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What is the monthly payment on a $1 million mortgage at recent interest rates? If we remove property taxes, property insurance, and mortgage insurance from the equation, you can expect to spend between $6,653 and $8,988 a month on principal and interest alone depending on which loan term you choose. But that’s not the whole story. There’s more you’ll need to know about a $1 million mortgage payment.

Cost of a $1 Million Mortgage

The cost of a $1 million mortgage varies depending on which home mortgage loan you choose and a few other factors, such as interest rate and property taxes. As you may know, different types of mortgage loans have different expenses, such as mortgage insurance, which can change your monthly payment.

Monthly Payments for a $1 Million Mortgage

The monthly payment on a $1 million mortgage is influenced by a variety of factors, which include:

•   Interest rate

•   Fixed vs variable interest rate

•   Mortgage insurance

•   Property insurance

•   Loan term

•   Type of loan

•   Property taxes

Removing all variables except a 7% interest rate, a $1 million mortgage payment would be between $6,653 and $8,988 per month. If you’re a first time home buyer considering a $1 million mortgage, make sure you understand the true cost of buying and owning a home. Remember that your property taxes and some insurance costs may be dictated by your home’s location. (You may want to analyze the cost of living by state. Some of the best affordable places to live in the U.S. may surprise you.)

If these variables are new to you, a home loan help center may smooth out any confusion you may have.

Where to Get a $1 Million Mortgage

You can get a $1 million mortgage with mortgage lenders such as banks, credit unions, and online lenders. However, they’ll need to offer jumbo home loans since $1 million exceeds the conventional loan limit of $832,750 in most areas. When comparing lenders, look at both interest rates and fees. Loan origination fees, in particular, can vary greatly between lenders.


💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

What to Consider Before Applying for a $1 Million Mortgage

The monthly payment for a $1 million mortgage isn’t the only thing you should consider. Also keep in mind the total amount you’ll spend on interest for each loan term. For a 30-year loan with a 7% interest rate, you’ll spend $1,395,086 on interest. If you opt for a 15-year loan, you’ll spend just $617,890. This means if you can afford a 15-year loan, you’ll save $777,196.

While you’re home shopping, use a mortgage calculator to see the amount of money you’ll spend monthly and over the life of the loan. You may also want to use a home affordability calculator to incorporate your monthly debts and spending habits into the equation. While you may be able to technically afford a large monthly payment, would the expense leave room for dining out, vacations, and retirement contributions?

During the early years of your mortgage loan, more of your monthly payment typically goes toward paying off the interest on the loan, with a smaller proportion paying down the principal you owe. An amortization schedule shows how the proportions shift and you build equity more quickly in the second half of the loan term. Here are sample schedules for 30-year and 15-year loan terms:

Amortization Schedule, 30-year, 7%

Amortization Schedule, 15-year, 7%

How to Get a $1 Million Mortgage

Anyone who has ever bought a home will tell you there are tips to qualify for a mortgage. The biggest ones include saving up for a large down payment, paying down your debts, and working on your credit score before applying for a mortgage. Paying off balances lowers your debt to income (DTI) ratio and helps you qualify for better mortgage terms. The maximum DTI is usually around 43%, but it can vary with each lender and borrower.


💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

The Takeaway

If you need to borrow $1 million to buy a home, a 15-year mortgage will require around a $9,000 a month mortgage payment, whereas a 30-year mortgage requires around $6,650. Assuming a 7% interest rate, homebuyers can expect to spend between $617,890 and $1,395,086 on interest alone.

Keep in mind that property taxes, home insurance, and mortgage insurance will increase your monthly payment. If you’re in the market to buy a $1 million house, principal and interest will comprise a majority of your monthly costs.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

FAQ

How much is $1,000,000 mortgage a month?

You can expect to spend around $6,653 a month with a 30-year mortgage term and $8,988 a month with a 15-year term. This assumes you have a 7% interest rate (and doesn’t take into account property taxes, mortgage insurance, and property insurance).

How much income is required for a $1,000,000 mortgage?

Housing costs should be at or below 30% of your income. If you were to choose a 30-year mortgage, this suggests that your income should be around $265,000 a year. Choose a 15-year mortgage, and your income should be around $360,000.

How much is a down payment on a $1,000,000 mortgage?

Because a $1,000,000 mortgage typically means a jumbo loan, you may need to make a down payment of at least 10%. That means your minimum down payment would be $111,112 on a home priced around $1,112,000.

Can I afford a $1,000,000 house with $70K salary?

No, a $70,000 salary would not be enough to cover the cost of a mortgage on a $1,000,000 house. Assuming you make around $5,800 a month (before taxes), this would not be enough to cover the minimum payment required of either loan term.

