9 Ways to Keep Inflation From Ruining Your Kitchen Reno Budget

9 Ways to Keep Inflation From Ruining Your Kitchen Reno Budget

Maybe you’ve just bought a house, or maybe you’ve had your house for decades and love everything about it — except for the extremely outdated kitchen, built before the days of marble top counters, stainless steel appliances, and kitchen islands. Renovating your kitchen can get expensive fast, but with inflation, materials cost even more than usual, so it can be tougher to control expenses. Luckily, there are a few strategies you can use to get the updates you crave, without emptying your pockets.

How to Keep Inflation From Ruining Your Kitchen Renovation

1. Setting A Budget

Like most people, you probably already have a budget in mind. That’s a good start, but even with a spending limit in place, it’s smart to use a tool like this home renovation cost calculator to get an estimate of what your kitchen reno will ultimately cost, and make sure your budget will truly cover it. These calculators allow you to choose from basic to extremely bespoke changes, and they consider the cost of labor and raw material, generally with a 20% margin for the contractors. (And contractors can cost much more than you may expect!)

2. Being Flexible

Be flexible about your upgrades. It’s not uncommon to have to cut back on some of your plans due to price hikes, sold out materials or surprise developments during construction. Expect to make compromises. If your dream project begins to get pricey, consider focusing on just one or two aspects of your reno that are most important to you, and saving other changes for another time.

3. Getting Creative

To keep your costs down, try thinking outside the box. Say the countertop you really want is way out of your budget. Perhaps your contractor may know where to find salvaged materials at a deep discount. Or the cabinets you had your eye on have jumped in price. Opting to reface instead of replace your existing cabinetry could be a reasonable, cost-effective approach. Being open to these kinds of options can really help keep your spending in check.

4. Doing It Yourself

DIY can be a great way to keep inflation from ruining your kitchen budget … if you know what you’re doing. There are millions of how-to videos online with detailed instructions on everything from putting in new flooring to installing sinks. One of the largest costs of any renovation is labor, and you can reap some significant savings by doing some of the things yourself, and saving the really hard stuff for a contractor. Keep in mind, though, that taking on tasks outside of your abilities could end up costing you in the end, so be realistic about what projects you can handle and which are better left to the professionals.

💡 Recommended: How Much Does it Cost to Remodel a House?

5. Considering Temporary Fixes

Can you update your cabinets and countertops with removable materials? Or perhaps a new coat of paint and some new pulls? Peel and stick wallpaper has become particularly popular due to its variety and flexibility. It comes in countless prints from wood grain to marble, and can be used as a backsplash, on countertops, kitchen cabinets, and yes, walls. Incorporating one of these simple changes can give your kitchen a fast and financially friendly refresh.

6. Renovating vs Remodeling

Yes, there’s a difference, and the distinction is important. If you are remodeling, you are changing the physical space, breaking down walls, removing cabinetry, etc. Remodels are almost always more labor intensive, require more materials, possibly permits, and definitely more of your contractor’s time, so they are almost always more expensive, even without inflation. Renovating, however, means you are updating what already exists. In this scenario, it’s often easier to pick your battles — keep the cabinets but change the countertop, for instance. So, if you really want to keep costs down, you may want to consider renovating cosmetic features instead of remodeling.

7. Consider a Loan

If you can’t wait to renovate but don’t have all the cash you need, you could consider getting a personal loan to cover the costs. If you’ve made enough mortgage payments, tapping into your home equity could be another option for funding your project. There are both benefits and drawbacks to borrowing so be sure to read the fine print, keep a close eye on interest rates and do your best to keep your project on track and under budget.

8. Increase Your ROI

Tapping into a mortgage refi or getting a personal loan might seem risky, but it can make sense if you’ve considered how much your home improvement may boost the value of your home when it comes time to sell it. Using a home improvement ROI calculator can help you estimate how much value you can add to your home after a renovation or remodel.

Another metric you may want to consider is the return on investment, for a particular project. Boosting your curb appeal — that is, the exterior of the house — can give you the most bang for your buck. So can things like replacing a garage door, sprucing up the yard and landscaping, and even painting the exterior of the house. And even a minor kitchen renovation can boost your home’s value, potentially offsetting any inflation costs you may incur.

9. Choosing The Right Contractor

Once you’ve decided what you want to do and what you can afford, it’s time to find a good contractor to execute your vision. This one decision can make or break the entire project, so it’s wise to ask for personal referrals. If that’s not an option, you can always search the top-reviewed contractors in your area. And just like comparing prices at the grocery store, getting estimates from at least three contractors can help you save.

