Interior Decoration Tips for Furnishing a New Home

Interior Decoration Tips for Furnishing a New Home

Turning a new space into a home can be daunting. By far the hardest part of furnishing a house from scratch is figuring out where to start. One good first step is deciding on a budget — ideally, before you move out of your old place.

However you proceed, recognize that it’ll take some trial and error: At some point, you’re going to realize that something you had your heart set on is not what you want to spend your money and time on after all.

Whether you’re a minimalist or maximalist, we’ll show you tips for furnishing a home on a realistic timeline and budget.

Recommended: Things to Budget for After Buying a Home

6 Tips for Furnishing a Home

The key to finding the right home furnishings is to follow your instincts. There isn’t one universal definition of good taste. This is your taste, and your home. Here are a few guidelines.

1. Consolidate Your Stuff

Before you set a budget for new home furnishings, walk through your old place and identify what you want to keep (if anything) and what you’ll need to purchase. A new home is the perfect opportunity to say goodbye to pieces that don’t suit your lifestyle anymore. (“What would Marie Kondo do?” is still a good mantra.)

Start with the key pieces of furniture you’ll need for your home to be functional — beds, couches, dining table, area rugs. Did you recently purchase your dream bed, or have you had the frame since college? Decide what to move and what to chuck.

You can sell or donate furniture, depending on value.

2. Prep Before the Schlep

A rule of thumb for interior decoration: Pulling up carpeting and painting the walls are much easier to do before any furniture is brought into the house. Before move-in day, create a list of any changes you would like to make to the existing interior. Ask yourself if you want to include minor home repairs in this budget or create a separate one.

Here are some basics to consider before furnishing a house:

•   Walls and ceilings: Choose a paint color, patch holes, remove popcorn ceilings

•   Floors: Remove or add carpet, put in hardwood floors, refinish floors

•   Appliances: Select kitchen appliances, bring in a washer and dryer, install ceiling fans and lighting fixtures

•   Kitchen and bath upgrades: Redo the kitchen counters, choose a backsplash, retile the bathroom

•   Laundry room: A laundry room remodel can create a more efficient space or a room with a dual function.

Once you’ve made the list of potential changes, determine what needs to be tackled now and what can wait. You may be able to live with the blue tile in the kitchen, for instance, but the pink walls in the bedroom aren’t going to cut it. Next, determine what you can do yourself and what will require professional attention. You may want to research reliable contractors in your new neighborhood before you need one.

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3. When Buying Furniture, Start with Key Rooms

The living room and main bedroom are two places you likely spend the most time in, so these are good rooms to prioritize. You don’t need to have a fully organized pantry before you have an acceptable place to sleep.

A bed and a couch may be worth spending extra money on in order to get something that will last for years and tie the room together.

•   Bedroom: A good bed frame and mattress are wise investment pieces. And it can be a good idea to choose a whole bedroom vibe before buying new pieces so that you have a cohesive theme.

•   Living room: A couch is the centerpiece here, so that’s the investment piece (and a good decor starting point). Consider size, comfort, and color. A big TV or entertainment center may also be part of the equation.

•   Home office: You may be able to offset some of the cost with a home-office tax deduction.

4. Keep Things Organized While You Unpack

The two elements that really shape the feng shui of a home are organization and decor. An organized pantry or closet makes life easier, while a curated bookshelf can subtly affect the feel of an entire room.

See what you already have that can be functional — baskets, bins, and such. As you unpack your belongings, use these tools to stay organized. Depending on your lifestyle, organizational outlays for your new home could range from slimline hangers to a closet remodel.

5. Little Things Add to the Big Picture

Lay out all decor pieces you own, including art, books, family heirlooms, photographs, trays, candles, and vases. Ideally, you’ve gone through most of this stuff in the consolidation phase and kept only things that are meaningful to you or fit your home’s aesthetic.

Once you see everything in one place, begin picking out things that go together. There are no wrong answers here — you might choose travel books for your office and a series of family heirlooms and photographs for your bedroom. This is the most forgiving aspect of interior decoration because smaller decor pieces can be easily shifted.

Once all of your belongings are in place and the art is hung, you can browse online to find some great pieces that resonate with you and your space. Now may be the time to frame that print you’ve been hanging on to, or to splurge on the perfect pillows for your couch. These may seem like small additions, but they can make a huge difference.

