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The average cost across the United States to install central air conditioning was $5,958 as of mid-2025. That price can, however, fluctuate based on such factors as where you live, the size of your home, and what kind of unit you choose.

Here, learn more about air conditioning costs, your options, and how to get the best possible price if you do choose to install central cooling.

What Factors Play a Role in Installing Central Air?

Many factors go into the cost to install central air conditioning, including the brand of AC you choose, the unit itself, and the overall size of your home. A central air conditioning unit alone can cost thousands of dollars. For instance, a split unit air conditioning unit will typically run between $2,000 and $3,000 on average; a packaged central air conditioning unit will be somewhat more, typically between $2,500 to $4,500. (More in a minute on the difference between these types of systems.)

If you add in the labor of an air conditioner contractor, the cost to install central air ranges from $3,500 and $7,000 on average. But that number can range depending on where you live, the type of AC system your home needs, and the condition of your existing air ducts.

According to HomeAdvisor, these are the average air conditioning unit costs with installation:

💡 Quick Tip: SoFi lets you apply for a personal loan online in minutes, without affecting your credit score.

Pre-Installation Evaluation

Some helpful things to think about when evaluating your home for a new air conditioning system include a careful analysis of how big of a system your living quarters need. The price jumps quickly for larger units, so it’s often smart to make sure you’re not overdoing the cooling capacity for your project.

Ease of access for installing the bulky ducting system of a traditional air conditioning setup is important, so if you have a tight basement or attic crawl space, expect to pay more in labor costs than if you had more room to mount all the equipment and pipes easily.

Also, think about where you’d want to locate the duct feeding into the room. You might have to cut through hardwood or tile, for example, to gain an access point for the air to flow. Or there could be a spot in your house that needs a little more airflow and will therefore require multiple ducts into the room.

Though an AC installation typically just takes one day, if extensive cutting into floors or walls or ductwork is required, it could take several. If this might disrupt your quality of living, you’ll likely want to consider staying with family or friends as your central air is installed — or move into a hotel, the cost of which should factor into how you make a budget for your overall air conditioning costs.

Recommended: Personal Loan vs. Credit Card

Types of AC Units

Affordability and preference help determine the type of air conditioning unit that you’ll need, which affects the overall central air cost. A traditional split system — with air conditioning on one side of the unit, heating on the other — is on the lower end of the pricing range vs. packaged units. In addition, more complex models that include heat-pump, hybrid, and geothermal functionality can run substantially higher.

Ductless air conditioning systems have been around for years and are rapidly entering the U.S. market from overseas. They can offer affordable efficiency as they cool living spaces. Ductless units have a central compressor and fan with standalone wall-mounted units that eliminate the need for ducting. Instead, a wall-mounted fan serves each room independently. Coolant and drainage lines are routed through the wall back to the centralized air conditioning assembly, making for a clean finish.

Ductwork

When planning central air installation, you should consider what kind of ductwork is best for your home. Ductwork falls into two categories — flexible or rigid — with many different options for materials within each. Flexible and rigid ductwork each has its own pros and cons regarding price, lifespan, efficiency, and flexibility.

The cost of ductwork can vary greatly. The national average cost for ductwork is $1,252, but can range from $453 to $2,188 or significantly higher depending on the job specifics.

The cost to replace old ductwork is higher since it involves both removing the existing materials and installing new ductwork.

Recommended: How Much Is My Home Worth?

AC Installation and Labor

While handy types may be tempted to tackle the central air installation on their own, it might be wise to find a contractor who is well-qualified to ensure that the job is done properly.

City codes departments typically require permits for work like central air installation that can be obtained easily by a state-licensed contractor. Handling refrigerant chemicals like Freon™ also requires a license, according to the EPA.

Many websites offer contractor and price-compare quotes in your area. Angi and Thumbtack both can be good places to start your research. A referral from someone you know also can be a great way to find a vetted air conditioning contractor.

You might also search online communities and neighborhood forums to find a reliable air conditioning contractor. There’s a good chance that someone locally has had similar issues and might be able to recommend a professional contractor to handle your air conditioning installation job.

You’ll also need to consider how to finance this work. Perhaps you have savings to draw upon and tax credits can help. You might also consider a home improvement loan, which is a kind of personal loan in which you receive a lump sum of cash and then pay it back over time with interest.

These loans offer the advantage of typically having a significantly lower interest rate than charging the costs to your credit card. Applying for a personal loan of this kind is usually quick and easy, too.

Recommended: The Top Home Improvements to Increase Your Home’s Value

The Takeaway

The cost to install central air conditioning is, on average, almost $6,000. While that’s a considerable expense, it can include the labor involved in addition to the price of the unit by itself. And it can give you peace of mind knowing you have a new central air system to keep you cool and likely improve the resale value of your home if you plan to list your house or refinance in the future. For this reason, it may be wise to look into your financing options, such as taking out 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.

