos.
Interview Candidates
Once you have a list of potential contractors narrowed down to your three top picks, it’s a good move to interview each of them before you go a step further. Maybe you won’t jibe with one of them, or perhaps another won’t seem as knowledgeable about certain components of construction or remodeling as you’d like for your particular project.
Treat hiring any contractor or handyman just like you would hiring an employee for your work, and if you don’t get a good feeling about the candidate, trust your gut. Communication is key for any successful project, and if the communication feels lacking in the interview process, it’s likely you’ll get frustrated down the line when all the moving parts of a remodeling project are also thrown into the mix.
Check References
After you’ve compiled a list of contractors and interviewed your top candidates, you’ll want to check references. Professionals should be able to provide a list of contacts from past jobs, and if they can’t do so right on the spot, that’s probably a red flag.
When checking references, you might want to ask past customers if the contractor completed the job on time and within budget, if there were any problematic interactions, and how the work has held up since.
Review the Cost Estimate
You could find the perfect contractor for the job, only to learn that the pro is far out of your budget.
It’s smart to get at least three competitive quotes from contractors before you move forward. A cost estimate should include labor, materials, change-order language, and a timeline, at minimum. Many contractors also have payment schedules so you will know when you’ll need to have your finances in order.
One positive if you have second thoughts about the expense: While the cost to remodel a house may not be cheap, if you keep your property modern and up to date, it’s possible you’ll recoup those dollars in resale value down the line.
💡 Quick Tip: Compared to credit cards and other unsecured loans, you can usually get a lower interest rate with a cash-out refinance loan.
Consider the Red Flags
If it’s your first time hiring a contractor, you may not know what to look for — or what’s a red flag. To save yourself headaches down the road, if the contractor checks any of the below boxes, the person’s professionalism might be in question and it’s probably wise to move on to the next candidate.
How to find a contractor for home renovations? Hiring a contractor is a process that you’d be smart to treat like a job interview. It’s a good idea to check references and credentials, get bids, look for red flags, and have financing lined up, whether you take out a personal loan or opt for a home equity line of credit (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.
Unlock your home’s value with a home equity line of credit brokered by SoFi.
FAQ
Before you sign on the dotted line for your remodeling job, there are some things about working with a contractor you need to know before locking one in.
What should a remodel contract include?
You’ll want to make sure the contract lays out the overall project budget and scope of work, when payments are due, and how to handle the inevitable changes that will arise.You’ll also want to have a dispute resolution and waiver of the lien clause so that a subcontractor cannot put a lien on your home, and a warranty for the work that is an acceptable time frame for the amount you’ve invested.
What questions should I ask a contractor?
When you’re meeting with each potential contractor, ask about past projects and if they have specific experience doing the type of renovation work that you’d like done. It’s also helpful to ask how they would approach the project and how much of an impact it’ll have on your ability to live in the home while work is taking place.
You’ll also want to inquire about insurance. Ask for proof that the contractor carries an insurance policy that protects you, the homeowner, as well. All of these are things a professional contractor should have and easily be able to produce.
What should you know before hiring a contractor?
Know that there are always bad actors who can take advantage of the huge sums of money that Americans pouring into real estate investment — and that no reputable contractor should be offended if you ask for references, proof of insurance, and all promises in writing.
Photo credit: iStock/BOX39studio
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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
If you’re one of the more than 20 million Americans working remotely, you might be tempted to buy a house out of state. Or maybe you just need a change of scenery.
Buying a house long distance can be a challenge, but it’s doable with a plan in place.
Key Points
• Millions of people are working remotely and may want to purchase a home out of state.
• To begin, research potential new locations online and engage with local communities through social media platforms like Nextdoor to gain insights about the area.
• Partner with a reliable real estate agent who knows the local market and can assist with navigating regulations and attending inspections.
• Consider visiting the location in person if possible.
• The closing process can now be easily handled online using remote notarization for efficiency.
Why Buy a House in Another State?
There are multiple reasons to consider a house in a different state. Here are some.
Affordability
People may be lured by the cost of living of a state and its quality of life, or trying to escape high costs in the state they are leaving.