Photo credit: iStock/Paul Bradbury

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

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

SOHL0124068

If you own a home, you probably always have a list of improvements you’re considering. Maybe you desperately want to replace those dated kitchen appliances that scream year 2000, or you want to focus on ways to lower your energy bills, whether that means some strategic air sealing or adding solar panels.

Chances are, you also want any upgrades you pay for to increase the value of your home. You want to know that if and when it comes time to sell your place, you’ll recoup a good percentage of what you invested.

So, whether you have the cash saved up for home investment or you are looking to borrow for your next home project, consider these wise investments.

1. Improve Your Attic Insulation

We get it: You’re not going to invite friends over to see your new attic insulation.But it’s one of the best ways to increase your home’s energy efficiency.

You’ll not only profit when it’s time to sell, but you’ll also see immediate savings from the ongoing energy efficiency this upgrade provides. A properly insulated attic, combined with sealing air leaks throughout your home, cuts an average of 15% off your heating and cooling costs, allowing you to pocket the savings month after month. And who doesn’t want a lower energy bill?

Cost: $600 to $1,200 for blown-in insulation for a 1,000-square-foot attic. You may also need to rent the machine that blows in the fiberglass if you’re a DIY type. If you hire a pro, labor will run about $40 to $70 an hour.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

2. Treat Yourself to New Windows

New windows can do double duty. Not only do they update a room’s tired appearance, they can also have energy-efficiency benefits. Depending on how many windows you replace, this can be a very big-ticket item. The average cost for a vinyl window replacement is $850, and a whole-home job can ring in at $20,091, according to Remodeling magazine. (Wood windows are pricier still.)

But here’s some good news: Replacing those windows adds value to your home. Typically, to the tune of 69% of the cost of the window-replacement project.

Cost: Anywhere from $850 per vinyl window to $20,000+ for the whole house. Again, if you go for wood vs. vinyl windows or need custom size ones (or several French doors), the price can ratchet up significantly. In that case, you might want to look at home improvement loan options.

3. Build a Deck

You and likely anyone who might buy your home in the future will love what a deck can do, lifestyle-wise. Weather permitting, you can have your AM coffee there, type away on your laptop during the day, and host friends, read, or just listen to the birdsong during off-hours. Here’s another nice thing about adding a deck: Your ROI is typically around 68% of the money you pay.

Cost: A new wood deck will cost on average $16,766. A composite one can cost more; on average, these are $22,426.

Read Next: How to Create a Renovation Plan to Match Your Budget

4. Refresh Your Bathroom

Who doesn’t love a beautiful new bathroom, whether your style is sleek and all white or if you prefer a warmer country cottage vibe? A bath remodel will cost, on average, between $6,627 and $17,494, according to Angi, the home renovation site. While an updated bath can definitely add to your home’s value, keep in mind that the sky’s the limit with the price tag. If you move the fixtures around and add one of those egg-shaped soaking tubs or a spa shower that has half-a-dozen mist settings, you may go well beyond the average range of costs.

Also, keep in mind that if you do something really singular (say, you pick tile in a super-bright shade), it may be harder to get your money out if and when you sell your property.

Cost: The average cost is $11,944, with cabinets and shelving accounting for 25% of the total, the shower and tub eating up 22% of costs, and your contractor’s fees usually being about 13% of your total expense. Of course, you can do a small bathroom remodel, perhaps repainting, adding some new artwork and a fresh shower curtain.


💡 Quick Tip: Home improvement loans typically offer lower interest rates than credit cards. Consider a loan to fund your next renovation.

5. Cook up a Cooler Kitchen

If you’re stuck with outdated appliances or hideous cabinets, a kitchen remodel is likely high on your list of improvements. It’s a great way to refresh your kitchen’s style and function.

But increasing home value with a new kitchen can fry your bank account: A remodel typically runs $14,612 and $41,392 according to Angi, but can cost much more if you move appliances’ position, opt for marble countertops, or fall in love with custom cabinetry. On average, you’ll recoup about 60% in ROI.

To update for less and wow your kitchen in a weekend, make some wallet-friendly upgrades: fresh paint, a new faucet, updated lighting (pendant lights are a good choice), and new cabinet pulls.

Cost: While you could just swap out cabinet pulls, which start at about $2 each, and repaint (plan on around $200), a larger kitchen remodel averages $26,849. Again, however, it’s worth noting you could spend multiples of that, depending on how large a project, how luxe the details, and where you live (cost of living can impact the price of goods and services in your area).

Recommended: Secured vs. Unsecured Personal Loans

The Easy Way to Finance HGTV-Worthy Upgrades

Even budget-friendly home improvements can set you back quite a bit. If you haven’t set aside the budget to bring more value to your home, you don’t necessarily have to dip into your retirement account or pay less on your student loans each month. You might want to consider a personal loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi 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.