6. Space Out the Purchase of Big-Ticket Items

It’s OK if your home looks like a work in progress for a while. Once you’ve consolidated, organized, and decorated, you may want to buy your investment pieces. Pick three or four non-negotiables — perhaps a bed, sofa, television, and live edge dining table — and get those into the house. Then focus on buying art, rugs, and lights you’ve been eyeing.

How Much Does It Cost to Furnish a House?

One way to estimate interior costs is to set a budget that’s a percentage of your home’s price — typically 10% to 50%. For a $400,000 home, for instance, you’re looking at a baseline of $40,000.

Remember, that includes any painting, flooring work, and minor updates in addition to new home furnishings. That figure also accounts for all interior-related costs in your first few years of home ownership: the inexpensive starter pieces you tolerated until the perfect item materialized, the well-intentioned mistakes, and so forth.

If you don’t have a separate fund earmarked for new home furnishings, it can be hard to come up with a chunk of cash right after closing. One option is taking out a personal loan. In fact, funding home updates and furnishings is one of the most common uses for personal loans.

There are different types of personal loans. Typically, you can borrow between $5,000 and $100,000, and pay it back in equal installments over a term of up to seven years. Fixed interest rates for personal loans tend to be lower than for credit cards.

Here are some cost ranges for key pieces to help you create a budget.

Recommended: Personal Loan Calculator

Painting: $500 to Thousands

The cost of paint supplies will depend on the number of rooms, amount of trim for doors and windows, and the quality of the paint. Paint is about $15-$40 per gallon, but a designer brand can cost much more than that. A gallon of paint covers about 400 square feet, and two coats may be recommended. Factor in all the myriad paint supplies to buy if you DIY.

Expect to pay a painter $2 to $6 per square foot for labor and materials, according to Home Advisor. For a 2,300 square foot home, you can pay from $4,000 to $11,000.

Bed: $200 to $2,000 and Up

Simple bed frames are available from IKEA or Wayfair in the $100-$200 range. Inexpensive bed frames and headboards are also easy to find at thrift stores and yard sales. While you may not want to furnish your entire house with thrifted pieces, one or two second-hand items can free up a lot of cash to put toward a couch or higher-end mattress.

You can also find mid-priced selections from $200 to $1,000 at those retailers as well as more design-driven vendors such as West Elm, Raymour & Flanigan, and Crate and Barrel.

Mattress: $300 to $2,000 and Up

Mattress-in-a-box brands such as Zinus, Allswell, and Nectar offer mattresses starting at a few hundred dollars. Higher-end brands like West Elm, Raymour & Flanigan, and Tempur-Pedic can run upwards of $3,000.

Sofa: $200 to $3,000

The IKEAs, Wayfairs, and Targets of the world offer many starter pieces for a few hundred dollars. Midrange selections run from $300 to $1,000 from these and other retailers, such as Ashley Furniture, West Elm, Raymour & Flanigan, Crate and Barrel, and CB2.

At the higher end of the spectrum, more sophisticated designs are available at Roche Bobois, Ligne Roset, Design Within Reach, and other luxury brands. And don’t forget second-hand designer marketplaces — such as Apt Deco, Kaiyo, 1st Dibs — and antique stores.

Dressers and Wardrobes: $500 to $5,000 and Up

Bedroom furniture can be found at the same kinds of retailers and run from modest to extravagant. While coordinating bedroom sets used to be de rigueur, in recent years they’ve been replaced by a less matchy-matchy aesthetic.

Rugs: $30 to $1,000 and Up

Rugs are a cost that’s easy to forget about, and they can be a lot more expensive than you expect. A high-quality Persian rug can run thousands of dollars, but some of the midrange retailers discussed have area rugs starting at $100. Look out for Labor Day and Black Friday sales, too.

Organizational Pieces: $20 to $300 and Up

Baskets, bins, storage ottomans, and closet systems can bring order to chaos. The Container Store offers inspiration.

The Takeaway

When furnishing a home, start with a budget. One rule of thumb suggests putting aside 10% to 50% of your home’s price for interior decorating. Before you move, cull your belongings and prepare the new space for move-in (pulling up carpet, redoing countertops, remodeling a closet). Then identify initial key purchases. Many homeowners today choose a mix of high and low-end furnishings, plus second-hand items from thrift stores and online designer dealers.

When you’re making your new house a home, a personal loan can help ensure that you don’t have to cut corners. SoFi offers no-fee personal loans that come with a fixed rate.