The Takeaway

Inflation might be sky high right now, but it doesn’t have to stop you from having the kitchen of your dreams. Whether you are going for a full remodel or a few cosmetic changes, there are ways to update the look of your kitchen without breaking the bank.

And should you decide to pick up a personal loan to cover those costs, be sure to budget a little extra for the “just-in-case.” SoFi’s home improvement loans range from $5K to $100K and can cover just about any kitchen project. Plus, with no collateral and same day funding, you can kick off your project sooner and can find yourself cooking in your new kitchen in no time.

Learn how a SoFi home improvement loan may help you fund your remodel in no time.


Photo credit: iStock/sturti

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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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.


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10 Tips for Writing a Real Estate Offer Letter

In a competitive market, buyers have been known to waive contingencies, increase earnest money, insert escalation clauses, and pen love letters. Yes, that’s right: personal letters to sellers in an attempt to stand out from the crowd.

The National Association of Realtors® (NAR) isn’t feeling the love for “love letters” because they often contain personal information about the buyer, like their race and culture, that could make sellers and their agents vulnerable to accusations of discrimination.

Oregon was poised to ban homebuyer offer letters until a federal judge permanently blocked the law in March 2022. That month a Rhode Island representative introduced a bill to outlaw the practice in her state, calling it “kind of a very quiet way of redlining, potentially,” before the bill was held for further study.

So the practice goes on, legally, as of now, despite the letters’ tepid sway. A Zillow survey of partner agents showed that love letters were the least successful strategy for winning the deal (all-cash offers made sellers’ hearts beat fastest).

If you’re inclined to write a homebuyer love letter, here are tips.

1. Make a Strong Opening

Remember handwriting? Do your best and write your letter on a nice piece of stationery. You’re trying to humanize yourself in the eyes of the seller, and a handwritten note can go a long way toward doing so.

Address the seller by name if possible, searching for it online, or asking your real estate agent. As you write the letter, convey a friendly tone and a sincere message.

2. Tell the Owner About Yourself

You might choose to tell the sellers something memorable about your family, that you plan to raise kids in the house, or that the yard is perfect for your dogs.

You could also talk about where you’re moving from and why. Maybe you’ve taken a new job, you’re looking for a sense of community, and you fell in love with this neighborhood.

If you mention your family, just realize that familial status is protected against discrimination under federal housing rules. (In this case, sellers or their agents are not to act with bias against, or in favor of, families with children. The point of the Fair Housing Act is to create a level playing field for all people renting or buying a home, getting a mortgage, or seeking housing assistance.)

3. Think Twice About Sending Photos

Photos are part of what makes NAR uneasy, because race, gender, gender identity, sexual orientation, disability, religion, and familial status are protected against housing discrimination under the Fair Housing Act.

Yet many real estate agents allow buyer clients to include photos with their offer letters.

The NAR director of legal affairs advises Realtors to “avoid helping buyer clients to draft or deliver love letters. … Counsel them to focus on the characteristics of the home or other objective information.”

Still, buyer love letters are actually encouraged by some agencies — along with photos and even videos.

4. Share What You Like Best About the Home

Why you want to buy the home is the central theme of your letter. So you may want to tell the sellers somewhere near the top what you like best about their house.

Mention details. For example, maybe you like the large front porch and can picture gathering there with friends and family on summer nights. Or maybe you’ve become enamored of the kitchen, where you’ll perfect your bread-making skills. If, by chance, the property has an ADU, you could describe your plans for it.

You could throw in a bit of flattery, letting the sellers know how much you appreciate how they’ve maintained the home.

5. Find a Connection

One way to develop a relationship with someone is to find common traits or interests. If you notice that you and the sellers share an interest, it can’t hurt to let them know.

Perhaps you’re a gardener, and it’s clear they’ve got the plant bug. Maybe you have a passion for pottery, and the seller has a small ceramics studio. Or maybe you noticed a jersey from your favorite basketball team.

As you hunt for a connection, be careful not to cross any personal boundaries that might make the seller uncomfortable.

6. Explain Your Offer

Once you’ve given a sense of yourself and why you want to live in this house, you can get down to explaining your offer. Be honest and respectful as you give context.

If you’re living in a time of bidding wars and your offer isn’t the highest, there’s no need to dance around it. You could explain that the house is your dream home, but it’s at the top of your price range and that you respectfully ask the seller to consider your offer.

If the sellers are selling and buying at the same time, you could mention your willingness to do a rent-back agreement that would allow them to lease their former house from you for a set period of time.

7. Let Them Know You Are Serious

Selling a home is a lot of work. The last thing sellers want on their hands is a buyer who slows down the process and might not even make it through closing.