SOPL1223002

If you’re a homeowner, you may know those “uh-oh” moments when the basement floods or the roof leaks. If you’re in that situation, you may well need a considerable amount of cash to pay for repairs ASAP.

In this guide, you’ll learn the ballpark prices for some of the most common home repairs so you are better prepared if an emergency strikes. You’ll also gain insight into some financing options so if you find yourself dealing with an unexpected and significant bill, you can decide which source of funding is best for your needs.

How Much Do Common Home Repairs Cost?

From the roof to foundation, there are a lot of things in and on a home that might need to be repaired. Among these features are things that might be emergency home repairs at some point, whether that means you’ve discovered black mold in the basement or a kitchen appliance has conked out. Here, learn about some of the most common home repair costs.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

Roof

A home’s roof has a certain life expectancy, generally based on the material used. A roof made of asphalt shingles might last from 15 to 30 years, while concrete- or clay-tiled roof could last for more than 50 years.

Regular roof inspections are a good way to identify any minor problems, which may typically cost about $220, but can vary with your specific home and the region you live in. Minor repairs might include:

•   Gutter cleaning.

•   Patching leaks.

•   Replacing shingles.

•   Repairing flashing.

Issues found during a roof inspection might average $1,100. Replacing a roof, a major expense, may be necessary at some point in the life of a home. For an average-sized home, a completely new roof can cost $9,217 on average.

Foundation

Foundation issues can show up as cracks in a home’s walls, floors that are not level, gaps around windows, or doors that don’t close properly. Fixing these symptoms of a foundation issue won’t solve the underlying problem, but repairing the foundation at the earliest sign of the symptoms may mean a less costly foundation repair.

Hiring a structural engineer can be a good first step if there appear to be major foundation problems, as they won’t be trying to sell a product to fix any potential problems, so will likely be unbiased. A structural inspection typically costs about $600.

•   Cracks in a foundation that don’t affect the structure are minor repairs but are best not ignored, lest they lead to major issues. Potential cost: between $250 and $800.

•   A leaking foundation might be the cause of those cracks. Waterproofing a foundation, which may involve excavating around the foundation, installing tile drains, filling cracks, and then coating the structure with a sealant, can cost anywhere from $2,000 to $7,000.

•   A house with a settling or sinking foundation may have flooring that is warped or sloping, doors and windows that don’t open and close properly, or even exterior cracks, or other apparent issues. The cost generally depends on the type of repair. Raising a house using piers can cost between $1,000 and $3,000, while jacking might be between $600 and $1,600.

Water Damage

Water damage in a basement might be due to flooding from a storm or broken water line, for example, and is best fixed quickly so mold doesn’t grow and become another issue to take care of. In addition to being an unpleasant sight, standing water can cause structural or electrical issues in a home. Extraction of the water is generally the first step in this type of repair, followed by any necessary structural repairs.

•   For simple fixes, such as cleaning up after an overflowing toilet, the cost might be around $150.

•   Water damage restoration, though, is a bigger ticket item, averaging between $1,300 and $5,600, though it could go higher. If your entire home’s wood flooring is warped by water damage or basement flooding wrecks your electrical panel, that could spiral into five figures.

Recommended: How Much Does It Cost to Finish a Basement?

Mold

If the above water issues are not fixed in a timely manner, mold can grow on the surfaces, requiring additional necessary repairs. In addition to damaging any surface mold grows on, it’s also a serious health hazard, potentially causing allergic reactions, asthma attacks, and skin irritation.

Mold remediation costs average between $5,000 and $30,000 for a 2,000 square foot home. If the mold issue is localized (say, just in the attic or basement), your costs could be anywhere from $500 to $7,500 on average, depending on the specifics of your situation.

Pests and Rodents

Pests and rodents in a home can be more than just annoying. Infestations might cause major damage to a home if left untreated. One-time pest control costs around $450 on average. Ongoing services may cost $50 or more a month.

Attics can be inviting spaces to rodents like mice, rats, or squirrels, or other animals such as raccoons or bats. Eliminating the problem can cost $200 to $600 typically.

HVAC

A home’s heating, ventilation, and air conditioning (HVAC) systems control the regulation and movement of air throughout the building. Like other components in a home, it’s wise to have an HVAC system inspected regularly to catch any problems before they become serious (as in, needing to pull together the cost of replacing an HVAC system). A standard tune-up for an HVAC system might cost between $150 and $450, with any potential repairs added to that. Some companies might offer ongoing maintenance plans, which could be a cost saver over time.

And what if the entire HVAC system needs replacing? Your price tag could be between $5,000 and $12,000 or higher. This could be a good opportunity to investigate any rebates available. For instance, if you buy an eco-conscious heat pump, you might find rebates as part of the Inflation Reduction Act.