FAQ

What is the $5,000 rule for air conditioning?

The $5,000 rule is a way to determine whether it’s worthwhile to replace your a/c system. Multiply the age of your system in years by the cost to repair it. If the result is over $5,000, you should replace it. If it’s under $5,000, then repair it.

What is the average cost to install new a/c?

As of 2025, the average cost to install air conditioning is $5,958, according to the home improvement site Angi.

Does new a/c qualify for a tax credit?

It may indeed. A tax credit is typically effective for qualifying products purchased and installed between January 1, 2023, and December 31, 2032 under the Energy Star guidelines. Claim the credits, up to 30% of costs to a maximum of $600, using the IRS Form 5695.

Photo credit: iStock/Pramote2015

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

SOPL-Q225-062

If you have your heart set on buying a fixer-upper, a 203(k) loan can help. Repair work requires energy and money, and it can be difficult to secure a loan to cover both the value of the home and the cost of repairs — especially if the home is currently uninhabitable. With a 203(k) loan, the Federal Housing Administration (FHA) insures loans for the purchase and substantial rehab of homes. It is also possible to take out an FHA 203(k) loan for home repairs only, which could prove helpful, given how costly this work can be.

Read on for more information about FHA 203(k) loans and the FHA 203(k) process, as well as your other home improvement loan options.

Note: SoFi does not offer FHA 203(k) loans at this time, but we do offer regular FHA mortgages.

What Is an FHA 203(k) Home Loan?

Section 203(k) insurance lets buyers finance both the purchase of a house and its rehabilitation costs through a single long-term, fixed-rate or adjustable-rate loan. Before the availability of FHA 203(k) loans, borrowers often had to secure multiple loans to obtain both a home mortgage and a home improvement loan.

The loans are provided through mortgage lenders approved by the U.S. Department of Housing and Urban Development (HUD) and insured by the FHA. This government loan helps to rejuvenate neighborhoods and expand homeownership opportunities. Some buyers use FHA loans to purchase and rehabilitate a HUD Home, a property that is in the government’s possession. These loans are also popular with first-time homebuyers, thanks to lenient credit requirements and a low minimum down payment.

Because 203(k) FHA loans are backed by the federal government, you may be able to secure one even if you don’t have stellar credit. Rates are generally competitive but may not be the best, because a home with major flaws is a risk to the lender.

The FHA 203(k) process also requires more coordination, paperwork, and work on behalf of the lender, which can drive the interest rate up slightly. Lenders also may charge a supplemental origination fee, fees to cover the review of the rehabilitation plan, and a higher appraisal fee.

Additionally, the loan will require an upfront mortgage insurance payment of 1.75% of the total loan amount (it can be wrapped into the financing) and then a monthly mortgage insurance premium.

How an FHA 203(k) Loan Works

As mentioned above, you can take out a 15- or 30-year fixed-rate mortgage or an adjustable rate mortgage through an FHA-approved lender. The amount for which you’re approved will depend on how much your home is expected to be worth after all of the renovations are completed, as well as the cost of the work.

Additionally, the amount you’re approved for will depend on which type of FHA 203(k) loan you get — either the limited (also called streamline) or the standard. (Note that both of these options also have a 203(k) refinance option for current homeowners.)

Types of FHA 203(k) Loans

Streamline or Limited 203(k) Loan

The limited 203(k) FHA loan allows you to finance up to $35,000 into your mortgage for any repairs or home improvements, including emergency home repairs such as replacing a roof or flooring. There is no minimum repair amount. However, the streamline 203(k) loan does not cover major structural work.

Standard 203(k) Loan

If you’re buying a real fixer-upper and looking to tackle larger jobs or major structural repairs, you’ll likely want to go for the standard 203(k) loan. A minimum repair cost of $5,000 is required, and you must use a 203(k) consultant, a HUD-certified professional who will oversee the project and make sure FHA standards are met.

What Can FHA 203(k) Loans Be Used For?

Purchase and Repairs

For a standard FHA 203(k) loan, other than the cost of acquiring a property, rehabilitation may range from minor repairs (though exceeding $5,000 in worth) to virtual reconstruction. If a home needs a new bathroom or new siding, for example, the loan will include the projected cost of those renovations in addition to the value of the existing home.

You could do either a remodel or a renovation with the funds, the former of which is making updates to an existing room or structure, while the latter is more extensive and can include changing the function or partially the structure of a home. An FHA 203(k) loan, however, will not cover “luxury” upgrades like a pool, tennis court, or gazebo.

If you’re buying a condo, 203(k) loans are generally only issued for interior improvements. However, you can use a 203(k) loan to convert a property into a two- to four-unit dwelling.

Project estimates done by the lender or the FHA will determine your loan amount. The loan process is paperwork-heavy. Working with contractors who are familiar with the way the program works and will not underbid will be important.

Contractors will also need to be efficient: The work must begin within 30 days of closing and be finished within six months.