Check your rate in 60 seconds without affecting your credit score†, and get your loan funded as soon as the same day you’re approved.*

FAQ

What is a good budget for furnishing a new home?

Some experts recommend setting your home furnishings budget as a percentage of your home’s price: say, 10% to 50%. That includes any cosmetic work done on the interior before you move in, as well as new home furnishings and decor pieces.

Can you furnish your home with a personal loan?

If you have an emergency fund tucked away and feel comfortable making another monthly payment on top of your mortgage, a personal loan can be a good option. In fact, home furnishings and updates are one of the most common uses for a personal loan. Just be prepared to prove to lenders that your debt-to-income ratio will remain below 36%.

Can you furnish a new home with a $10,000 personal loan?

A personal loan is a good option for covering new home furnishings. Just make sure $10,000 will cover your costs — you can’t add to a personal loan amount after the fact. One rule of thumb suggests budgeting 10% to 50% of your home’s price for furnishings and interior updates.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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.
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15-Year vs 30-Year Mortgage: Which Should You Choose?

15-Year vs 30-Year Mortgage: Which Should You Choose?

Deciding whether to pick a 15- or 30-year mortgage largely boils down to what kind of monthly payment you can afford and whether you need financial flexibility.

There’s a reason that the 30-year fixed-rate mortgage is most popular by far: Manageable payments that ideally allow room for other needs and wants.

But borrowers who can afford the higher payments of 15-year mortgages, and who like the lower rate, may find them compelling.

How Does a 15-Year Mortgage Work?

Borrowers who opt for a 15-year mortgage when choosing a mortgage term — and let’s just talk about fixed-rate, not variable-rate loans, which can be useful in certain situations but are more complicated — will pay off their loan faster and save significantly more in interest over the life of the loan. The main trade-off is the fact that your monthly payment will be significantly higher than a comparable 30-year home loan.

Fifteen-year mortgages typically carry lower interest rates than 30-year mortgages. Consequently, the combination of a lower rate and compressed payoff time means a much lower interest cost overall.

A 15-year mortgage loan for $300,000 with a rate of 4.6% would result in $115,860 in interest paid. That same loan amount with a 30-year term at 5.8% would translate to about $333,700 in interest, a difference of $217,840.

The basic monthly payment, however, would be $2,310 vs. $1,760 in this example. Use an online mortgage calculator to compare home loans.

Lenders charge lower rates for 15-year mortgages because it costs them less to underwrite 15-year mortgages than 30-year loans. Generally speaking, the longer term a loan, the riskier it is to lenders, which they price into the loan through a higher interest rate.

Here are the main pros and cons of 15-year mortgages.

ProsCons

•   Interest cost savings

•   Faster loan payoff

•   Lower interest rate

•   Equity built at a faster rate

•   Much higher monthly payments

•   Less cash available for other opportunities

•   Smaller range of homes in the budget, thanks to high payments

When to Consider a 15-Year Fixed-Rate Mortgage

You might want to consider a 15-year fixed-rate mortgage if you’re trying to pay off the loan faster, you want to save on total interest paid, want a lower rate, and can afford the higher monthly payments.

If you’re buying a home close to retirement and you’re interested in building generational wealth, a 15-year mortgage also is an attractive option as it ensures a faster payoff.

The 15-year mortgage is more frequently used for refinancing than buying, thanks to the lower rate and because most borrowers who choose to refinance are usually several years into their loan.

Consequently, borrowers who have longer-term mortgages with higher interest rates may want to consider refinancing to a 15-year home loan to save on interest costs. However, if you qualify as a first-time homebuyer or a typical U.S. family, expect a 15-year mortgage to restrict your budget.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


30-Year Mortgage vs. 15-Year Mortgage

Borrowers will find the payments on 30-year mortgages to be much more affordable than on 15-year mortgages. The longer the repayment term, the lower the monthly payment, potentially leaving more cash in your pocket every month.

Increased cash flow may allow borrowers to pursue other opportunities like preparing for retirement.

And shoring up emergency savings. Paying off higher-interest debt is always a good plan.

Homeowners may want to have enough cash to add or expand a home office, rev up the kitchen, and generally maintain the value of their home.

What about vacations and buying stuff? Yes and yes.

And some buyers will want to set up a college fund.

Like most things, 30-year home loans have upsides and downsides to consider.