💡 Quick Tip: Unsecured home improvement loans don’t use your house as collateral — a relief for many homeowners.

Electrical

Electrical issues in a house can vary from minor repairs, such as replacing an outlet, to wiring overhauls that may require professional help.

•   Hiring an electrician to replace a home’s outlets, light fixtures, and switches can cost around $280 on average. For someone who is confident in their DIY skills, this relatively simple job can be done for about $5 per outlet.

•   Replacing a circuit breaker or the entire electrical panel is something homeowners might leave to a professional. Costs will depend on the number of breakers being replaced or, in the case of replacing the electrical panel, how many amps. Panel replacement or upgrade can be anywhere from $2,000 to $6,000.

•   Rewiring a home can be quite expensive and include other repairs, such as plaster or drywall repair. To rewire an entire home, a homeowner might expect to pay between $2,500 and $6,000 for a three-bedroom house.

Ways To Finance an Emergency Home Repair

Even with regular inspections and maintenance, sometimes emergency home repairs are necessary. Some roof tiles may blow away, allowing rain in, or mold can take root in a damp basement. How to pay for home repairs (especially major ones) might involve using a variety of sources, depending on what is available and a person’s individual financial circumstances.

Homeowners Insurance

Homeowners insurance may be the first source most homeowners look to when needing to pay for emergency home repairs. The policy will stipulate what is covered, how much the company will pay, and any amount the homeowner might be responsible for, such as a deductible.

Some things a typical homeowners insurance policy might cover are costs to repair or rebuild after a disaster, replacement of personal belongings that were destroyed because of a disaster, or the costs of alternative housing while repairs are being made or a house is being rebuilt.

Emergency Fund

If there is a sufficient amount in an emergency fund, paying for an unexpected home repair with cash on hand is an option that won’t incur interest. How much to save in a home repair emergency fund will depend on the home’s size, age, and value. Older or more expensive homes might mean higher repair costs.

A typical recommendation is to save between 1% and 3% of a home’s value in a home repair emergency fund. So for a home valued at $500,000, this means having between $5,000 and $15,000 saved for emergency home repairs. This is a goal to work toward, but even having $1,000 in savings can be helpful.

If you do dip into your fund to fix your house, it can be like an emergency home repair loan, without any interest charged or monthly repayment schedule.

Home Equity

Homeowners who have built up equity in their homes may choose to use that equity to get money for home repairs. Using this type of financing, however, does come with some risk because the home is used as collateral. If the borrower defaults, the lender may seize the home as a way to repay the debt.

There are two types of loans that are based on a home’s equity: home equity loans and home equity lines of credit (HELOCs).

•   A home equity loan is a fixed-rate, lump-sum loan. It has a set repayment term, and the borrower makes regular, fixed payments consisting of principal and interest.

•   A HELOC also uses the equity a homeowner has built up, but the borrower does not receive a lump sum. Instead, they access the loan funds as needed until the loan term ends. Funds can be borrowed, repaid, and borrowed again, up to the limits of the loan.

HELOCs are variable-rate loans and consist of two periods: a draw period and a repayment period. The draw period is the time during which money can be borrowed, and might be 10 years. The repayment period is the time during which the loan is repaid and might last for 20 years. The combination of the two would make this example a 30-year HELOC.

Recommended: The Different Types Of Home Equity Loans

Assistance Programs

If emergency home repairs are required but the homeowner can’t afford to pay for them, assistance programs might be an option to look into.

•   Government loan or grant assistance. The U.S. Departments of Housing and Urban Development (HUD) , Agriculture (USDA), and Veterans Affairs (VA) offer grants and loans to eligible homeowners for home repairs and improvements.

•   Disaster relief. HUD offers several programs for homeowners affected by federally declared disaster areas. HUD partners with other federal and state agencies to provide relief in the form of mortgage assistance, relocation, food distribution, and other types of disaster relief.

•   Community Assistance Programs. Funding assistance may be able to be found by looking at local sources, such as county or city governments or charities. A good place to start a search is through HUD’s state listings .

Credit Card

Using a credit card to finance unexpected and urgent work on your home may seem like an easy fix. It can certainly be a quick way to pay for such repairs and a viable option if you’re thinking of how to pay for home repairs with no money withdrawn from your bank account. There are pros and cons to using a credit card for this purpose.

•   On the positive side: If the credit card is a zero-percent-interest card — and the balance can be paid in full before the promotional period ends — this can be a way to pay for an emergency home repair without paying interest.

•   As for disadvantages, credit cards are more likely to have high-interest rates, which can add a significant amount to the account balance if not paid off quickly.

•   Credit cards also come with borrowing limits. A major emergency home repair might max out this limit or even exceed it.