Note: SoFi does not offer FHA 203(k) loans at this time. However, we do offer other conventional mortgage options.

Temporary Housing

If the home is indeed unlivable, the standard 203(k) loan can include a provision to provide you with up to six months of temporary housing costs or existing mortgage payments.

Who Is Eligible for an FHA 203(k) Loan?

Individuals and nonprofit organizations looking for a home mortgage loan can use an FHA 203(k) loan, but investors usually cannot. (The only way to use a 203(k) loan to finance an investment property is to buy a property with multiple units and live in one of the units.)

FHA 203(k) Loan Qualification Requirements

Most of the eligibility guidelines for regular FHA loans apply to 203(k) loans. They include a minimum credit score of 580 and at least a 3.5% down payment. Applicants with a score as low as 500 will typically need to put 10% down. Those with credit scores of less than 500 are not eligible for FHA-insured loans.

Your debt-to-income ratio typically can’t exceed 43%. Additionally, you must be able to qualify for the costs of the renovations and the purchase price.

Recommended: How to Qualify for a Mortgage

How to Apply for a 203(k) Loan

To apply for any FHA loan, you have to use an approved lender, a list of which you can find on HUD.gov. It’s a good idea to get multiple quotes.

Once you have a lender, they will assign you a 203(k) consultant who will help you to plan the work that needs to be done on the property you’ve selected and determine how much it will cost. To do so, the consultant will perform a home inspection to identify necessary repairs and improvements, including any health or safety issues.

After that, you will need to find a contractor to write out an estimate for the cost of the labor and materials. Once the lender approves that estimate, they will appraise your home. Your loan can then close and work on your home can begin.

Pros and Cons of 203(k) Rehab Loans

Before you move forward with 203(k) rehab loans, it’s important to understand the benefits as well as the downsides. Here are the major pros and cons to consider:

How Much Can You Borrow with an FHA 203(k) Loan?

The maximum amount you can borrow with a standard FHA 203(k) loan is 110% of the home’s proposed future value or the purchase price plus your anticipated renovation costs, whichever is less. The total value of the home must still fall within the FHA’s mortgage limits for your area, however. (As noted above, the most you can borrow with a limited FHA 203(k) loan is $35,000.

203(k) Loans vs Conventional Home Rehab Loans

As you consider whether an FHA 203(k) loan may be your best bet from among the many types of mortgage loans, you may be wondering how it compares to a conventional home rehab loan. Both can provide financing to cover the cost of renovating, but there are some key differences to keep in mind — namely, the credit score and down payment requirements as well as what types of improvements can be financed.

Recommended: Guide to Buying, Selling, and Updating Your Home

Alternatives to 203(k) Rehab Loans

The FHA 203(k) provides the most comprehensive solution for buyers who need a loan for both a home and substantial repairs. However, if you need a loan only for home improvements, there are other options to consider.

Depending on the improvements you have planned, your timeline, and your personal financial situation, one of the following alternatives could be a better fit.

Other Government-Backed Loans

Limited FHA 203(k) Loan: In addition to the standard FHA 203(k) program, there is a limited FHA 203(k) loan of up to $35,000, as mentioned above. Homebuyers and homeowners can use the funding to repair or upgrade a home.

FHA Title 1 Loans: There also are FHA Title 1 loans for improvements that “substantially protect or improve the basic livability or utility of the property.” The fixed-rate loans may be used in tandem with a 203(k) rehabilitation mortgage. The owner of a single-family home can apply to borrow up to $25,000 with a secured Title 1 loan.

Fannie Mae’s HomeStyle® Renovation Mortgage: With Fannie Mae’s HomeStyle® Renovation Mortgage, homebuyers and homeowners can combine their home purchase or refinance with renovation funding in a single mortgage. There’s also a Freddie Mac renovation mortgage, but standard credit score guidelines apply. Need more details? Our complete guide to government home loans can help.

Cash-Out Refinance

If you have an existing mortgage and equity in the home, and want to take out a loan for home improvements, cash-out refinancing from a private lender may be worth looking into.

You usually must have at least 20% equity in your home to be eligible, meaning a maximum 80% loan-to-value (LTV) ratio of the home’s current value. (To calculate LTV, divide your mortgage balance by the home’s appraised value.)

A cash-out refi could also be an opportunity to improve your mortgage interest rate and change the length of the loan. To examine whether this approach is right for you, check out your cash-out refinancing rate.

PACE Loan

For green improvements to your home, such as installing solar panels or an energy-efficient heating system, you might be eligible for a Property Assessed Clean Energy (PACE) loan.

The nonprofit organization PACENation promotes property-assessed clean energy (or PACE) financing for homeowners and commercial property owners, to be repaid over a period of up to 30 years.

Home Improvement Loan

A home improvement loan is an unsecured personal loan — meaning the house isn’t used as collateral to secure the loan. Approval is based on personal financial factors that will vary from lender to lender.