ProsCons

•   Lower monthly payments

•   Extra monthly cash to dedicate to other opportunities

•   Making extra payments or refinancing will shorten term

•   Greater mortgage interest deduction if you itemize than a shorter-term loan allows

•   Higher interest expense than a 15-year loan

•   Builds equity at a slower rate

•   Longer time to pay off loan

When to Consider a 30-Year Fixed-Rate Mortgage

You may wish to consider a 30-year fixed-rate mortgage if you’re looking for the most affordable option when buying a home.

Fixed-rate 30-year home loans are the most straightforward and common type of mortgage loan on the market.

Between rising home prices and interest rates, 30-year home loans have started looking more attractive than other options. Despite the higher overall interest cost, the lower monthly payments on 30-year mortgages make it easier to afford a home.

Borrowers always have the option of paying off the mortgage early. Every extra principal payment reduces your overall loan balance and reduces the amount of interest that compounds over time as well.

The final thing to consider is that a 30-year mortgage provides a greater tax benefit than a shorter-term mortgage if you take the mortgage interest deduction. Some homeowners use this strategy when itemized deductions on a primary and second home total more than the standard deduction.

Should You Choose a 15-Year or 30-Year Mortgage?

For many homebuyers, the choice of 15- vs. 30-year mortgage will not be voluntary: The monthly payments will force the decision.

If you are able to choose one or the other, you’ll want to consider whether you’re able to comfortably commit to a series of high monthly mortgage payments in exchange for the earlier loan payoff and interest savings, or whether any money left over monthly after making the relatively low mortgage payment on a 30-year loan could be put to other uses.

Your income level, career stability, and debt-to-income ratio may largely determine your course.

The Takeaway

The decision on a 15- vs. 30-year mortgage depends on your personal budget and financial goals. If you can swing the shorter term, you’ll benefit from a lower interest rate, faster loan payoff, and substantial interest savings.

SoFi offers fixed-rate mortgages with a variety of terms and competitive rates. Check out all the advantages of SoFi Mortgages.

FAQ

Is a 30-year mortgage better than a 15-year mortgage?

It’s a matter of personal choice and affordability.

Is it better to pay off my mortgage for a long period?

You’ll pay a lot more in total interest than you would with a shorter-term loan, but payments will be more affordable.

Can I pay off my 30-year mortgage in 15 years?

Yes, assuming that your mortgage doesn’t have a prepayment penalty, there’s nothing stopping you from paying off the balance ahead of schedule.

Are the interest rates for a 30-year mortgage higher than a 15-year mortgage?

Yes, the interest rates for 30-year mortgages are typically higher than 15-year mortgages because of the extra risk of longer-term loans.


Photo credit: iStock/Tatomm
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.
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What Is a Mortgage Lien? And How Does It Work?

What Is a Mortgage Lien? And How Does It Work?

A mortgage lien may sound scary, but any homeowner with a mortgage has one.

Then there are involuntary liens, which can be frightful. Think tax liens, mechanic’s liens, creditor and child support liens.

What Is a Mortgage Lien?

Mortgage liens are part of the agreement people make when they obtain a mortgage. Not all homebuyers can purchase a property in cash, so lenders give buyers cash upfront and let them pay off the loan in installments, with the mortgage secured by the property, or collateral.

If a buyer stops paying the mortgage, the lender can take the property. If making monthly mortgage payments becomes a challenge, homeowners would be smart to contact their loan servicer or lender immediately and look into mortgage forbearance.

Mortgage liens complicate a short sale.

They will show up on a title report and bar the way to a clear title.

Recommended: Tips When Shopping for a Mortgage

Types of Mortgage Liens

Generally, there are two mortgage lien types: voluntary and involuntary.

Voluntary

Homeowners or homebuyers agree to a voluntary, or consensual, lien when they sign a mortgage. If a homeowner defaults on the mortgage, the lender has the right to seize the property.

Voluntary liens include other loans:

•  Car loans

•  Home equity loans

•  Reverse mortgages

Voluntary liens aren’t considered a negative mark on a person’s finances. It’s only when they stop making payments that the lien could be an issue.

Involuntary

On the other side of the coin is the involuntary, or nonconsensual, lien. This mortgage lien type is placed on the property without the homeowner’s consent.

An involuntary lien could occur if homeowners are behind on taxes, HOA payments, or mortgage payments. They can lose their property if they don’t pay back the debt.