Make sure your letter reiterates that you are pre-approved for a mortgage and are flexible about closing dates.

8. Mind the Length

If there’s a lot of interest in a property, sellers might receive many love letters. They may not have the time, or interest, to read long-winded missives, so keep yours short and sweet, perhaps one page.

9. Thank the Owners

The close of your letter should be as strong as the opening. This is your last chance to make an impression, weave in some personal notes, and make any final flattering remarks.

Thank the sellers for considering your offer, and let them know you are looking forward to hearing from them soon.

10. Avoid Negativity

Some things are better left unsaid, like changes you’d like to make. The sellers may have spent a long while making their home perfect in their eyes. So even if you want to open up the floor plan and pull up the carpet, it’s a good idea to keep those thoughts to yourself for now.

You don’t want to make market prices, or this particular one, sound unfair. And it’s smart to avoid pressuring the sellers in any way, as with talk about time constraints.

Finally, don’t contradict anything that might go into a purchase agreement.

The Takeaway

In a seller’s market, a so-called love letter gives buyers a chance to distinguish themselves. Though not all real estate agents are keen on clients sending personal letters, the practice continues.

Home shoppers in an active market will want to get pre-qualified and then pre-approved. Learn the SoFi Mortgage advantages: loans with competitive fixed rates and low down payment options.

Check your rate in minutes.



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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.


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


Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Can You Roll Your Student Loans Into Your Mortgage?

It’s possible to roll student loans into a mortgage using a cash-out refinance. In order to to do this, you’ll already need to have enough equity in your home. While this could potentially help you secure a lower interest rate, it’s not the right choice for everyone. Read on for more information on situations when it may make sense to roll your student loan into a mortgage and other strategies to pay off student loan debt.

Paying Your Student Loans

Paying off one loan with another is a standard form of debt reshuffling or consolidation. When it comes to student loans, though, your options may seem limited. It is, however, possible to roll student loan debt into a new mortgage through a cash-out refinance loan — as long as you have sufficient equity in your home.

But just because you can, it doesn’t mean you should. Here are some tips on how to consolidate student loans into a mortgage — and whether it may be the right move for you.

Rolling Student Loans Into a Mortgage

A cash-out refinance is a type of mortgage loan that enables you to turn a portion of your home’s equity into cash. Simply refinance your existing mortgage for more than what you currently owe into a new loan with new terms and keep the difference.

Once you have the cash in hand, and as long as there are no loan conditions to pay off specific debt with the cashout, you can do whatever you want with it, including paying off your student loans.

You may need to do the legwork of determining how much you need to add to the new proposed loan and may be responsible for ordering the final payoff. If it is not a condition of the new mortgage loan, the lender would normally not request escrow to order the payoff and pay the loan in full at loan closing. If you would like escrow to perform this service for you, just let them know.

Once you’ve completed the loan consolidation process, you may still have the same amount of debt as you did before (possibly more if you added any applicable closing costs to your new loan). You’ll just be paying it all in one monthly payment, based on your new mortgage terms.

If you want to refinance student loans into a mortgage, it could be beneficial in some situations. However, it’s important to understand the benefits and drawbacks of doing so and also to compare the benefits of this option with other alternatives.

One such drawback is that you may no longer be eligible for federal student loan benefits , such as the ability to pursue federal student loan forgiveness or federal student loan repayment plans. This includes income-driven repayment plans, where your monthly student loan repayment changes according to your income.

Pros and Cons of Rolling Student Loans into a Mortgage

Depending on your debt situation and your credit profile, consolidating student loans and your mortgage into new terms could be a smart idea or a terrible one. Here are some of the pros and cons to consider.

Pros of Rolling Student Loans into Mortgage

•   It could lower your interest rate: If you pay a higher interest rate on your student loans and current mortgage vs. a new Cash-Out Refi, consolidating may help reduce how much you pay in overall interest.

•   It could lower your monthly payment: If you qualify for a lower interest rate and choose a longer repayment period with the new loan, it may significantly lower the total amount you pay each month for your mortgage and student loans combined. Keep in mind that extending the life of the loan may mean you pay more in interest in the long-term.

•   It simplifies your finances: Having a single monthly payment might make your finances easier to manage. The fewer monthly payments you have to keep track of, the better. If you have multiple student loans, rolling them into your mortgage can make your life easier.

Cons of Rolling Student Loans into Mortgage

•   You could end up paying more interest over time: Stretching a 10-year student loan repayment term to up to 30 years could end up costing you more in interest, even if the interest rate is lower. Also, if you have paid down a 30 year mortgage for a few years and originate a new 30 year mortgage, you will be extending your existing loan term and may be paying additional interest over the life of the loan.