Lenders offer a wide range of loan sizes, so you can invest in minor updates or major renovations. A home improvement loan of $5,000 to $100,000 may be an option worth considering to turn your home into a haven.

Home Equity Line of Credit

If you need a loan only for repairs but don’t have great credit or wish to fund more than $35,000 in repairs, a HELOC may provide a lower rate. Be aware that if you can’t make payments on the borrowed funding, which is secured by your home, the lender can seize your home.

Recommended: Guide to Buying, Selling, and Updating Your Home

The Takeaway

If you have your eye on a fixer-upper that you just know can be polished into a jewel, an FHA 203(k) loan could be the ticket. However, other loan options may make more sense to other homebuyers and homeowners.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it hard to qualify for an FHA 203(k) loan?

An FHA 203(k) loan is easier to qualify for than many other types of mortgage because you can have a down payment of as little as 3.5% with a credit score of 580. With a higher down payment, a credit score of 500-580 could be adequate.

Who qualifies for FHA 203(k)?

To qualify for an FHA 203(k) loan, you’ll need a credit score of at least 500 and a down payment of 3.5% (10% if your credit score is below 580), and you will need to use the property you are buying and renovating as your primary residence. You’ll also need to use a professional contractor to make improvements. (This is not a loan for DIY renovators.)

How much can you borrow on a 203(k) loan?

The most you can borrow with a standard FHA 203(k) loan is the lower of either: 110% of the home’s proposed future value or the purchase price plus expected renovation cost. A limited FHA 203(k) loan has a ceiling of $35,000.

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

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

SOHL-Q225-071

For many people, purchasing a home is the very definition of living their best life and achieving the American dream. But it’s not the right choice for everyone, and it might not be the right move to make at a given moment.

Owning a home may be the biggest financial commitment you’ll ever make, so it makes sense to carefully consider the upsides and downsides of buying vs. renting. Sometimes, the flexibility and affordability possible with renting can be a good fit.

Read on for advice that will help you answer, “Should I rent or buy a house?”

•   Learn the pros and cons of buying vs. renting a home

•   Take a quiz to help you decide if you should buy or rent a home

•   Find out the steps to take when you’re ready to start hitting the open houses

Rent or Buy a Home: Pros and Cons

Deciding whether to rent vs. buy is a very individual decision. There’s no rule about which is better; much will depend on your personal goals and your financial situation.

Let’s, take a closer look at whether it is better to buy or rent a house.

Advantages of Renting

Here, the upside of being a renter:

•   Low-maintenance lifestyle. Your landlord is typically responsible for repairs and maintenance, so your time and money can be spent elsewhere.

•   Potentially lower monthly expenses. Your landlord may also pay some of your monthly utilities, and you aren’t responsible for paying property taxes.

•   Flexibility. When your lease is up, you can renegotiate or move…across the street or across the country. If you aren’t ready to lock into a location for at least a few years, renting can be a smart step.

•   Low investment. You don’t need to make a big investment (like the down payment and closing costs associated with home buying) when you move into a rental. You might have to put down a security deposit, but that will typically be much less costly.

Disadvantages of Renting

Now, consider the downside of being a renter vs. a homeowner.

•   Rules to follow. Your landlord may have restrictions that you don’t like, such as no pets or no remodeling.

•   Not building wealth. The rent you pay each month doesn’t give you any equity in a property. It just goes to the owner, unless you set up a rent-to-own agreement.

•   Lack of control over your monthly charges. Your rent could spike due to inflation, the housing market heating up in your area, and other factors.

•   Uncertainty. If the owners decide to sell the building you live in, you may need to move unexpectedly and quickly, which can also get expensive.

Advantages of Buying

If you decide to buy vs. rent, here are some of the benefits you may enjoy.

•   Building wealth. As you make payments on your home loan, you are usually building home equity.

•   Tax advantages. Homeowners may be able to deduct both mortgage interest and their property tax payments (plus possibly other related expenses) from their federal income taxes if they choose to itemize their deductions.

•   Freedom. You have far fewer restrictions involving remodeling, pet ownership, and so forth. Want to paint a bathroom purple, rip out a wall, or adopt five rescue dogs? Go for it.

•   Stability. You can put down roots in a community and school district. When you decide to move, it’s your decision.

•   Affordability. Sometimes a mortgage payment can be cheaper than rent, especially if you get a good mortgage rate.

Looking at the price-to-rent ratio of a city helps gauge whether it makes more sense to buy or pay a landlord. The housing market dynamics of your location may determine this aspect of whether to buy or rent a house.

Disadvantages of Buying

Now that you know the potential upsides of owning your own home, take a look at the potential drawbacks.

•   High costs. The price of homeownership may be painful in a hot market. Accumulating the cash to make a down payment can be challenging and take years of saving. Plus, the closing costs when securing a home can be considerable.