More than 350,000 people left California (the country’s third-highest state in cost-of-living rankings) from April 2020 to January 2022 for Arizona, Texas, Florida, Washington, and other states. This trend slowed in 2023, but the state still lost more than 250,000 people.
Job Relocation
Some companies move personnel out of state, and some employees are good with that. A Graebel report exploring the Great Resignation found that 70% of knowledge workers who resigned in the past two years may have stayed if they’d been offered the same role in a different region of the country.
Family Reasons
Some folks choose to buy a house out of state to be closer to parents, children, or grandchildren. And people in their 40s,especially, may have aging parents and financial concerns on their minds.
Retirement
Americans entering retirement may want to buy a home in a state where the weather and lifestyle are more appealing. When it comes to a home, some may want to downsize.
How to Purchase a Home in Another State
Buying a house from out of state may be a challenge, but people do do it.
It can be tough to buy a house if you already have a house and a home mortgage loan. Homeowners have been known to use a home equity loan or bridge loan to fund the down payment on another house.
Areavibes, BestPlaces, and HomeSnacks provide rankings or information. Coldwell Banker introduced Move Meter, to compare locations across the country. Or you could use Google Maps or Google Earth to study an out-of-state home’s proximity to schools, medical centers, law enforcement agencies, parks, and restaurants.
2. Link Up to Social Media
Social media platforms like Facebook Groups and Nextdoor can provide a personal sense of home buying and community. These groups are user-friendly to newcomers, and many group members are happy to answer questions about life in their city or town.
3. Ask Co-Workers, Friends, or Family
If you’re moving out of state for a job, check in with future co-workers for advice about the homes and neighborhoods. If you’re moving near friends or family members, pick their brains. Is this going to be a good spot for you?
Moving is stressful enough. If you’re one of the growing number of people interested in financially downsizing, you may want to just exhale and enjoy when you land.
4. Consider Talking to a Relocation Specialist
Yes, home relocation professionals exist. And they do everything from connecting clients with a real estate agent to finding a long-distance moving company, scouring school districts, securing a storage space, and supervising a contractor’s work if the client is buying or building a house.
Relocation companies can also suggest local service providers and transport pets and vehicles across state lines.
Relocation services are often free of charge because the specialists earn their money from third-party vendors like real estate firms and employers transferring employees.
If you’re not inclined to hire a relocation specialist, here’s some helpful reading before making a big move:
You can look into the safety record of carriers on the U.S. Department of Transportation website.
5. Find a Reliable Real Estate Agent
A brave few who are interested in buying a house out of state opt to go without an agent.
It’s true that you can buy a house without a Realtor® — but even a local home sale may be challenging without a buyer’s agent in your corner.
Partnering with an experienced real estate agent who is based in the area where you hope to move could be highly beneficial.
Besides familiarity with neighborhoods, schools, and vibe, a buyer’s agent can walk a future homebuyer through local zoning regulations and the permit process.
6. Consider Visiting IRL
It’s not that rare to buy a house sight unseen. That can work out.
But someone looking to buy a house in a new state may want a real visit. You may receive short notice on a viewing date, so it could be helpful to budget for out-of-state travel as part of the buildup to buying a home in another state.
While a real estate agent can act as a proxy for homebuyers, there may be nothing like being onsite during the home inspection of a property you’ve made an offer on.
Then again, if you adore a property and must have it, you might waive some contingencies in the case of multiple offers.
7. Get Preapproved for a Mortgage
It can be easier to find a real estate agent or relocation specialist with a mortgage preapproval letter in hand.
When a lender preapproves a mortgage (a credit check and a review of financial assets is typical), it is tentatively greenlighting a specific home loan amount at a particular interest rate, which is not locked unless the lender offers a lock.
Obtaining preapproval tells home sellers that you’re qualified for a home loan up to a certain amount.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
8. Handle the Closing Online
Get ready, because closing on a house may take only 20 or 30 days.
In some cases, everyone huddles to sign closing paperwork. Other times, buyers and sellers sign separately.