Property Liens to Avoid

Homeowners will want to avoid an involuntary lien, which may come from a state or local agency, the federal government, or even a contractor.

Any of the following liens can prohibit a homeowner from selling or refinancing property.

Judgment Liens

A judgment lien is an involuntary lien on both real and personal property and future assets that results from a court ruling involving child support, an auto accident, or a creditor.

If you’re in this unfortunate position, you’ll need to pay up, negotiate a partial payoff, or get the lien removed before you can sell the property.

Filing for bankruptcy could be a last resort.

Tax Liens

A tax lien is an involuntary lien filed for failure to pay property taxes or federal income taxes. Liens for unpaid real estate taxes usually attach only to the property on which the taxes were owed.

An IRS lien, though, attaches to all of your assets (real property, securities, and vehicles) and to assets acquired during the duration of the lien. If the taxpayer doesn’t pay off or resolve the lien, the government may seize the property and sell it to settle the balance.

HOA Liens

If a property owner in a homeowners association community is delinquent on dues or fees, the HOA can impose an HOA lien on the property. The lien may cover debts owed and late fees or interest.

In many cases, the HOA will report the lien to the county. With a lien attached to the property title, selling the home may not be possible. In some cases, the HOA can foreclose on a property if the lien has not been resolved, sell the home, and use the proceeds to satisfy the debt.

Mechanic’s Liens

If a homeowner refuses to pay a contractor for work or materials, the contractor can enforce a lien. Mechanic’s liens apply to everything from mechanics and builders to suppliers and subcontractors.

When a mechanic or other specialist files a lien on a property, it shows up on the title, making it hard to sell the property without resolving it.

Lien Priority

Lien priority refers to the order in which liens are addressed in the case of multiple lien types. Generally, lien priority follows chronological order, meaning the first lienholder has priority.

Lien priority primarily comes into play when a property is foreclosed or sold for cash. The priority dictates which parties get paid first from the home’s sale.

Say a homeowner has a mortgage lien on a property, and then a tax lien is filed. If the owner defaults on their home loan and the property goes into foreclosure, the mortgagee has priority as it was first to file.

Lien priority also explains why lenders may deny homeowners a refinance or home equity line of credit if they have multiple liens to their name. If the homeowner were to default on everything, a lender might be further down the repayment food chain, making the loan riskier.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


How to Find Liens

Homeowners or interested homebuyers can find out if a property has a lien on it by using an online search. Liens are a public record, so interested parties can research any address.

For a DIY approach:

•  Search by address on the local county’s assessor or clerk’s site.

•  Use an online tool like PropertyShark.

Title companies can also search for a lien on a property for a fee.

If sellers have a lien on a property they’re selling, they’ll need to bring cash to the closing to cover the difference. If the seller doesn’t have enough money, the homebuyer is asked to cover the cost, or they can walk away from the deal.

How Can Liens Affect Your Mortgage?

An involuntary lien can affect homeowners’ ability to buy a new home, sell theirs, or refinance a mortgage. Lenders may deem the homeowner too big a risk for a refinance if they have multiple liens already.

Or, when homeowners go to sell their home, they’ll need to be able to satisfy the voluntary mortgage lien or liens at closing with the proceeds from the sale. If they sell the house for less than they purchased it for or have other liens that take priority, it may be hard to find a buyer willing to pay the difference.

Liens can also lead to foreclosure, which can impede a person’s chances of getting a mortgage for at least three to seven years.

How to Remove a Lien on a Property

There are several ways to remove a lien from a property, including:

•  Pay off the debt. The most straightforward approach is to pay an involuntary lien, or pay off your mortgage, which removes the voluntary lien.

•  Ask for the lien to be removed. In some cases, borrowers pay off their debt and still have a lien on their property. In that case, they should reach out to the creditor to formally be released from the lien and ask for a release-of-lien form for documentation.

•  Run out the statute of limitations. This approach varies by state, but in some cases, homeowners can wait up to a decade and the statute of limitations on the lien will expire. However, this doesn’t excuse the homeowner from their debt. It simply removes the lien from the home, making it easier to sell and settle the debt.

•  Negotiate the terms of the lien. If borrowers are willing to negotiate with their creditors, they may be able to lift the lien without paying the debt in full.

•  Go to court. If a homeowner thinks a lien was incorrectly placed on their property, they can file a court motion to have it removed.