•   Credit score. You typically need to qualify for a mortgage, and your credit score will be a factor. Those with excellent credit scores will get better rates; those with lesser scores may want to wait to build their rating before buying.

•   Maintenance. You’re generally responsible for all repairs, maintenance, and utilities, plus homeowners insurance, property taxes, and any homeowner association (HOA) dues. These can not only impact your finances but also your lifestyle. Taking care of a home and property can require an investment of time and energy.

•   Locked in place. You probably can’t pick up and move on a whim. If you decide to move, until your home is sold, you’re still responsible for mortgage payments and the expenses attached to your new place.

Take the Rent or Buy Quiz

Are You Really Ready to Buy?

When you’re supposed to be deciding between renting vs. buying a house, the answer may already be clear to you. If you’ve decided to buy, it might make sense to take the following steps.

•   Make sure you’re ready for a long-term commitment. If you’ve saved enough for a down payment and know how much house you can afford, those are good signs. Otherwise, create a home-buying budget and saving plan to get started.

•   Consider if your line of work allows for job continuity with steady income. Have you had this type of income for the past two years or more? That kind of stability can be important to lenders.

•   If your debt-to-income ratio (DTI) appears too high for a loan program you would like to apply for, you may need to consider paying down some debt. To calculate your DTI ratio, divide your monthly debt payments by your monthly gross (pretax) income. The federal Consumer Financial Protection Bureau advises renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio). However, mortgage lenders usually like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

•   Save money for a down payment, closing costs, and other fees, plus some funds for moving expenses and any remodeling/repairs.

•   Check if your credit score is good enough to buy a house, and, if it falls short, work on building it.

•   Do a gut check to see if you’re really ready to be your own landlord, meaning being responsible for your own home maintenance, inside and out.

•   Get prequalified or preapproved for a mortgage by providing a few financial details to one or more lenders. They will usually do a soft credit check and estimate how much you may be able to borrow and the terms. A prequalification or even a preapproval can also help give you a leg up when you start home shopping.

The Takeaway

Should you buy or rent a home? That will be a personal decision, reflecting your finances, the housing market’s dynamics, your willingness to take on the responsibilities of homeownership, and your inclination to put down roots in a certain location. Both owning and renting have pros and cons, and making the right decision will likely require careful consideration and thorough planning.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to rent or buy a home?

There isn’t a simple yes/no answer to whether it is better to rent or buy a home. Each has its advantages and disadvantages and may or may not suit your needs at a given moment. For instance, owning a home can allow you to build equity and personal wealth, but the maintenance responsibilities and expenses may offset that for you. Renting may be cheaper, but you may not be able to personalize your space the way you’d like or perhaps own pets. Examine the tradeoffs to figure out what’s best for you.

Is renting cheaper than owning a home?

Renting can be cheaper than owning a home, though that can depend upon housing market conditions in a given area and the particulars of the home in question. In general, people who rent don’t have to pay property taxes and they may not be responsible for the cost of improvements and repairs, which can make renting more affordable.

Is homeownership a good investment?

Buying a home can be a good investment. It allows you to build equity and may offer tax deduction opportunities. However, if property taxes rise steeply or major home repairs loom (like a new roof), homeownership could prove financially challenging.

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

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

SOHL-Q225-180

Homeownership has long been a part of the American dream, and it opens the door to benefits like the mortgage interest deduction for those who itemize deductions on their taxes.

Itemizing typically makes sense only if itemized deductions on a primary and second home total more than the standard deduction, which nearly doubled in 2018.

Here’s what you need to know about the mortgage interest deduction.

What Is the Mortgage Interest Deduction?

The mortgage interest deduction allows itemizers to count interest they pay on a loan related to building, purchasing, or improving a primary home against taxable income, lowering the amount of taxes owed.

The tax deduction also applies if you pay interest on a condominium, cooperative, mobile home, boat, or recreational vehicle used as a residence. The deduction can also be taken on loans for second homes, as long as it stays within the limits.

States with an income tax may also allow homeowners to claim the mortgage interest deduction on their state tax returns, whether or not they itemize on their federal returns.

What Are the Rules and Limits?

The passage of the Tax Cuts and Jobs Act of 2017 was a game-changer for the mortgage interest deduction. Starting in 2018 and set to last through 2025, the law greatly increased the standard deduction and eliminated or restricted many itemized deductions.

For the 2025 tax year, the standard deduction is $30,000 for married couples filing jointly and $15,000 for single people and married people filing separately.

If you itemize deductions, you’re good to go and can deduct the interest. There’s further good news, as you may also be able to deduct interest on a home equity loan or line of credit, as long as it was used to buy, build, or substantially improve your home.

The loan must be secured by the taxpayer’s main home or second home and meet other requirements. For tax purposes, a second home not used for income is treated much like one’s primary home. It’s a home you live in some of the time.