But most states have approved remote online notarization, when buyers join a video call, present their government-issued IDs to a title company rep and a notary, and sign all paperwork electronically.
The Takeaway
Buying a house out of state requires investigation and probably a good real estate agent. Getting preapproved for a mortgage can ease the path to a new address.
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.
In many cases, you can pay your taxes with a credit card. Whether you want to pay the IRS with a credit card so that you can earn rewards or have a bit of financial breathing room, it’s important to be aware of the implications of using such a payment method, such as fees and interest you may pay. Read on to learn more about how to pay taxes with a credit card.
Key Points
• Paying taxes with a credit card is often possible.
• Paying taxes with a credit card can earn rewards like cash back, miles, or points.
• Third-party processing fees for credit card tax payments can cost a couple or a few percentage points of the balance due.
• Using a 0% APR credit card allows spreading tax payments interest-free.
• High interest charges can apply if the tax balance is not paid off promptly.
Can You Pay Federal Taxes With a Credit Card?
Yes, you can. More specifically, you can pay your federal taxes with a credit card (and in some cases, you may even be able to pay your state taxes with one as well). The IRS offers different third-party payment processors that accept credit card payments for taxes.
Keep in mind that if you pay the IRS with a credit card, this type of transaction isn’t free, given how credit cards work. Whichever third-party payment service provider you choose, you’ll be charged additional processing fees for the convenience of using your credit card to pay taxes. For example, all of the third-party options charge a percentage of the amount you’ll be paying in taxes, but there’s also a minimum flat fee you’ll owe.
In addition, there may be limitations on how many times you can use your credit card for IRS payments. For instance, if you wanted to pay your personal income taxes, you can only do so twice per year for the current tax year due. However, if you worked out a monthly payment plan with the IRS, you can pay with a credit card up to two times per month.
What to Know Before Paying Taxes With a Credit Card
Before pulling out your credit card to pay your taxes, it’s important to know what your goals are. Here are some common reasons taxpayers choose to pay their taxes with a credit card:
• You may earn rewards points, cash back, or miles. Many consumers love to earn perks offered by their credit card issuers and see it as a major benefit of what a credit card is. Even with the additional fees associated with paying taxes with a credit card, you may feel like the rewards offset what you’ll pay. In other words, if the value of the rewards is much higher than the service fees, it might be worth using your card. As an example, say you’ll be able to earn 4,000 rewards points from your tax payment, which equates to $100 toward a flight or hotel room. If you owe $3,000 in federal taxes and the third-party payment service charges a 2% fee, you’re effectively paying $60 in fees to earn $100 in rewards. Whether that’s worth it is up to you.
• It’s possible to earn a major rewards bonus. If you signed up for a new rewards credit card and need to meet a minimum spending threshold to earn a huge bonus, it might be worth considering paying your taxes with that credit card. For instance, if you signed up for a credit card offering 50,000 bonus miles — an equivalent to $1,000 worth of travel — paying a $4,000 tax bill with a payment service charge of 2% equates to $80 in fees. Assuming that meets your minimum spending threshold, the value you receive is pretty high. Just make sure you can make more than your credit card minimum payment, and ideally your full balance, to avoid interest accruing.
• You’ll gain the ability to spread out your payment. Paying taxes with a credit card might be worth considering if you’re looking for a low-cost way to spread out your tax payments. If you have excellent credit, you may qualify for a credit card offering a 0% introductory annual percentage rate (APR), meaning you’ll have time until the offer runs out to pay off your taxes interest-free. Sure, you’re paying card processing service fees, but that could be worth it to spread out your payments. However, many credit card companies have terms and conditions that stipulate how you can remain in good standing for the introductory offer for the APR on a credit card — make sure you’re following them, or you could end up paying a high amount in interest.
What Is the Fee for Paying Taxes With a Credit Card?
As mentioned, the amount of the fee you’ll owe for paying taxes with a credit card will vary depending on which payment processor you use. Here’s a look at how much each processor’s fees run:
Payment Processor
Fee Rate
Minimum Fee
Pay1040
2.89%
$2.50
ACI Payments, Inc.