Before taking any approach, you might consider reaching out to a legal professional or financial advisor to plan the next steps.

Recommended: Home Loan Help Center: Tips, Tools, and Education for Home Buyers

The Takeaway

Mortgage liens can be voluntary and involuntary. Many homeowners don’t realize that the terms of their mortgage include a voluntary lien. It’s involuntary liens they would be smart to avoid.

Mortgages can be complicated, but SoFi is here to make things simple. If you need a mortgage on a primary home or investment property, a jumbo loan, a refinance, or home equity loan, get pre-qualified painlessly with SoFi.

Explore the advantages of SoFi fixed rate mortgages and find your rate.

FAQ

What type of lien is a mortgage?

A mortgage lien is a voluntary lien because a homeowner agrees to its terms before signing the loan.

Will having a lien prevent me from getting a new loan?

Some liens can keep people from getting new loans. Lenders are unlikely to loan applicants money if they have multiple liens.

Is it bad to have a lien on my property?

A mortgage lien is voluntary and not considered bad for a borrower. But an involuntary lien prohibits owners from having full rights to their property, which can include selling the home.

How can I avoid involuntary liens?

Homeowners can avoid involuntary liens by staying up to date on payments, including property taxes, federal income taxes, HOA fees, and contractor bills.

Can an involuntary lien be removed?

Yes, an involuntary lien can be removed in several ways, including paying off the debt, filing bankruptcy, negotiating the debt owed, and challenging the lien in court.


Photo credit: iStock/adaask
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.
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How to Pay Off a 30-Year Mortgage in 15 Years

How to Pay Off a 30-Year Mortgage in 15 Years: Tips and Tricks

Want to know how to pay off a 30-year mortgage in 15 years? A homeowner can use one of a few strategies to pay off a home loan early and save a boatload of interest.

Here’s what you need to know about how to pay a 30-year mortgage in 15 years and what to consider before you do.

Paying Off a 30 Year Mortgage Faster

When you start paying on a 30-year mortgage, most of your payment will go toward interest rather than the principal (the amount you borrowed). This makes it hard to pay down your mortgage and build equity.

Over time, the percentage of your payment that goes toward interest vs. principal will change. Toward the end of your 30-year loan, you will pay more toward the principal than interest. This is what’s known as mortgage amortization.

Instead of following the amortization schedule, paying more on your mortgage — in one way or another — will reduce the principal more quickly, which means you’ll pay less interest on your loan.

Should You Pay Off Your Mortgage Faster?

Paying off your mortgage faster may give you a sense of accomplishment and save you a lot of money in interest charges, but if it takes you further away from your financial goals, it may not be worth it to you. Consider what you value most before deciding to put extra money toward paying off your mortgage.

Recommended: Is is Smart to Pay Off a Mortgage Early?

Pros and Cons of Paying Off Your Mortgage Early

Paying off a 30-year mortgage in 15 years has benefits, but in some cases, it may not make sense to. Consider these pros and cons.

Pros

Cons

Higher monthly payment
Own your home outright soonerYou will lose the home mortgage interest tax deduction (if you itemize)
Ultimately no mortgage payment
Build equity fasterLess money available for retirement, higher-interest debt, a rainy day fund, etc.
Save money on interestGains by investing could trump interest saved

Factors to Consider Before Paying Off Your Mortgage Faster

While paying off your mortgage early — a few zealous borrowers aim to pay off a mortgage in five years — can save you tens of thousands of dollars in interest, the lost opportunities from not having money readily available for other things could be more valuable. Think about:

•   Have I been contributing enough to my retirement plans as an employee?

•   Have I been funding retirement as a self-employed person?

•   Do I have three to six months of expenses, or more, if my personal situation calls for it, in an emergency fund?

•   Am I able to secure a lower rate or shorter term for a refinance to pay off my mortgage faster? Would a cash-out refinance make sense?

•   Do I have higher-interest debt like credit card debt or student loans I should tackle first?

•   Have I set up a college fund for the kids?

•   Does my mortgage carry a prepayment penalty (unlikely for loans originated after January 2014)?

How to Pay Off a 30-Year Mortgage Faster

There are at least three methods to pay off a 30-year mortgage in 15 years if that’s your goal.

Make Extra Principal Payments

Paying more toward principal is the primary way to pay off a 30-year mortgage early.