The IRS considers a second home that’s rented some of the time one that you use for more than 14 days, or more than 10% of the number of days you rent it out (whichever number of days is larger). If you use the home you rent out for fewer than the required number of days, it is considered a rental property—one that you never live in, and not eligible for the mortgage interest deduction.

Generally, your interest-only mortgage is 100% deductible, as long as the total debt meets the limits.

According to the Internal Revenue Service, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of debt. Higher limitations ($1 million, or $500,000 if married filing separately) apply if you are deducting mortgage interest from debt incurred before Dec. 16, 2017.

You can’t deduct home mortgage interest unless the following conditions are met:

•   You must file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040).
•   The mortgage must be a secured debt on a qualified home in which you have an ownership interest.

Simply put, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you can’t pay the debt, your home can then serve as payment to the lender to satisfy the debt.

A qualified home is your main home or second home. The home could be a house, condo, co-op, mobile home, house trailer, or a houseboat. It must have sleeping, cooking, and toilet facilities.

Know that the interest you pay on a mortgage on a home other than your main or second home may be deductible if the loan proceeds were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.


💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a great rate with SoFi mortgage loans.

How Much Can I Deduct?

In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

The IRS says that if all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.)

1. Mortgages you took out on or before Oct. 13, 1987 (called grandfathered debt).

2. Mortgages you (or your spouse if married filing jointly) took out after Oct. 13, 1987, and prior to Dec. 16, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

(There is an exception. If you entered into a written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and you purchased the residence before April 1, 2018, you are considered to have incurred the home acquisition debt prior to Dec. 16, 2017.)

3. Mortgages you (or your spouse if married filing jointly) took out after Dec. 15, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.

What Are Special Circumstances?

Just like you need to understand your home loan options, you need to know the special situations where the IRS says you might or might not qualify for the mortgage interest deduction.

You can deduct these items as home mortgage interest:
•   A late payment charge if it wasn’t for a specific service performed in connection with your mortgage loan.
•   A mortgage prepayment penalty, provided the penalty wasn’t for a specific service performed or cost incurred in connection with your mortgage loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

Is Everything Deductible?

The government is only so generous, and there are many costs associated with homeownership. Some of them are not tax deductible under the mortgage interest deduction, like homeowners insurance premiums.

One caveat: You might be able to write off a portion of insurance, as well as utilities, repairs, and maintenance, if you have a home office and deduct those expenses on Schedule C.

Also not on the list for inclusion in the mortgage interest deduction are title searches, moving expenses, and reverse mortgage interest. Because interest on a reverse mortgage is due when the property sells, it isn’t tax deductible.


💡 Quick Tip: Have you improved your credit score since you made your home purchase? Home loan refinancing with SoFi could get you a competitive interest rate with lower payments.

How to Claim the Mortgage Interest Deduction

An itemizer will file Schedule A, which is part of the standard IRS 1040 tax form. Your mortgage lender should send you an IRS 1098 tax form, which reports the amount of interest you paid during the tax year. Your loan servicer should also provide this tax form online.

Using your 1098 tax form, find the amount of interest paid and enter this on Line 8 of Schedule A on your tax return. It’s not a heavy lift but gets a tad more complicated if you earn income from your property. If you own a vacation home that you rent out much of the time, you’ll need to use Schedule E.

Furthermore, if you’re self-employed and write off business expenses, you’ll need to enter interest payments on Schedule C.

The Takeaway

You can take the mortgage interest deduction if you have one or more mortgages and itemize deductions on your taxes. Keep in mind that it’s typically only worth taking if the write-offs exceed the standard deduction.

As with all matters that affect your taxes, you’ll want to consult with your financial advisor about claiming the deduction.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Do you get a bigger tax return if you have a mortgage?

Having a mortgage won’t necessarily help your taxes, though it might. When you have a mortgage, you may be able to deduct the interest you pay on that mortgage if you itemize on your federal income tax return. However, for itemizing to be worthwhile, your combined items would have to exceed the amount of the standard deduction, and your mortgage interest deduction, even in combination with other potential deductions, may not reach that threshold.

Is mortgage interest 100% deductible?

For loans taken out before December 16, 2017, qualifying mortgage interest may be deductible up to $1,000,000. For loans on or after that date, the limit is up to $750,000. The exception is that if you signed a legally binding mortgage contract on or before December 15, 2017, with the intention of closing by January 1, 2018, you can also deduct up to $1,000,000 (as long as you closed by April 1, 2018).

Can I deduct mortgage interest if I take the standard deduction?

No. If you want to deduct your mortgage interest, you must itemize your federal income tax and file a Schedule A.

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

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If you’re looking for a cheaper alternative to a traditional house, you might consider buying a mobile or manufactured home. The price of one of these homes is typically much lower than the cost of a standard single-family home. Plus, these homes aren’t necessarily temporary. These days, factory-made homes can be just as permanent as houses that are built on-site. They can also be customized in many of the same ways as a traditional home. (In this article, we’ll use the term “mobile home” when we’re talking about both mobile and manufactured homes.)