•   In addition, using all available credit can potentially have a negative effect on a borrower’s credit score. It can raise a person’s credit-utilization ratio. And if they are applying for a loan, it could raise their debt-to-income ratio, which might make getting a favorable loan rate a challenge.

Should I Get a Home Repair Loan?

Another option to pay for emergency home repairs might be a home improvement loan, which is a type of personal loan.

•   An unsecured personal loan does not use collateral, like a home equity loan or HELOC, so the borrower is not risking losing their home if they can’t repay the loan. The potential loan value is also not limited by the amount of equity in the home.

•   An unsecured personal loan may be funded more quickly than a home equity loan or HELOC. Because there is no collateral to determine a value for, this cuts out a potentially time-consuming step included in secured loans.

•   How can you use a personal loan? They can be tapped for a variety of reasons, not just emergency home repairs. If there are expected repairs, planned repairs, or home renovations that might make a home more livable, an unsecured loan can be a good option.

The Takeaway

It’s probably safe to say that nobody likes to think about emergencies. But it’s wise to be prepared in the event that one arises. When pricey home repairs are required, a personal loan may be the option that works best for your financial situation.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi 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.

SOPL1023029

Home prices are on the rise again, especially in large metro areas, after a lull leading into 2023. Seven cities, including Atlanta, Charlotte, Detroit, and Miami are at all-time highs as measured by the Case-Shiller U.S. National Home Price NSA Index. So saving for a down payment for your first house can be tough. This is especially true if you’re trying to buy that first home while you also have student loans to pay off. And if you’d like to purchase that home super fast before prices soar higher, it can feel impossible.

But here’s the good news: It’s definitely doable, even within just 12 months, if you accelerate your savings and prepare wisely. Follow our strategy below to take that big step into home ownership fast.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Months 1–3: Save Like You’ve Never Saved Before

Do the Math

The median home price in the U.S. in late 2023 was $431,000. Saving 10% for a down payment on a home at that price is far more manageable than following the old 20%-down school of thought, especially when you have student loans to pay off. To succeed at saving $43,100 in a year’s time, you’ll need to save $3,592 a month, which seems slightly more plausible if you take a breath and break it down into 52 weeks, at $829 a week. Of course, you’ll want to crunch the numbers for the type of home you’re looking to purchase. If you can find a well-priced property and put even less than 10% down, you may need significantly less cash on hand.

But don’t put your calculator away yet.

In addition to saving for the down payment, you’ll need to factor in closing costs, which typically amount to about 3% of the home price. So for a home that costs $431,000, you would need to add $249 to your weekly savings goal.

Yeah, that’s a big chunk of change. But don’t panic; the first step is always the hardest. Just imagine yourself landing your first job or hosting your first big party. You managed that and you’ll manage this too. And remember to consider student loan refinancing, which can help lower your interest rate, monthly payments, and ultimately save you money.

Revise Your Budget

Hunker down and take a hard look at your budget. If you’ve decided to refinance your student loans, don’t forget to adjust your monthly fixed expenses to account for your lower payments. Compare your income and expenses to get a clear view of your spending habits, and then make the necessary changes to meet your weekly savings goals.

Look closely at your expenses to see what you can give up to increase your savings, and what costs you can cut back on. Can you join a rideshare group to save on gas? Part with a streaming subscription or two? Also, consider setting limits on eating out and buying clothing or gadgets you don’t really need.

Recommended: Home Affordability Calculator

Flex your Negotiation Muscles

Put your savvy bargaining skills to use to get lower interest rates on existing credit cards and auto loans, or discounted rates on subscription services.

Start a Home Fund

Open a savings account just for your down payment, and avoid dipping into it. This will help you keep careful tabs on your progress.

Reach out to Your Family and Friends

Within your 12 months of saving, you’ll have a birthday and celebrate gift-giving holidays. Let your friends and family in on your major goal of buying a house, and ask that they contribute money toward a down payment in lieu of material presents.

Just remember that if you receive unusually large sums or a large number of deposits in the months leading to your home purchase, you may need gift letters from the generous people in your life, indicating that there is no expectation of repayment. Depending on the mortgage loan, rules vary when it comes to how much of your down payment can come from gifts.

Months 3–6: Keep Saving. And Focus on Earning More

Ramp up Your Income

Think of creative ways to use your expertise and skills to boost your income. You did invest a substantial amount of time and money in your education, after all, so maximize the ROI to rake in some extra cash to put toward your home fund.

Perhaps you can roll out an e-course or teach a professional seminar at your local community college. Or look for a way to make extra money from home. And, if the time is right, ask for a raise.

Months 7–9: Build Your Credit (and Keep Saving)

Review Your Credit Report

Check your credit report to make sure it is error-free and that your credit score is as high as it can be. And mind the cardinal rule of credit scores: Pay your credit cards, student loans, and bills on time.