•   You may not be eligible: To qualify for a cash-out refinance loan, you typically need to have at least 20% equity left over after the new loan amount on the cash-out refinance. Even if you do have more than 20% equity right now, the difference might not be enough to pay your student loan in full.

•   You may pay closing costs: Depending upon the rate and term you choose, you may have applicable closing costs. FannieMae offers a program for student loan cash-out refinance loans. Consider getting a quote for this program and compare the rate and fees of this program to a standard cash-out refi.

•   You may be reducing the amount of available equity in your home: Taking cash out of your home can reduce the amount of available equity in your home. Market value fluctuations can also impact the amount of available equity.

3 Alternatives to Rolling Student Loans into a Mortgage

Before you seriously consider consolidating student loans into a mortgage, it’s important to know what other options you may have for paying down your debt faster.

1. Refinancing Your Student Loans

Whether you have federal or private student loans, you can refinance your student loans with a private lender like SoFi. Depending on your credit, income, and financial profile, you may qualify for a lower interest rate, monthly payment, or both.

You can also gain some flexibility by choosing a longer or shorter repayment term. Keep in mind that refinancing federal student loans means they’ll no longer be eligible for any federal programs or borrower protections, such as income-driven repayment plans.

2. Seeking Repayment Assistance

Employers are increasingly offering student loan repayment assistance as an employee benefit. Well-known companies that provide this repayment benefit include Aetna, Fidelity, PricewaterhouseCoopers, SoFi, and more. If your current employer doesn’t offer student loan repayment assistance, consider finding a job that does when you are next seeking employment.

3. Apply for Student Loan Forgiveness or Grants

Depending on your career path, you may qualify for student loan forgiveness or grant programs. Examples of these programs include (but are not limited to):

•   Health care

•   Veterinary medicine

•   Law

•   Military

•   STEM

If you’re working in one of these fields or a similar one, check to see if there are forgiveness or grant programs for which you may qualify. As previously mentioned, a cash-out refi may make you ineligible to participate in these programs. Check on any possible loss of benefits before considering a refinance of these loans.

Deciding If Rolling Student Loans into a Mortgage Is Right for You

Using a cash-out refinance to consolidate student loans and a mortgage into one affordable monthly payment sounds appealing, especially if you can get a lower interest rate than what you’re currently paying. But it’s crucial to consider all of the costs involved before you make a decision.

A lower interest rate, for instance, doesn’t necessarily mean you’ll pay less interest over the life of the loan. Work with a mortgage loan officer or run an amortization schedule in order to do the math.

Also, keep closing costs in mind. Closing costs can vary depending upon the loan scenario and is tied to factors such as the interest rate you choose, your credit score, loan type, property type, and more.

And paying closing costs is not a given. For instance, you can choose to take a higher interest rate (if it is still lower than what you currently have) and use the lender rebate money built into that higher rate to cover some or all of your applicable closing costs. When the time comes to lock in your rate, speak with your chosen lender about various loan programs and the estimated closing costs tied to each rate and term option.

Finally, take a look at some of the other options out there and determine whether you could potentially save more money in interest with them. The more time you spend researching, the better your chances of settling on the option that is most affordable overall.

Can You Buy a House With Student Loans?

While existing debt can impact whether you’re approved for a loan, or the interest rate and loan terms if you are approved, it’s still possible to buy a house with student loan debt. When you apply for a mortgage, the lender will review your complete financial picture including your debt obligations, which might include student loans, credit card debt, or a car loan.

Debt-to-income ratio is one important consideration for lenders. This is a measurement of how much debt one has in comparison to how much money you earn and lenders rely on this metric to inform whether or not you’d be able to make the monthly payments on a new loan, considering your existing debt. Generally speaking, lenders are unlikely to approve anyone for a mortgage with a debt-to-income ratio higher than 43%, though lenders may be more inclined to lend to someone with a debt-to-income ratio lower at or less than 36%.

Beyond debt-to-income ratio, lenders will also evaluate factors such as the borrower’s credit score.

Before applying, do some number crunching to see what a mortgage might cost and how it will impact your overall debt-to-income ratio. This might be helpful in understanding the mortgage rates you may be eligible for.

In addition to traditional home loans there are programs available for first-time home buyers that might make buying a home with student loan debt more achievable.