1.85%
$2.50
Pros and Cons of Paying Taxes With a Credit Card
There are advantages and disadvantages to paying the IRS with a credit card. Here’s an overview of the pros and cons, which will be covered in more detail below:
Pros of Paying Taxes With a Credit Card
Cons of Paying Taxes With a Credit Card
Earn cash back and credit card rewards
Third-party payment processors charge fees
Meet spending thresholds for bonus rewards earnings
Rewards earnings may not offset fees paid
Use a convenient form of payment
Potentially pay high credit card interest rates if you carry a balance or the introductory APR period ends before your balance is paid off
Spread out payments interest-free if using a card with 0% introductory APR
IRS payment plan interest rates may be lower than what’s offered by credit cards
Pros of Paying Taxes With a Credit Card
There are the major upsides of paying the IRS with a credit card, including:
• You can earn cash back and credit card rewards. By putting the amount of your tax bill on your credit card, you might earn some credit card rewards. Just make sure your rewards earnings will offset any fees you’ll pay (though rest assured, taxable credit card rewards usually aren’t a thing, except in certain cases).
• It can help you meet spending thresholds to earn bonus rewards. Often, credit cards that offer bonuses require you to spend a certain amount within a specified period of time in order to earn them. If you’re struggling to reach that threshold, paying your taxes with your credit card could help, allowing you to snag those bonus rewards.
• It’s a convenient form of payment. Anyone who has paid with a credit card knows it’s easy. You don’t have to fill in various bank account numbers like you otherwise would if you opt to cover your tax bill with a credit card.
• You can spread out payments — and interest-free, if you have a 0% APR card. If you’re tight on cash or simply want to spread out your tax payment, a credit card can enable you to do so. Even better, if you have a card that offers 0% APR, you’ll avoid paying any interest while you space out your payments.
Cons of Paying Taxes With a Credit Card
It’s not all upsides when it comes to paying taxes with a credit card. Make sure to consider these drawbacks as well:
• You’ll pay third-party processing fees. Perhaps the biggest drawback of paying the IRS with a credit card is you’ll pay fees. The exact amount you pay in fees will vary depending on which third-party payment processor you use, but they can range up to almost 3%. If your tax bill is $1,000, for example, you could pay up to almost $30 in fees.
• The rewards you earn might not offset the fees. If your rewards rate is close to the amount in fees, those two will effectively cancel each other out. In other words, you’ll pretty much break even if you pay roughly the same amount in fees as you earn in credit card rewards, which might not make using a credit card worthwhile.
• You could end up paying interest at a steep rate. If you aren’t able to pay off your balance in full by the statement due date, or if for some reason you don’t pay off your full balance by the time your 0% APR intro offer ends, interest charges will start racking up. Plus, credit card interest rates tend to be pretty high compared to other types of loans.
• There might be lower interest rate payment plans available. If you’re hoping to spread out your payments, using a credit card might not be your most cost-efficient option. The IRS offers a payment plan for those who qualify, and the interest rate can be lower than the APR on a credit card.
If you’ve decided you want to use your credit card for tax payments, here’s how you do it.
1. Decide Which Credit Card to Use
Consider your reasons for using a credit card — is it to earn rewards, meet a minimum spending threshold, or spread out your payments interest-free? Whatever it is, make sure to choose a card that meets your goals. If you want to open a credit card, then you’ll want to make sure you receive the card in time to pay the IRS before the tax filing deadline.
Whatever the amount is, ensure it’s well within your credit card limit. You can spread your payments over multiple credit cards, but keep in mind the transaction limits that the IRS imposes for certain payments.
3. Choose a Third-Party Payment Processor
The IRS website currently lists three approved payment service providers that you can use. Compare which one offers the best features and lowest fees for your situation.
4. Make Your Payment
Once you’ve selected which payment service provider you want to go with, head to their website and follow the instructions. You may be asked to provide information such as the credit card expiration date and CVV number on a credit card. Double check that you’re making the right type of payment and that all the information you’ve entered is accurate before pressing submit.