Check your credit utilization ratio (the amount of your credit card balances against their limits), too; you want that number to be low.

Now is also the time to be wary of applying for new lines of credit, as that will result in lenders doing a “hard pull” on your credit. Too many of these within a 6-month time frame could ding your credit score.

Recommended: First-Time Homebuyer Guide

Keep an Eye on Your DTI

Make sure your debt-to-income ratio (DTI) is as low as possible. Your DTI is a key part of securing a home mortgage loan, and while the lower the better, it should fall below 36% — although for certain types of mortgage the DTI can be as high as 43%.


💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.

Months 10–12: Learn About the Mortgage Process (While You Keep Saving)

Do Your Mortgage Application Prep

Your mortgage company will require quite a bit of paperwork to get your loan approved. Familiarize yourself with the mortgage loan application process. Also check your credit score once more to make sure it’s still solid.

Explore Homebuyer Assistance Programs

There are many different programs designed to help first-time homebuyers gain access to home ownership. A loan from the Federal Housing Administration, for example, may help you purchase a home even if you haven’t saved a heap of cash for a down payment or if your credit score isn’t at the highest level.

If a fixer-upper is your goal, a HUD loan may be worth exploring. And depending on where you’re looking to buy, you might find city- or state-specific homebuyers assistance programs.

The Takeaway

Saving for a down payment and the associated costs of buying a home is a big endeavor, but with persistence and discipline, both in terms of your spending and your home-search process, you can find a home and have the down payment necessary to purchase it. The same careful planning that got you to college and helped you secure a student loan will help you achieve your dream of becoming a homeowner.

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

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

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

SOHL1023250

A higher resale value of your home is one of the many rewards for carrying out home improvements and renovations. But remodeling projects cost money, and financing them can be expensive, depending on the amount you borrow and the type of loan you use.

Options for home improvement financing include home equity loans (HELOCs), home equity lines of credit, and cash-out refinancing. These types of financing allow homeowners to borrow against the equity they have built up in their home. Other financing options are personal loans, credit card financing, and government programs. Any of these could be the best option depending on the circumstances.

Here’s what homeowners need to know about the different types of home improvement loans and what factors they should consider before settling on a lender.

1. Home Equity Loans

If you have built up equity in your home, which means you have paid off a portion of your mortgage, a home equity loan could be the right choice to finance home improvements. To find out how much equity you have, subtract the balance due on your mortgage from the assessed value of your home. For example, if your home is worth $400,000 and you owe $200,000 on your mortgage, you have $200,000 in equity. A bank will let you borrow up to a certain percentage of that amount — up to 100% in some cases.

A home equity loan acts like an additional mortgage, where the homeowner pays back the loan in monthly payments. The payments are in addition to the original mortgage payments. Home equity loans often have low fixed interest rates because the home is used as collateral for the loan. However, there are closing costs to consider that could be between 2% to 5% of the loan amount.

On the plus side, home equity loans usually qualify for the mortgage interest tax deduction as long as the funds are used to substantially improve the home.

If you have plenty of equity and need a sizable amount to finance a big project, a home equity loan could make sense. You will receive a lump sum payment, and the improvements you make may increase the value of your home.

💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit also borrows against the equity you have built up in your home. But the funding works more like a credit card and is not distributed as a lump sum payment. A bank will allow a qualified homeowner to borrow up to a preapproved limit and then pay it back. HELOC loan terms are typically between five and 20 years.

Interest rates differ for HELOCs because they are adjustable and rise and fall over the life of the loan. However, interest is only due on the outstanding balance — the amount borrowed — not the full credit limit.

The amount you can borrow through a HELOC depends on your credit score, income, and the value of your home. Your lender can change the loan terms, too. For example, if your credit score drops during the loan term, your lender may reduce the amount you can borrow.

One advantage of a HELOC is that you can use funds from the line of credit, make payments, and then borrow again. A HELOC is a better option if you have smaller projects to do over a longer term. You can borrow as you go, only pay interest on how much you use, and avoid paying closing costs.

3. Cash-Out Refinancing

Another option to fund home improvements is cash-out refinancing. In the case of cash-out refinancing, a homeowner takes out a new mortgage that is higher than their original mortgage. The borrower then pays off the original mortgage and uses the leftover cash to fund home improvements. The amount of cash they can access depends on the equity they have in the home.

For example, let’s say the homeowner currently owes $100,000 on a $300,000 mortgage. They take out a new mortgage for $350,000, pay off the old mortgage ($300,000), and now have $50,000 left to spend on home improvements. The catch is that their new monthly mortgage payments will be higher because they have increased the size of the loan, and they will have to pay origination fees and closing costs.

Money from refinancing does not have to be used to improve a home; it can be used to consolidate debt, pay for school, or anything else the borrower wants to use it for. Also, the cash is not considered income from the IRS and is not taxable.