While mobile homes don’t always qualify for a traditional mortgage, there are several types of financing that can help make buying a factory-built home more affordable. Read on for a closer look at the process of buying — and financing — a mobile, manufactured, or modular home.

What Is the Average Cost of a Mobile Home?

According to the Census Bureau’s December 2024 Manufactured Housing Survey, the average price of a new manufactured home is $121,700.

More specifically, the average price for a single-wide mobile home is $86,700 and average for a double-wide mobile home is $148,700.

However, mobile home prices can vary significantly by region. The highest prices right now tend to be in the West, where the average cost of a new mobile home is $98,600 for a single-wide and $148,800 for a double-wide.

The lowest prices are currently in the Northeast, where the average price for a single-wide is $86,200 and average cost of a double-wide is $144,800.

In the Midwest, a single-wide mobile home averages $95,600 and a double-wide averages $152,900, while in the South, a single-wide mobile home averages $84,300 and a double-wide averages $148,300.

Recommended: How to Budget for Buying A House

Differences Between a Mobile Home, Modular Home, and Manufactured Home

The terms mobile home, manufactured home, and modular home are often used interchangeably. While all three refer to homes built in a factory rather than on-site, there are some differences between them. Below, we break it down.

Mobile Home

A mobile home is a prefabricated home built on a permanent trailer chassis that was constructed prior to June 15, 1976. That is when the U.S. Department of Housing and Urban Development (HUD) enacted the National Manufactured Housing Construction and Safety Standards Act. After that date, new safety standards went into effect, which led to a new designation for these homes.

Manufactured Home

Like a mobile home, a manufactured home is built almost exclusively in a factory rather than on-site. However, these homes were built after June 15, 1976, when HUD put new safety standards into effect for mobile homes and changed the name of these structures from “mobile” homes to “manufactured” homes.

Another difference between mobile and manufactured homes is that manufactured homes typically are not moved after assembly. That said, it is possible to move a manufactured home if it has a pier and beam foundation. Manufactured homes need to not only meet HUD standards but also local building standards for the communities where they will be located.

Recommended: How Much Does It Cost to Build a Manufactured Home?

Modular Homes

Like mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. However, modular homes are often delivered in two or more modules (hence the name) that are then put together on-site by a contractor.

Modular homes are not designed to be relocated and are placed on a permanent foundation. Once put together, these homes have a lot in common with on-site built homes. They may have a basement and/or crawlspace, come in a variety of layouts, and can be one or two stories.

Like manufactured homes, modular homes must adhere to local building codes.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Things to Consider When Buying a Mobile Home

To find the best mobile home for your needs, here are some things to keep in mind.

Location

As with any home purchase, location is key. You can install your mobile home on land you already own, or purchase land for your mobile home. In either case, you’ll want to make sure that local zoning regulations allow for the installation of mobile homes and that the local utilities are able to connect a mobile home.

Another location option is to rent a plot of land in a mobile home community. If you find a community you like, it’s a good idea to ask what their restrictions are for home size and features before you buy a mobile home.

Size

Mobile homes are usually classified by their width. A single-wide is typically about 15 feet wide and around 70 feet long. A double-wide mobile home is usually the same length or longer but double the width — around 30 feet wide.

Due to their long, narrow shape, single-wide homes have fewer floorplan options and may work best for individuals or couples. Double-wide homes offer more space, as well as design options, and can be ideal for larger families.

Keep in mind that larger homes will, of course, be more expensive and also require a larger lot.

New vs Used

These days, you find new manufactured homes with all kinds of bells and whistles, including vaulted ceilings, walk-in closets, and luxurious bathrooms. If you’re looking to save money, however, you might consider going with a used mobile home. Just keep in mind that a used home may show signs of wear and tear (depending on how well it was maintained) and that some mobile home sites don’t allow homes made before a certain date.

Financing a Mobile Home

Once you’ve decided on the type and size of mobile home you want to buy, it’s time to figure out how you are going to pay for it. While it can be harder to find a loan for a mobile home than a traditional home, there are still a number of options. Here are some to consider.

Fannie Mae Mortgages

While not all lenders finance manufactured homes, some may offer Fannie Mae’s MH Advantage program. These loans come with terms of 30 years, competitive rates, and down payments as low as 3%.

However, they also come with strict qualification criteria: The manufactured home must be at least 12 feet wide, have a minimum of 600 square feet, and can’t be on leased land. The home also needs to have a driveway and a sidewalk that connects it to the driveway, carport, or detached garage.

Freddie Mac Mortgages

Another option for manufactured home financing is the Freddie Mac Home Possible mortgage program. This program offers 15-, 20- and 30-year fixed-rate loans, as well as adjustable-rate mortgages. Like Fannie Mae, these loans typically come with low rates and down payments as low as 3%. Freddie Mac loans also have strict criteria for qualification: The home must be considered real property, have at least 400 square feet of living space, and be built on a permanent chassis.