Refinancing Student Loans With SoFi

If you are interested in consolidating your student loan debt at a lower interest rate but don’t want to roll them into your mortgage, you may instead want to consider student loan refinancing. With SoFi student loan refinancing, you can refinance your private or federal loans (or both!) with no application fees, origination fees, or prepayment penalties. And you still get the benefit of consolidating your loans to one payment, with a new (and potentially better) interest rate and loan terms. Keep in mind that refinancing any federal loans will eliminate them from federal programs and borrower protections such as income-driven repayment plans or deferment options.

The Takeaway

When paying down student loan debt faster, there’s no one-size-fits-all solution. The more information you gather about your options, the easier it will be to eliminate your debt as quickly as possible.

If you’re interested in refinancing your student loans, consider SoFi. Student loan refinancing at SoFi has no fees and as a SoFi member, borrowers qualify for perks such as career coaching, community events, and more.

Learn more about SoFi student loan refinancing.

FAQ

Is it a good idea to roll your student loans into a mortgage?

Evaluate all loan details carefully before rolling your student loans into a mortgage. Factors such as closing costs, loan term, any additional fees, and interest rate can all influence how much it will cost to borrow money over the life of a loan. In some cases, it may be possible to qualify for a lower interest rate when borrowing a mortgage. In other cases, extending the repayment of your student loans over a 30-year period with your mortgage may make it more expensive. If you have any questions on your personal financial situation, consider speaking with a qualified financial professional or mortgage loan officer who can offer a personalized assessment.

Can student loans be included in a mortgage?

Student loans can be included in a mortgage if you have enough equity in your home. Rolling student loans into a mortgage generally requires the borrower to take out a cash-out refinance loan, which allows you to turn a portion of your home’s equity into cash. Once you have the cashout in hand, you can pay off your existing student loans.

Terms may vary by lender. There are certain programs, such as Fannie Mae’s Student Loan CashOut Refi that specialize in this type of borrowing.

How much of student loans is counted for a mortgage?

Student loans are evaluated as a part of your overall debt-to-income ratio. In general, lenders avoid lending to borrowers with a debt-to-income ratio greater than 43%.


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


SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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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Should You Use Your Roth IRA to Buy Your First Home?

If you are a young professional, you most likely have multiple savings goals, including retirement and buying your first home. Saving for both can be challenging while also covering your monthly expenses.

When you factor in things like student loan payments and any other debt, not to mention a bit of wiggle room to actually live your life, you might find yourself struggling to balance it all. You don’t want to spread yourself thin with all of the different payments, so it is a good idea to get an understanding of how much home you can afford.

On one hand, if you start saving early for retirement, your money has more time to grow with compound interest. On the other hand, saving for a down payment on a home in today’s market can take years depending upon the purchase price and loan program you choose. According to research by Zillow, it takes about seven years for home buyers to save a 20% down payment for the median value of a home in the U.S.

While 20% down is often thought of as the golden rule for mortgage down payments, these days it’s not required. In 2018, the median down payment on a home was around 5%, according to HousingWire.

There’s one tool of many that can help you reach both your home and retirement goals without requiring you to plan your entire life out before you turn 30: A Roth IRA.

While you’ve probably been told that you should never tap into your retirement money, using cash from a Roth IRA to fast-track your dream of home ownership can be a worthy exception.

Here are a few reasons you may consider leveraging a Roth IRA to become a first-time homeowner without having to delay your retirement goals, and some tips on how to go about it.

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


The Low-Down on a Roth IRA

IRAs are designed to help you save for retirement. However, a Roth IRA is different from other retirement accounts, such as 401(k)s and traditional IRAs. The main distinction is that you contribute after-tax dollars to a Roth IRA because contributions are not tax deductible.

Since you already paid taxes on the money before putting it into the account, the distributions you take when you retire can be withdrawn tax-free.

Compare that to traditional IRAs where you reap the tax benefits at the time of contribution (they’re deducted from your income on your tax return). The money is taxed when it is withdrawn in retirement, which according to IRS rules is after age age 59 ½.

Under certain circumstances, distributions can also be withdrawn tax free before retirement from a Roth IRA. So long as the account has been open for at least five years distributions can be withdrawn tax free; in the case of disability, if the distribution is made to a beneficiary after the account holder’s death, or in the case that the withdrawal fulfills the requirements for the first time home buyer exception.

But here’s the real game-changer: Unlike a traditional IRA, you can withdraw the money you contributed to a Roth IRA at any time without penalty.

Things get a little more complicated when it comes to your investment earnings. In very specific instances—buying your first home, for one—you are allowed to withdraw up to $10,000 of investment earnings from a Roth IRA with no tax or penalty. The only stipulations are that you must have had the account open for five years, and that the withdrawal is for your very first home.