Cash-out refinancing may be a good option if interest rates have dropped since you took out your original mortgage. You can take out cash and pay a lower interest rate on the new loan. You might also be able to reduce the term length of your original mortgage and pay off your home loan sooner. This will be the case if the total cost of your new loan including closing costs is less than the total cost of your original mortgage.

4. FHA 203(k) Rehab Loan

An FHA 203(k) rehab loan is a loan taken out at the time of the home’s purchase. These loans are typically used for a fixer-upper, when the owners need funding right away for improvements. This could be the best type of loan for home improvements for big projects. The advantages of this type of loan for the borrower are that they have funds available for improvements from the outset, and they only have to pay back one loan with one set of closing costs.

These loans are also backed by the government and come with benefits. Borrowers can qualify with a less-than-stellar credit score (typically, a minimum of 620), and the down payment expected is lower than it would be for a traditional mortgage loan (as low as 3.5%).

Two things to remember are that the renovation costs must exceed $5,000 for the borrower to qualify for this type of loan, and the closing process can take a long time. Lastly, work covered under an FHA 203(k) loan must start within 30 days of closing, and projects must be completed within six months.

This type of loan may be worth considering if you are buying a fixer-upper that requires significant work, and your credit score qualifies you for this type of loan.

5. Personal Loans

If you don’t have sufficient equity in your home to take out a home equity loan or a HELOC, a personal loan is an option. A personal loan will come with a higher interest rate, adjustable or fixed, because this type of personal loan is unsecured. Your home is not used as collateral. These loans are processed much quicker than home equity loans or HELOCs, sometimes the same day.

Personal loan terms are shorter, from two to five years, which will mean higher monthly payments, and you’ll have to pay closing costs.

These loans may work if you lack equity or if you have an emergency, such as a broken water heater or HVAC system. That said, they are probably one of the most expensive borrowing options.

6. Credit Cards

A credit card can be used for financing, and it’s a fast, simple way to access funds. The amount you can spend on improvements will depend on your credit limit (although you could use multiple cards), and the interest charges are likely to be much higher than other financing options.

A credit card can be a good option if you think you can finish your renovations quickly and pay off the balance on the card. Look for cards with an introductory 0% annual percentage rate (APR). Some cards allow you up to 18 months to pay back the balance at that introductory rate. If you can pay off the balance by the deadline, that’s interest-free financing. However, check for fees and other hidden costs.

The danger here is that if you don’t pay off the balance by the end of the interest-free rate, the interest charges can skyrocket. That’s why credit cards should not be used for long-term financing.

A credit card can be a great option for home improvement financing if you can find one with a low introductory rate, low fees, and you are confident you can pay off the balance within the introductory rate period.

7. Government Assistance Programs

The federal government has grants and programs that can help homeowners pay for renovations. Two home renovation loan options are Title I loans and Energy Efficient Mortgages. Lenders for Title I property improvement loans for your state are listed on the U.S. Department of Housing and Urban Development’s website.

Title I Loans

An FHA Title 1 loan is a fixed-rate loan used for home improvements and rehabilitation. Loans under $7,500 are usually unsecured, but bigger loans may use your home as collateral. These loans may be used in conjunction with a 203(k) rehabilitation mortgage.

The maximum loan terms are between 12 and 20 years, and loan amounts are $7,500 to $60,000, depending on the home’s size and type.

The loan must be used for property improvements, and an FHA mortgage insurance premium of 1% of the loan amount will be added to your interest rate. There is no minimum credit score required, but your debt-to-income ratio may factor into your loan terms.

Energy Efficient Mortgage

FHA’s Energy Efficient Mortgage program (EEM) finances energy-efficient improvements with their FHA-insured mortgage. The borrower must qualify for the loan amount used to purchase or refinance a home. However, they’re not required to be qualified on the total loan amount that includes the amount used to finance energy-efficient improvements. The FHA insures the loan to protect the lender against loss in the event of payment default.

Starting in 2023, homeowners can also get tax credits for some energy-efficient updates, including windows, insulation, new doors, heat pumps, and air conditioners.

These types of programs will reduce the cost of financing for home improvements and are great options if you meet the criteria.

How to Decide the Best Type of Home Improvement Loan for You

If you’re trying to decide what home improvement loan is best for you, consider the following factors:

Are You Purchasing a Fixer-Upper?

If you are buying a fixer-upper, check if you qualify for either an FHA 203(k) rehab loan or a government-assisted program. You may get cheaper financing this way.

Do You Need Funds Right Away?

If you need funds quickly — for example, you have a broken heat pump or HVAC system — a personal loan or credit card financing are options to explore.

Do You Have Equity Available?