If you’re not convinced the costs involved in credit card payment are worth it, there are other ways that you can pay your taxes.
Direct Pay With Bank Account
While this option won’t allow you to earn rewards or spread out your payments, you’ll also steer clear of paying any fees or potentially owing interest. To make a tax payment directly from your bank account, you’ll simply need to select this option and provide the requested banking information, such as your bank account and routing numbers.
IRS Payment Plan
If you’re hoping to be able to pay off your balance over time, you can apply for a payment plan with the IRS. You may qualify for a short-term payment plan if you owe less than $100,000 in combined tax, penalties or interest, or you could get a long-term payment plan if you owe $50,000 or less in combined tax, penalties, and interest and have filed all required returns.
Note that this option may involve fees and interest though. The costs involved will depend on which type of plan you’re approved for.
You can pay taxes with a credit card. Paying taxes using a rewards credit card is a great way to earn perks, helping you maximize your spending. However, there are downsides to consider as well, such as the third-party processing fees and the potential to run into high credit card interest if you don’t have a good APR for a credit card.
Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.
FAQ
What does it cost to pay taxes with a credit card?
Third-party payment processors charge a service fee to pay your taxes with a credit card. In many cases, it’s typically a percentage of your payment amount, with a minimum flat fee charged.
Does paying taxes with your credit card earn you rewards?
Paying taxes can earn you rewards, depending on the type of credit card you use. Many rewards credit cards offer cash back, miles, or travel points on qualifying purchases. Before doing so, it might be helpful to determine whether the value of the rewards earned will outweigh the fees you’ll pay.
Is it better to pay taxes with a credit card or debit card?
Both methods of paying your taxes can be a great choice, depending on your financial situation. If you’re not interested in earning rewards or spreading out your payments and have the cash on hand, you can pay with a debit card. Some may prefer to pay with a credit card because they feel it’s a more secure way to make payments.
Are credit cards the cheapest way to pay your tax bill?
No. Paying your taxes with a credit card will add an additional fee onto your tax bill, plus you could end up paying interest if you don’t pay off your full statement balance by the due date. Other options, such as direct pay with your bank account don’t involve paying fees or interest.
Can you pay state taxes with a credit card?
It depends. Some states do facilitate tax payments with a credit card. To find out if yours does, check your state’s tax website for more information.
Can you pay property taxes with a credit card?
Once again, it depends which state you live in. Many counties and cities will allow you to pay property taxes with a credit card, though not all do. Reach out to your local tax collector’s office to see which payment options are accepted.
Photo credit: iStock/Moyo Studio
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Buying a house is a major step, and planning to purchase a home can be a lot of fun. You get to figure out where you’d hang your favorite artwork, plant a vegetable garden, put the PlayStation — and maybe contemplate taking on some DIY projects yourself.
But there’s another, more nuts-and-bolts aspect to your pursuit of the American Dream: how to budget for a house. Most people in the U.S. are homeowners, with the latest Census data revealing that 65.6% had attained this status in the second quarter of 2024. So that’s a good indicator that buying your own home is within reach.
Doing so will likely require you to be smart about your finances, both as you save and then take on the responsibility of owning a home. To help you be successful in this pursuit, read on for the intel you need, such as:
• How do I know how much house I can afford?
• What are the costs/fees to consider?
• What will my ongoing costs be?
• How can I budget for a house?
Get matched with a local
real estate agent and earn up to
$9,500‡ cash back when you close.
Pair up with a local real estate agent through HomeStory and unlock up to $9,500 cash back at closing.‡ Average cash back received is $1,700.
Up-front Expenses
First, consider how much you would have to fork over if you find that perfect center-hall Colonial or loft-style condo. Once an offer on a new home is accepted, there are certain costs the buyer needs to pay right off the bat and, in most cases, out of their own pocket. These are called up-front expenses. Here are a few to prepare for as you consider how to budget for a house:
Down Payment
You may have heard of the traditional 20% down payment guideline, which helps you avoid paying private mortgage insurance (PMI) on applicable loan programs. Additionally, a higher down payment can sometimes result in better mortgage loan terms (such as a lower interest rate) which may translate into lower monthly mortgage payments.