Traditional IRAs also qualify for the first time home buyer exception. While this exception allows first time home buyers to avoid the 10% penalty, the withdrawal would still be charged income tax. By comparison, if you wanted to withdraw money from your 401(k), you would likely pay taxes and a penalty. However, there are certain situations that allow first-time homebuyers to withdraw from a 401(k). Whichever retirement account you decide to go with, SoFi is here to help. Start contributing to your account today by opening a online ira.

Crunching the Numbers

The best way to explain how this all works is by running the numbers. Let’s say you open a Roth IRA in 2019, contribute $6,000 per year (the current maximum contribution allowed) for five years, and hypothetically earn 7% per year on that money.

After three years, you would have made $18,000 in contributions and earned about $1,300 on your investment. If you continue to save $6,000 for two more years, your contributions would climb to $30,000 and the investment earnings would be around $4,500.

After five years, you can withdraw all of your contributions and up to $10,000 of your investment earnings—but you might not have earned that much yet.

Because this withdrawal benefit is available only once in a lifetime, ideally, you might want to time it so that you only tap into your Roth after you’ve earned the full amount allowable.

One other important thing to keep in mind: Roth IRAs have contribution limits based on your income. For example, if you are single and make less than $129,000 in 2022 , the maximum Roth IRA contribution is $6,000 , even if you participate in a retirement plan through your employer.

If you make more than that, the benefit begins to phase out. If you make more than $144,000 as a someone who is filing single, you’re not able to contribute to a Roth IRA.For more information about IRA accounts and contribution, check out SoFi’s IRA calculator.

To recap, you can withdraw from the investment earnings in your Roth IRA to buy a house if:

•   You are a first time home buyer.

•   It has been at least five years since you first contributed to your Roth IRA (the five year mark starts on January 1st of the year you made your first contribution.)

•   You only withdraw up to $10,000 within your lifetime (pre-retirement).

•   You use the funds to purchase, build, or rebuild a home.

•   You can also use the money to help fund the purchase of a home for your child, grandchild, or parent who qualifies as a first time home buyer.

•   The funds must be used within 120 days of withdrawal.

You can withdraw from the contributions you have made into your Roth IRA at any time, for any reason. There is no tax or penalty, and you can use the money however you like.

Qualifying as a First Time Home Buyer

Even if you have owned a home in the past, you may still be able to qualify as a first time home buyer and withdraw money from your Roth IRA.

According to the IRS, you qualify as a first time home buyer if “you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.”

So if the acquisition date (the date you enter into a contract to purchase a home or start building a home) is at least two years later than the last date you had any ownership interest in a primary residence home, you can qualify as a first time home buyer under this program.

💡 Recommended: First-Time Home Buyer’s Guide

Things to Consider Before Withdrawing from Your Roth IRA

Although using money from your Roth IRA may seem like an easy source to fund a down payment to purchase your first home, it might not be the right decision for everyone. Before you cash out your Roth IRA, think about how it might broadly impact your financial future.

Where Will Your Money Work the Hardest?

Figure out where your money will be working harder for you. Keep market conditions in mind and compare your mortgage interest rate to the expected long term return you would earn by keeping your money in your Roth IRA.

It can be difficult to predict the stock market, but in the past 90 years, the average rate of return for the S & P 500 has hovered around 7%, and that’s adjusted for inflation. When money is withdrawn from the Roth IRA, the potential for additional growth is eliminated, as is the opportunity to benefit from compounding interest.

The housing market is also subject to fluctuation. Consider things like the location and housing market where you plan to buy. In addition, it’s worth factoring in things like current mortgage rates. Another factor that could influence your decision—mortgage interest is generally tax deductible up to $750,000.

There are a lot of moving pieces to consider when determining whether or not to use your Roth IRA to fund a down payment on a house. Consulting with a financial advisor or other qualified professional could be helpful as you weigh your options.

What Mortgage Options Are Available?

Conventional wisdom suggests a 20% down payment when buying a house. And generally, a larger down payment can mean improved loan terms and lower monthly payments.

But if it requires tapping into your retirement fund you may want to think twice. Before committing to a mortgage, explore your options—some mortgages, such as Fannie Mae’s 97% program, offer as little as 3% for a down payment.

How Will Your Retirement Goals Be Impacted?

Everyone’s financial journey is different. Financial and retirement goals are deeply personal, as are the amount of money an individual is able to save each month. For most people, taking money out of a retirement account early will hinder their progress.

Plus withdrawing the money early means you’ll miss out on the tax free growth offered by a Roth IRA. These negative impacts would need to be weighed against any market appreciation you may gain through homeownership.

How Will Your Retirement Goals Be Impacted?

