hand dangling key

What Is Mortgage Forbearance?

What happens to a mortgage if the homeowner hits a snag and can’t pay? Thankfully, sudden hardships — such as temporary unemployment or health issues — do not necessarily lead to credit damage or foreclosure.

Some mortgage servicers allow borrowers with unforeseen financial troubles to trim or pause mortgage payments short term through mortgage forbearance. The goal is to give the borrower a chance to become more financially stable.

Identifying Your Loan Servicer

If you want to ask if mortgage forbearance is an option, determine your mortgage servicer, which may not be the lender that originally provided the loan.

The name of the servicer typically appears on the bill that arrives in the mail or on the website where mortgage payments are made. You could also try the MERS® website .

Those who think they may have Fannie Mae or Freddie Mac-owned loans can check online as well.

What Does Mortgage Forbearance Really Mean and How Does It Work?

First things first: If rough seas are rising around you, it doesn’t make much sense to wait to ask for a lifeline. During forbearance, interest is not paid but accrues and is later added to the loan balance. All suspended payments also will need to be paid back.

Similarly, if you’re experiencing a hardship, before missing even one mortgage payment, it would be smart to contact your servicer to ask about options, go over the details, and formalize an agreement. Forbearance is often only granted after a financial review to gauge the likelihood that you can resume regular payments at the end of the forbearance period.

It’s important to ask whether skipped payments are expected to be paid in a lump sum when the forbearance ends, paid in installments, or added to the end of the loan term.

Do You Have to Pay Extra Interest for Forbearance?

Typically no. The interest rate and amount of interest follow the loan agreement.

The loan interest might change only if the lender extends the loan term or increases the loan interest rate.

Pros and Cons of Mortgage Forbearance



It’s a chance to avoid foreclosure Often higher monthly payments after forbearance
Usually has no impact on credit You normally have to prove hardship
Good for short-term hardships Interest accrues
Missed payments must be repaid

Federally Backed and Private Mortgage Options

Under the CARES Act, borrowers with conventional, FHA, USDA, or VA loans could request mortgage forbearance for six months, and then a six-month extension, for Covid-related hardships. The deadline for an initial hardship application for federally backed loans was extended yet again, into 2022. At that time, no deadline for requesting an initial Covid hardship forbearance was apparent for loans backed by Fannie Mae or Freddie Mac.

Whether you have a conventional home loan or government-insured home loan and you’re experiencing hardship, again, it’s important to contact your loan servicer as soon as possible to discuss options and the exact terms of each.

With coronavirus-related requests, most mortgage lenders do not require proof of hardship other than verbal or written verification.

But in general, lenders ask for documentation to prove the hardship, including current monthly income and expenses. They also will want to know whether your hardship is expected to last six months or less (short term) or 12 months (long term).

Depending on the lender, you may need to call to discuss options or might be able to start the forbearance request process online.

Coming Out of Forbearance

When a forbearance period ends, how will the amount that was paused be repaid? The answer depends on the lender and type of loan.

•   It’s possible that the sum unpaid during the forbearance period will be due in full once a loan is out of forbearance.

•   That is not true with a Fannie Mae, Freddie Mac, FHA, USDA, or VA loan. With these loans, the amount that was suspended will not be required to be paid back in a lump sum.

•   Other lenders may extend the loan period, adding the forbearance dollars to the end of the loan.

•   Yet other lenders may raise monthly payments once a loan is out of forbearance to make up the amount that wasn’t being paid during the mortgage forbearance period.

Deferred Mortgage Payments and Credit Scores

Even one missed mortgage payment will dent your credit scores, and late payments will stay on your credit history for seven years.

Forbearance, on the other hand, usually does not show up on credit reports as negative activity.

Alternatives to Mortgage Forbearance

For those who can’t afford to pay their mortgage, options like these may be available.

Mortgage Loan Modification

If you cannot refinance, loan modification is an option. Loan modification changes the original terms of your mortgage long term or permanently. The point is to make your payments more manageable, usually with a lower interest rate, a longer loan term, or both.

If the length of the loan is extended, you’ll probably pay less per month than before but pay more interest over the life of the loan.

When reaching out to your loan servicer to discuss loan modification, you might want to ask about any fees for the modification; what the new repayment term, rate, and payments will be; and whether the modification is temporary or permanent.

Financial evidence of hardship and a letter will be required.

A federal mortgage relief plan for homeowners affected by Covid-19 and exiting forbearance allows, as of 2021, modification of eligible FHA, VA, and USDA loans, reducing monthly payments by 20% to 25%.

The Federal Housing Finance Agency has similar options for conventional conforming loans (non-government-backed loans that conform to loan limits). Not among conforming loans: jumbo loans.

Mortgage Refinancing

Refinancing a mortgage is altogether different from modifying a home loan. When refinancing a mortgage loan, you’re applying for a brand-new loan that would then be used to pay off outstanding home debt.

You might qualify for a lower interest rate or get a longer loan term. Closing costs apply.

If you’re struggling financially, it might be difficult to qualify for refinancing, but it doesn’t hurt to get pre-qualified, which takes mere minutes. You may find that you’re eligible for a refinance during or after forbearance, according to Fannie Mae.

Draw on Savings

In an emergency, you may want to consider tapping your emergency fund.

If you have a Roth IRA, remember that you can withdraw contributions at any time tax- and penalty-free.