Yep, it’s a lot of money to try to save, but if you can swing it, in the long run, applying a 20% down payment will likely save you from paying thousands of dollars in additional mortgage interest over the life of the loan. Can’t pull together that big a chunk of change? Look into your options for a mortgage lender with lower or no down payment. Some options:
• The minimum down payment for a first-time homebuyer on a conventional loan can be as low as 3%. You may also need a certain credit score of, say, 620, to qualify for this kind of mortgage.
• An FHA government loan that is open to everyone typically requires a down payment of at least 3.5%.
• Veteran VA loans or government USDA loans may allow eligible borrowers to finance up to 100% of their home’s cost. In other words, no down payment is required.
It’s worth noting that, regardless of the size of your down payment, buying may still significantly reduce your overall monthly expenses, compared to your current rent and real-estate market conditions.
3% to 5% Closing Costs
You can likely expect to pay an estimated 3% to 5% of your home price for closing costs, and should save accordingly. For example, if you buy a home that costs $300,000, you may be required to pay between $9,000 and $15,000 in closing costs.
Worth noting: Some costs are fixed and not tied to the price. In these cases, the percentage can be higher for the lower range and lower for the higher purchase price range.
What exactly comprises closing costs? This can be bank charges like origination fees and any points you may have purchased to buy down your interest rate. There are also costs like the appraisal fee, a title search, and others.
Keep in mind that there are alternatives to paying the closing costs out-of-pocket, such as requesting a seller credit, requesting a lender credit, or tapping an applicable down payment assistance program. These can help you minimize this expense.
Moving Costs
Don’t forget when budgeting for buying a house that you will need funds to actually move in. Unless you’re lucky enough to have a generous pal with a van, you are probably going to have to hire a moving company when it’s time to get settled in your new home. The average cost of moving the contents of a three-bedroom home 1,000 miles is $4,800 according to research by U.S. News & World Report.
These costs can vary widely, of course. If you are moving with just a bedroom’s worth of furniture versus a whole house, your price tag will be lower. It’s wise to comparison-shop for moving companies and factor this expense into your own budgeting for a home move.
If you are moving for work reasons, check with your company to see if it offers a relocation package to help cover some or all of the moving costs.
New Furniture and Appliances
Your new house may not have the same dimensions and style of your old house. That could mean that you need to buy new furniture and appliances. When budgeting for buying a house, you might want to talk to friends or relatives who have moved recently and inquire about unexpected expenses as well. For example, it’s not uncommon when you move to have to purchase such items as new locks, shower rods, and window treatments. These can add up quickly.
You might want to start a savings account for these types of purchases — some of them may be unexpected and costlier than you imagined.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Ongoing Expenses
Now that you’ve figured out the details related to the actual purchase, consider the expenses that will accrue once you are a homeowner. This is a very important step when budgeting for buying a house. These recurring charges are a vital part of the calculations of how much home you can afford.
Monthly Charges
First, consider how much you’ll be spending every month on your monthly mortgage payment and related costs. PITIA (principal, interest, property taxes, homeowners insurance, and other assessments) is an acronym describing all the components of a mortgage payment. Here’s how it breaks down:
• P: The principal is the “meat” of the monthly payment amount — paying down the principal will reduce the loan balance.
• I: Interest is what you are charged for borrowing the money.
• T: Taxes refer to your property taxes.
• I: This “I” refers to insurance. This includes both your homeowners and mortgage insurance, if applicable.
• A: The other assessments refer to things that may be applicable to the home you purchase such as homeowners association dues, flood or earthquake insurance, and more.
HOA Dues
HOA stands for homeowners association. These dues usually apply to a condo, co-op, or property owned in a planned community.
The charge is usually monthly (but it could also be charged quarterly or annually), and it typically goes to maintaining the community (landscaping, garbage collection, repairs, and upgrades).
Before purchasing a property with HOA dues, it can be important to ask the Homeowners Association for a complete HOA questionnaire. With this in hand, you can view how healthy the association is, whether there is any outstanding litigation due to structural or other issues, etc. These could mean increased costs down the road.