Everyone’s financial journey is different. Financial and retirement goals are deeply personal, as are the amount of money an individual is able to save each month. For most people, taking money out of a retirement account early will hinder their progress.

Plus withdrawing the money early means you’ll miss out on the tax free growth offered by a Roth IRA. These negative impacts would need to be weighed against any market appreciation you may gain through homeownership.

Making This Strategy Work for You

In a perfect scenario, you wouldn’t choose to become a homeowner at the expense of draining your retirement nest egg. Instead, explore other options such as opening a Roth IRA and treat it almost like a savings account, with the intention of using it for your first home purchase five years (or more) from now.

Unlike other investment accounts, your investment returns are tax free, and—contrary to other retirement products—you wouldn’t even be taxed when it comes time to withdraw, as long as all Roth IRA requirements are met.

Ideally, at the same time, you would continue to fund other retirement accounts, such as the one offered through your employer. Even though home ownership is your immediate goal, you’d likely be working toward other longer-term financial goals (like retirement) as well.

And what if you don’t end up buying a home, or you come up with another source of down payment? A Roth IRA is still a win, since you can leave that money be and let it continue to grow for your retirement.

There are a few other circumstances in which you can likely avoid penalties on a withdrawal. These include qualified higher education expenses, some medical costs, and other hardships. Be sure to consult with your tax professional to clarify any of these exceptions before you move forward.

It’s also worth noting that traditional IRAs also qualify for a first time home buyer exception. This exception allows for up to $10,000 to be withdrawn from the IRA before the age of 59 ½, to purchase a house as a first time home buyer and avoid penalties.

In this case, income tax will likely need to be paid but qualifying withdrawals won’t be subject to the additional 10% early withdrawal penalty.

For most young adults with other financial obligations and an early career-level salary, using a Roth IRA to help save for a down payment will require an examination of personal priorities.

Getting Professional Advice

Only you can determine if using money from your Roth IRA to purchase your first home is a trade-off you are willing to make. As you’re starting to make these large life decisions, it can be very useful to seek out tools and resources to help you through the process.

SoFi offers an integrated platform where you can invest toward your financial goals and get personalized advice from qualified professionals.

With SoFi Invest®, you can set up an IRA or another investment vehicle and choose between active or automated investing, depending on your personal preference and financial goals.

Schedule a complimentary consultation with a SoFi Financial Planner to discuss your goals and develop a plan to help you reach them.

Learn more about SoFi Invest now, and start online investing smartly.


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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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Loss of Use Insurance: What is It, and What’s Covered?

Loss of Use Insurance: What Is It and What Does It Cover?

When most of us think of homeowners insurance, we think about getting coverage for major home repairs — the big-ticket items the insurance company can pay out for in the event of a loss or damage. We’re talking about things like a tree falling over in a storm and wrecking your roof or a robber making off with your electronics and jewelry.

Sure, you need that kind of protection, but your homeowner’s insurance policy should also include a very important kind of coverage beyond that: loss of use coverage. This is also sometimes known as additional living expenses (ALE) coverage or Part D coverage. Loss of use coverage is an important part of your home insurance (and some rental insurance policies) that kicks in when your home is rendered uninhabitable. Let’s say in the example above, where your roof needs major repair work. You may not be able to live in your home while this is underway. Since you have “lost the use” of your typical living space, the policy will help you pay for lodging and other expenses.

Read on to learn more about the loss of use coverage, including coverage limits and policy conditions. It’s an important consideration if a worst-case scenario ever happens to your home sweet home.

What Does Loss of Use Coverage Mean?

Loss of use coverage is the part of your homeowner’s insurance policy that covers the costs you’ll incur if you lose the usage of your home.

For example, if a fire destroys a significant portion of your house and it needs to be rebuilt, your typical home insurance policy will cover the cost of repairs. But (and this is a biggie) you may find yourself suddenly facing a whole lot of living expenses you otherwise wouldn’t. Hotel rooms and restaurant meals can add up quickly, and without your own kitchen and bedroom to cook in and retire to, you’d be pretty much forced to take advantage of these expensive options. Or perhaps you have to put your possessions in storage as your home is rebuilt, or even rent an apartment. These are the kinds of expenses that loss of use coverage will typically reimburse.

Recommended: Homeowners Insurance Coverage Options to Know

Coverage Limits

Like most other forms of insurance, loss of use coverage does come with certain limits — you don’t have carte blanche to go out and stay at a swanky hotel for months and eat exclusively Wagyu beef on the insurance company’s dime.

Generally, loss of use insurance is calculated and expressed as a percentage of your dwelling coverage limit — the amount of money up to which the insurer will pay out to repair or rebuild your home in the event of a qualified loss.