If you have built up equity, a home equity loan or line of credit will provide cheaper financing than a personal loan and over a longer term, so that your monthly payments will be lower. A cash-out refinancing loan might also mean that you could lower your payments and reduce your term if interest rates have dropped significantly since you took out your original mortgage.

How to Get a Home Equity Loan

The first step in getting a home equity loan is to decide which loan is best for your situation. Next, find a lender with the best terms and fill out an application to see if you qualify.

1. Check Your Financial Health

The better your credit score, the better the loan terms will be. If you can boost your credit score before you apply for financing, you’ll boost your chances of getting a better deal. Lenders will also look at your debt-to-income ratio when setting the interest rate and term, so lowering your debt before you apply for a home improvement loan can help lower the cost of your financing.

2. Compare Lenders

You should contact a few different lenders to compare their rates and loan terms. Look for benefits, such as rate discounts for enrolling in autopay, and watchouts, such as late payment fees and minimum loan amounts.

3. Gather Documentation

You will need to submit a few basic pieces of information when you apply for a loan. As a general guide, you will need:

•  Proof of income, such as W-2s or 1099s, bank statements, pay stubs, or tax returns.

•  Proof of residence, such as your Social Security number and utility bills.

Your current debts, housing payment, and total income will also play a role. Be sure to have all the information your lender may need on hand when you apply to speed up the application process.

💡 Quick Tip: With home renovations, surprises are inevitable. Look for a home improvement loan with no fees required — and no surprises.

4. Apply for Prequalification

Some lenders will prequalify you, which will tell you your interest rate and how much your monthly payments will be. Prequalification should not affect your credit score, whereas a formal loan application could. Applying for too many loans in a short space of time could lower your credit score.

5. Complete the Loan Application Process

Your loan application might be fully online, via phone and email, or in person at a local branch. In cases where you are borrowing against equity, your lender may require a home appraisal. Provided your finances are in good shape, the lender should approve your application, and you’ll receive funding.

How Your Credit Affects Your Home Improvement Loans

Your credit score will affect the total cost of a home improvement loan. The higher your score, the less of a risk you pose to a lender, so the better the loan terms will likely be for a mortgage or long-term loan. The same goes for credit cards and personal loans. Also, if you have good credit, you’ll probably have an easier time securing a home improvement loan.

Can You Use Home Equity Loans for Non-Home Expenses?

Home equity loans and HELOCs are flexible and can be used for anything, not just home expenses or renovations. However, these loans are best suited for long-term, ongoing expenses like home renovations, medical bills, or college tuition.

The Takeaway

The types of loans for home improvements include loans based on the equity you have built up in your home, such as a home equity loan, a HELOC, or cash-out refinancing. You can also use personal loans, credit card financing, and government programs. Loans based on equity tend to cost less over the loan’s lifetime, but they also tend to have longer loan terms. Equity-based loans also tend to be best when you need to borrow a larger amount, because you can spread out the cost over a longer period.

A personal loan will have a higher interest rate and a shorter term, but the higher your credit rating, the better the interest rate tends to be. Alternatively, credit card financing is favorable if you need funds quickly, the amount you need is not too high, and you can take advantage of a 0% introductory rate and pay off the balance before the rate expires.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What type of loan is best for home improvements?

The type of loan that is best for home improvements depends on your finances and how much you need to spend. If you hold a fair amount of equity and need a sizable amount of cash, a home equity loan, HELOC, or cash-out refinancing may be good options. Cash-out refinancing might be particularly appealing if interest rates have dropped, and you can refinance with better loan terms.

If, on the other hand, you have a smaller project that you expect to complete in a short timeframe, using a credit card that gives a 0% interest rate for a period could be the way to go.

What is the best renovation loan?

If you’re taking on a big project, buying a fixer-upper or planning to renovate an older home, you may want to consider the FHA 203(k) mortgage. The 203(k) rehab loan lets you consolidate the home and renovation costs into a single remodel home loan and avoid paying double closing costs and interest rates.

If your home is newer or higher-value and you have equity, cash-out refinancing can be a good option, particularly if interest rates have dropped.

Should I use a personal loan for home improvements?

Personal loans are a more expensive option for home improvements, especially if your credit score is average. However, using a personal loan for home improvements might be the best option if you don’t have a lot of equity to borrow from.

Are home improvements tax deductible?

Home improvement loans are generally not tax deductible. However, if you use a refinance or home equity loan, some of the costs might be tax deductible. Check with a CPA or tax specialist.

What credit score is needed to get a home improvement loan?

Credit score requirements for a home equity loan depend on the lender. A credit score in the mid-600s might be enough to be approved by some lenders, while others might not approve you with a score above 700. Lenders consider many factors, including your debt-to-income ratio and equity in the home, when considering you for a home equity loan.

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