Maintenance and Lawn Care
Your budgeting probably won’t stop once you’ve moved and settled into your new home. Expenses will likely continue to knock on your door — landscaping, roof repair, and water heater replacement are just a few items that might require ongoing financial consideration.
You may want to budget for 1% to 4% of the cost of your home in maintenance each year to pay for these expenses. However, deferred maintenance costs may require more funding, depending on the age, quality of construction, where you live, and more.
Pest Control, Security, Utilities
The cost of electricity, gas, water, and internet services differ from market to market. This is also true with pest control, and services that help ensure your home is secure and safe. You could find yourself paying more (or even less) for these services in your new home.
How Much House Can You Afford Quiz
Planning Ahead
So now that you understand the costs associated with homeownership, whether they are one-time or ongoing, you can get to work on how to budget for a house.
Ideally, you want to cover the homebuying costs and then be able to afford your monthly carrying costs without racking up debt. The standard advice is that your monthly housing expenses should account for up to 28% of your monthly pre-tax income. Given how expensive some housing markets can be, it’s not uncommon to find people spending more than that right now.
Here, some advice on figuring out what you can afford.
Target Mortgage Costs
Do your research on the different types of mortgage loan programs. Determine what your price range is given the current interest rates. Find the programs that may best suit you, so you’ll feel confident you can bid and afford a home once you have your down payment saved. Don’t forget to factor in those other PITIA expenses mentioned above as you think about your own monthly income and cash outflow when you’re a homeowner.
Build a Budget
Once you have these costs calculated, you can then start budgeting for buying a house. You’ll want to accumulate your down payment, while taking care of current bills and other financial obligations, of course.
• Create a line item budget. You’ll want to note how much money you have coming in and how much goes out toward your needs (housing, food, medical expenses, debt repayment). Then you’ll see what’s left for your wants (think travel, dining out, clothes, entertainment) and start saving it, whether for your future home or retirement.
Don’t skimp, though, on establishing an emergency fund. In a pinch, these funds can keep you from using your credit card and running up even more debt.
• Assess where you can save more. To ramp up your savings for your house, look for ways to economize. Could you drop a subscription or two to streaming channels, or perhaps eat out less often?
Also see what you can do to avoid high-interest credit card debt, which can take a bite out of anyone’s budget. You might want to take advantage of a zero-interest balance transfer credit card offer, or investigate whether a lower-interest personal loan could help you pay off your debt and save money.
• Use automatic transfers. Help yourself hit your savings goals by automating payday transfers from checking to savings. That way, you won’t see the cash in your account and be tempted to spend more.
• Bring in more moolah. If the numbers aren’t adding up to bring your homebuying plans within reach fast enough, consider using windfalls (a tax refund, a bonus at work, a birthday gift of cash from a relative) to plump up your savings. Also think about ways to bring in more income, whether by asking for a raise or pursuing a side hustle.
The Takeaway
Budgeting for buying a house requires thinking about both short-term costs, such as a down payment, closing costs, and moving expenses, as well as long-term costs such as homeowner’s insurance and maintenance expenses. It’s wise to look at both before you pursue a mortgage preapproval or make an offer on a home.
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 much money should you save before buying a house?
If possible, you should save enough money for a down payment on a house in the price range you’re thinking about. But you don’t need to make a 20% down payment — many homebuyers put down less, and some government programs will allow you to buy with no down payment at all. You’ll also want to have closing costs on hand (3% to 6% of the home’s price). And it’s wise to always have an emergency fund in case of an unexpected setback.
How much do I need to earn to afford a house?
How much you need to earn to afford a house depends on the housing market you’re looking in and the area’s overall cost of living. The national average salary is $63,795 and at that salary you may be able to afford a home priced at $180,000. Use a home affordability calculator to explore the numbers for your specific situation.
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.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.
Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.
HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.
SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.
If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.
Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.
SoFi loans subject to credit approval. Offer subject to change or cancellation without notice.
The trademarks, logos and names of other companies, products and services are the property of their respective owners.