For example, if your dwelling insurance limit is $350,000, and your loss of use coverage is 20%, you’d have up to $70,000 to put toward living expenses during the time your home is being repaired. That may sound like a lot of money, but you’re likely to face a lot of expenses, especially since you’ll still be responsible, during that time, for paying your mortgage, insurance premiums, and other normal monthly bills.

Loss of use coverage is most commonly between 20% and 30% of the dwelling coverage limit, but it is possible to find plans with a higher loss of use limit — or a lower one.

In fact, although loss of use coverage is fairly standard, it is possible to purchase a homeowners or renters insurance policy that doesn’t include it, so always be sure to read your paperwork in full, including the fine print, to ensure you know what you’re getting.

Recommended: What Is Renters Insurance and Do I Need It?

Policy Conditions

Loss of use coverage is subject to additional conditions along with the coverage limit. For example, you’ll most likely be asked to prove your expenses to the insurance company in order to get the claim paid — so be sure to keep the receipts for all those hotel-room breakfasts!

Your policy may include other terms and conditions as well. Yet again, another good reason to get nice and cozy with that fine print.

Which Living Expenses Are Covered By Loss of Use Insurance?

Although the loss of use insurance covers many different kinds of living expenses while your home is being rebuilt or repaired, it doesn’t cover everything.

Once again, the only place to get verified information about what your specific policy covers is — you guessed it — your specific policy paperwork, but here are some of the most common covered costs.

•   Temporary housing, such as hotels, motels, or a temporary apartment

•   Moving costs

•   Public transportation

•   Grocery and restaurant bills beyond your typical expenditure

•   Storage costs

•   Costs to board a pet

•   Laundry costs

•   Parking fees

Once again, refer to your policy documentation in order to confirm which expenses are covered under your plan.

What Else Does Your Home Insurance Cover?

Loss of use coverage is only one small part of your overall homeowner’s insurance policy, which likely has several different coverages built in. A standard homeowners insurance policy offers coverage in the following categories:

•   Dwelling coverage, which covers the cost of repairing or rebuilding your house up to the given limit

•   Personal property coverage, which covers the costs of replacing your belongings in the event they are stolen, lost or damaged as part of a covered event

•   Personal liability coverage, which pays out to cover the medical or legal expenses you might incur if someone is accidentally hurt on your property (for example, if they’re bitten by your dog)

•   Additional coverages, such as coverage for additional structures on the property, specific damaging events (or “perils”) that aren’t listed in the standard policy, excess coverage for expensive belongings, etc.

As you can see, homeowners insurance is about way more than insuring the four walls of your home, though it should cover that, too. Keep in mind that each of these coverages comes with its own limits and policy conditions. (We’d remind you to read the fine print again, but at this point, you’ve probably got it. Right?)

In addition, homeowners insurance generally involves — as do most forms of insurance — paying a deductible when it comes time to file a claim. That means you’ll be responsible for a certain out-of-pocket cost to cover even coverage-eligible sustained damages, although the insurance company will likely pay out significantly more. (For example, a homeowners insurance deductible might be $1,000, which isn’t nothing… but is a lot better than paying $30,000 out of pocket to replace your entire roof. In this instance, you’d pay $1,000 while the insurer would pay $29,000.)

Deductibles are charged in addition to the premiums you pay on a monthly, quarterly, or annual basis simply to keep the insurance policy active. (Typically, the higher the deductible, the lower the premium, and vice versa.) Again, it may feel like a pain to have to pay so much money simply to have insurance just in case something happens, at which point you’d have to pay out your deductible as well… but for most of us, our homes are the single largest purchase we ever make and the biggest asset to our names. It’s an investment worth protecting, especially when you consider the often astronomical cost of even basic home repairs.

The Takeaway

Loss of use insurance is a type of coverage baked into most homeowners and many renters’ insurance policies. This coverage pays out toward the extra living expenses you’ll incur if your home is rendered uninhabitable by a qualified loss, such as the cost of hotel rooms, additional food expenses, pet boarding, and public transportation.

While homeowners insurance is a valuable financial tool, it’s not the only one to keep in your tool belt. If you have family members and loved ones who rely on your income in order to maintain their lifestyle and comfort, life insurance can be a great way to ensure your death is primarily an emotional, rather than financial, loss.

SoFi has teamed up with Ladder to offer high-quality life insurance plans that are quick to set up and easy to understand, and our overall policy limits go up to $8 million. You can get a decision in minutes today, right from the comfort of your home — which, after all, already has its own insurance policy. (Right?)

Photo credit: iStock/Ridofranz


Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance, LLC (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.


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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