Here’s an example of how interest adds up: Assuming you buy a $350,000 house and put 10% down on a 30-year mortgage at 5.5%, this mortgage calculator shows that total interest will be $328,870. Even by the 120th payment, you will have paid only $55,000 of the $315,000 principal and will have paid nearly $160,000 in interest.

Putting just $200 more per month toward principal, you’d save $80,837 in interest and pay off the mortgage six years and four months earlier.

Switch to Biweekly Payments

Biweekly payments are half-payments made every two weeks instead of a full payment once a month. Making biweekly payments instead of monthly payments results in one additional payment each year.

Using the example above, making one full, extra mortgage payment each year will reduce the amount of time it takes to pay off your 30-year mortgage by five years.

Look Into Refinancing

Refinancing your loan into one with a lower interest rate and/or a shorter term can help you pay off your mortgage faster. A shorter term usually comes with a lower interest rate, so you’re saving on interest while also paying your mortgage off sooner than 30 years.

Refinancing to a lower interest rate will reduce your monthly mortgage payment, so if you continue to make the higher payment, you’ll pay your mortgage off faster.

Recommended: Mortgage Questions for Your Lender

The Takeaway

There are a few ways to pay off a 30-year mortgage in 15 years. Paying off your mortgage early will result in substantial interest savings, but the tradeoff for many borrowers is not having extra money to put toward retirement and other purposes.

Whether you’re on the path to paying off your mortgage or shopping for a new mortgage, SoFi is here to help. SoFi offers traditional refinancing and cash-out refinancing. SoFi Mortgages come with competitive rates, flexible terms, and Mortgage Loan Officers who can help.

Take a look at SoFi home mortgage loans, and then get your own rate quote.

FAQ

Is it cheaper to pay off a 30-year mortgage in 15 years?

The amount of interest you’ll save by paying off your mortgage in 15 years instead of 30 is substantial.

Why shouldn’t you pay off your mortgage early?

Homeowners who haven’t fully funded their retirement accounts, who don’t have an emergency fund, or who have other debt with high interest rates may not want to pay off a mortgage early. Also, those who think they can earn a better return on their money with investments may not want to pay off their mortgage early. (They need to keep in mind that past performance is not necessarily indicative of future returns.)

How do you pay off a 30-year mortgage in half the time?

Paying more toward the principal early in the mortgage can help you cut the amount of time you spend paying on your mortgage in half. The good news is you don’t have to make double payments to cut the amount of time you pay on your mortgage in half. Because each payment will reduce the principal, you will pay less overall.

Are biweekly mortgage payments a good idea?

Biweekly mortgage payments, or half-payments made every two weeks, will add a full mortgage payment every year. Using this method can take a few years off your mortgage.


Photo credit: iStock/everydayplus

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

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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.
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Mortgage Servicer vs Lender: What Are the Differences?

If you’re on the fast track to buying a home, you’ve probably come across a lot of different players in the game, including mortgage lenders and mortgage servicers. There are some important differences between a mortgage servicer and mortgage lender.

A mortgage lender is the lending institution that originates your mortgage. The loan officer you work with on your home loan is a representative of the lender. But once the papers are signed, the lender is no longer your primary point of contact. That role falls to the mortgage servicer, which is the institution responsible for administering your loan.

What Is a Mortgage Lender?

A mortgage lender is the financial institution that funds your mortgage. The lender serves as your primary point of contact during underwriting while your mortgage heads toward the closing table.

Once your loan closes, the servicing of the loan may be handled by a different entity. It may be the same company (for example, Wells Fargo both originates and services home loans), but you may have a different mortgage servicer, which will issue your mortgage statements.

What Do Mortgage Lenders Do?

Mortgage lenders guide borrowers through the entire financing process. In a nutshell, mortgage lenders:

•   Help borrowers choose a home loan

•   Take the mortgage application

•   Process the loan

•   Draw up loan documents

•   Fund the mortgage

•   Close the loan

After shopping for a mortgage and obtaining mortgage pre-approval, you choose a lender.

Your mortgage lender helps you compare mortgage rates and different mortgage types to find one that may be right for you.

The lender also answers any mortgage questions you may have.

Your lender will also fund the mortgage and close the loan. After your loan has been funded, it may be transferred to a mortgage servicer.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


What Is a Mortgage Servicer?