FHA Loans

The Federal Housing Administration (FHA), which offers loans for traditional homes with flexible credit and down payment requirements, also offers manufactured home loans called Title I and Title II loans.

You can use a Title I loan to buy a manufactured home (but not the land it sits on), provided that the property is your primary residence, is connected to utilities, and meets FHA guidelines. These loans typically come with terms up to about 20 years and relatively low loan amounts.

Title II loans, by contrast, can be used to purchase both a manufactured home and the land it sits on together. However, the home must count as real property and have been built after 1976.

US Department of Veterans Affairs (VA) Loans

If you’re a member of the military community, you may be able to qualify for a loan insured by the Department of Veterans Affairs (VA) to purchase a mobile or manufactured home. To qualify for a VA loan for a manufactured home, your home must be on a permanent foundation, meet HUD guidelines, and must be on land you own. These loans often offer 100% financing with no money down; maximum terms can range from 20 to 25 years.

💡 Quick Tip: You never know when you might need funds for an unexpected repair or other big bill. So apply for a HELOC (a home equity line of credit) brokered bySoFi today: You’ll help ensure the money will be there when you need it, and at lower interest rates than with most credit cards.

Chattel Loans

A chattel loan is a loan designed to purchase different types of expensive personal property, such as cars, boats, and mobile homes. You don’t have to own the land your home will sit on to get a chattel loan, so this can be a good option if you plan to rent a space in a mobile home community. Some lenders also offer chattel loans that are insured by the FHA, VA, and the Rural Housing Service (RHS) through the U.S. Department of Agriculture.

Chattel loans typically have higher rates and shorter terms than traditional mortgages. Like a traditional mortgage, however, these loans hold the property being financed as collateral for the loan. That means that if you run into trouble making payments, the lender can seize and re-sell the mobile home.

Personal Loans

Since mobile homes generally cost far less than traditional homes, you may be able to finance your purchase through a personal loan.

Personal loans are typically unsecured loans with a fixed interest rate that can be used for virtually any purpose (including the purchase of a mobile home). These loans don’t have restrictions on how your mobile home is built, so you can likely qualify even if it’s fully movable and not attached to a permanent foundation. Also, personal loans don’t put your home at risk, and the application process and time to funding tends to be shorter than it is for other types of mobile home loans. However, interest rates may be higher.

While some lenders offer maximum personal loans of $40,000 to $50,000, others will let you borrow $100,000 or more. If you can find a larger personal loan, it may be enough to finance a mobile, manufactured, or modular home.

Recommended: How Much Is a Down Payment on a House?

Getting Approved for a Personal Loan

If you’re thinking about applying for a mobile home loan, here are some steps that can help streamline the process.

1. Check Your Credit Reports

Whenever you apply for any type of financing, a lender will likely look at your credit history to help them determine how much they will lend to you and at what rate (or if they will lend to you at all). It’s wise to look at your three credit reports, see where you stand, and make sure there aren’t any mistakes or inaccuracies that could negatively affect your credit. You can get free copies of your credit reports from the three consumer bureaus — Equifax®, Experian®, and TransUnion® — at AnnualCreditReport.com.

2. Determine Whether You’re Buying Land and a Mobile Home

This will determine how much money you need to borrow, as well as what your financing options are. Some lenders will only offer mobile home financing if the home will be permanently set up on land that you own.

3. Save For a Down Payment

While it’s not always required, you may also want to think about saving for a down payment on your manufactured or mobile home.

4. Find the Right Lender

Interest rates can vary from one lender to the next, so it can definitely pay to shop around and compare offerings from banks, credit unions, and online lenders. Some lenders will allow you to “prequalify” for a loan with a soft credit check (which doesn’t impact your credit score). This will allow you to get an idea of the loan amount and rate you may be able to qualify for before you officially apply.

The Takeaway

While mobile and manufactured homes are typically more affordable than a traditional home, you may still need financing to cover the cost of the purchase. You may be able to get a loan from the same sources as traditional mortgages (such as FHA and VA loans). Other options include specialized manufactured home loans through Fannie Mae and Freddie Mac, chattel loans, and personal loans.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Can you get a personal loan for a mobile home?

Yes, a personal loan can be used to buy a mobile, manufactured, or modular home. Applicants will need to meet qualification requirements of the lender they’re working with.

What is the maximum personal loan amount for a mobile home?

The maximum loan amount depends on the lender. Many have maximum loan amounts of $40,000 and $50,000 but some will offer up to $100,000. The amount you can borrow will also depend on your income, credit score, and other factors.

Where can I get a personal loan to buy a mobile home?

Traditional banks, credit unions, and online lenders may offer personal loans to buy a mobile or manufactured home.

^†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.
^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.

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

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

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