A mortgage servicer is a company that receives installment payments for a mortgage loan. It is responsible for administering the day-to-day tasks of the loan, which include sending statements, keeping track of principal and interest, monitoring an escrow account, and taking care of any serious concerns that may occur.

A mortgage servicer may or may not be the same company as your mortgage lender. The rights to service your loan can be transferred to another company. When this happens, your mortgage terms will remain the same, but you’ll send your mortgage payment to the new servicer.

What Do Mortgage Servicers Do?

The main role of a mortgage service is to collect your payment and ensure that the different parts of your payment (principal, interest, taxes, and insurance, and mortgage insurance, if applicable) make it to the proper entity.

The mortgage servicer will forward principal and interest to the investor (or holder of your mortgage note). Taxes collected and stored in the escrow account will go to the taxing entity when they are due, the insurance premium will be paid to the homeowners insurance company, and the mortgage insurance payment will be forwarded.

The mortgage servicer’s main duties are:

•   Managing and tracking borrowers’ monthly payments

•   Managing borrowers’ escrow accounts

•   Generating tax forms showing how much interest borrowers paid each year

•   Helping borrowers resolve problems, such as with mortgage relief programs

•   Initiating foreclosure if the borrower defaults

•   Performing loss mitigation to prevent foreclosure (in some cases)

•   Processing requests to cancel mortgage insurance

Mortgage servicers also have the responsibility of preserving properties that are in distress. Should a hardship befall borrowers and they need to vacate the property, the servicer must step in to take care of the property while it’s in foreclosure proceedings.

Recommended: Home Loan Help Center: Tools and Education for Buying a Home

Differences Between a Mortgage Servicer and a Mortgage Lender

To summarize, these are some of the major differences between a mortgage lender and a mortgage servicer.

Mortgage ServicerMortgage Lender
Handles day-to-day administration of the loanIs the financial institution that loaned you the money for the mortgage
Sends you your monthly statementsProcesses your mortgage application and decides whether or not to loan you money
Keeps track of principal and interest paidAssesses your income, credit history, and assets
Manages escrow accountCan pre-qualify or pre-approve borrowers for a mortgage amount
Responds to borrower inquiriesCan advise borrowers on loan options
Ensures that homeowners know their options should they fall behind on paymentsHelps move the loan through underwriting, which includes verifying credit history, submitting supporting documentation, and ordering an appraisal for the property
Responsible for forwarding property tax payments from escrow account to the proper taxing entitySupplies you with a loan estimate, which outlines the costs associated with the loan, including interest rate, closing costs, estimated costs of taxes and insurance, and monthly payment.
Responsible for property preservation should homeowners need to leave the home because they are no longer able to pay the mortgageSupplies you with a closing disclosure, which plainly outlines the terms and conditions of the mortgage loan, including amount borrowed, interest rate, length of the mortgage, monthly payments, fees, and other costs

The Takeaway

Both the mortgage lender and mortgage servicer play an important role in the home-buying process but at different times. The lender will guide you in applying for and obtaining a mortgage. The mortgage servicer will assist in your everyday needs with the mortgage.

If you’re getting ready to shop for a home loan, consider giving SoFi Mortgages a look. SoFi offers competitive rates, low down payments, and flexible terms for today’s borrowers.

Explore the advantages of an online mortgage lender like SoFi today.

FAQ

What are the four types of mortgage lenders?

Banks, credit unions, mortgage lenders, and mortgage brokers.

What is the difference between a mortgage servicer and investor?

A mortgage servicer is responsible for the day-to-day administration of a loan. A mortgage investor is the person or entity who owns the mortgage note. The investor may be the originator, but it’s more likely that the investor owns a mortgage-backed security. A mortgage investor has no active role in the administration of the actual loan.

How do I find out who my servicer is?

You should receive monthly statements that will have information on who your servicer is and where you can send payment.

You can also find out who your mortgage servicer is by calling 888-679-6377 or going to www.mers-servicerid.org/sis, which has the current servicer and note owner information for loans registered on the MERS® System.

Can I change my mortgage loan servicer?

You cannot change your mortgage loan servicer unless you refinance your mortgage. Servicing of your mortgage, however, can be transferred to another loan servicer without your consent.

What happens when my loan moves to a new servicer?

If your loan has been transferred to a new servicer, the new company will send you a letter and you will need to send your monthly payments to them. The terms of the original loan will never change, no matter who the servicer is.


Photo credit: iStock/MicroStockHub

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

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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 or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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