You may qualify for a hardship distribution from a 401(k) and permanently withdraw money if your plan allows it. Your employer will likely deduct 20% upfront for taxes. The 10% penalty tax is waived if the hardship withdrawal is for a handful of specific reasons.

Sell Your Home

If the weight of mortgage payments becomes too much, you could sell your house and pay off the mortgage.

If the proceeds would fall short, an option is a short sale. Your lender decides whether to OK the sale or whether to work out a plan, like allowing you to make interest-only payments for a set amount of time or extending the loan term.

Declare Bankruptcy

Another option is filing for Chapter 13 bankruptcy to stave off foreclosure.

Chapter 13 allows a borrower up to five years to pay missed mortgage payments. So instead of having to make one giant payment, if that’s what is being asked for, a homeowner could break up the payments over 60 months.

If, for example, a homeowner accepted a 12-month forbearance on monthly payments of $2,400, a Chapter 13 plan could allow the $28,800 in arrears to be paid over 60 months.

Other debts can be restructured and possibly discharged under Chapter 13.

The Takeaway

Mortgage forbearance allows paused or reduced payments for borrowers experiencing a sudden hardship that is expected to last six months or less. It’s one way to ward off foreclosure.

If refinancing your mortgage could help, get pre-qualified with SoFi. It’s quick and easy to get your rate.


Does forbearance hurt credit?

No, if you abide by all the terms of the agreement. Skipped payments during a forbearance period are typically not reported to the credit bureaus.

Is mortgage forbearance a good idea?

If the financial hardship is short term, forbearance could provide a welcome respite until you get back on your feet. And it sure beats foreclosure.

Does forbearance affect getting a new mortgage?

It depends. For Fannie Mae- and Freddie Mac-backed loans, if you paid everything back in a lump sum after forbearance, you can proceed. If not, you will need to make three consecutive payments under your repayment plan or payment deferral option.

FHA loans have a waiting period that varies by loan type if you’ve missed any payment in forbearance, even if you paid everything back in a lump sum.

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

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

Read more
Home Equity: What It Is, How It Works, and What It Can Be Used For

Home Equity: What It Is, How It Works, and What It Can Be Used For

There are many reasons to pursue homeownership, from obtaining a yard for your dog to painting the bathroom whatever darn color you want. But one of the biggest financial reasons to own your own home is to start building home equity.

Home equity is considered one of the most common and accessible ways to build wealth over time, thanks in large part to the appreciation of real estate over time.

You can even leverage your home equity to take out loans and fund your retirement. But what, exactly, is home equity, and how does it work?

What Is Home Equity?

Home equity is the amount of your home value that you actually own. It’s calculated by subtracting your mortgage balance from the market value of your property.

For example, if your home is worth $350,000, and you’ve paid enough toward your down payment and home loan that your mortgage balance is $250,000, you own $100,000 in home equity. (Keep in mind that the $350,000 value might not be what you initially purchase your home for — that figure tends to, though doesn’t always, increase over time, which is part of how equity is built!)

Once you own home equity, you can borrow against it or make a profit if you choose to eventually sell the home.

In short, home equity is pretty great to have. But how is it built?

Building Home Equity

Home equity is primarily built in two ways: paying down your mortgage and seeing the value of your home appreciate over time. Both of these can be nudged a bit to help you build equity faster. Here’s how.

Putting Down a Larger Down Payment

Many buyers, especially first-time homebuyers, take advantage of programs that allow small down payments — sometimes as little as 3% of the home purchase price.

But when it comes to building equity, a higher down payment could help. The more you put down when you’re first purchasing your house, the more equity you have right out of the gate — and if you put down more than 20%, you’ll be able to skip the additional cost of private mortgage insurance, commonly called PMI.

When calculating mortgages, you’ll also see that the higher the down payment you can afford, the lower your monthly mortgage bill.

That said, substantial down payments can be prohibitive for many buyers, and it may make more sense to get in with a lower down payment and start building equity rather than waiting a long time to save up tens of thousands of dollars.

Paying Off Your Mortgage

If making a larger down payment isn’t possible, you might also be able to speed up your equity earnings — and save money on interest over time — by paying off a mortgage early.

Of course, you’ll need to consult your mortgage documentation to ensure that your lender doesn’t charge a prepayment penalty, or if it does, that it would still be a cost-efficient decision to make.

Only some lenders charge a prepayment penalty, and of those that do, only within the first few years (usually three to five).

Paying More Than the Minimum on Your Mortgage

If you can’t afford to pay off your mortgage early in its entirety all at once, you can chip away at the loan over time by making more than the minimum monthly payment.

It’s a good idea to ensure that the additional funding is going directly toward your principal balance (the amount of money you borrowed in the first place). That way, you’re dialing down the amount of interest you’ll pay before it can even accrue.

Staying in Your Home for Five or More Years

Along with chipping away at the amount you owe, the other function that increases equity is allowing your home to appreciate. Although that rise in value isn’t guaranteed, if it’s going to happen, it takes time.

Thus, staying in your home for a longer amount of time (at least five years) gives you a better chance at building enough equity for all the other costs of homeownership to be worth it.


Allowing your home to naturally increase in value over time is one thing, but you can also take matters into your own hands and help drive up the value by renovating or remodeling. (Not sure aboutrenovations vs. remodels? Essentially, remodels are more extensive — and expensive.)

While even lower-cost renovations, like painting, can increase the home value a little, major repairs may have major costs associated with them. Sometimes, though, the equity increase you’d gain makes it worth going to the expense in the short term; home improvement loans can help make these efforts more accessible (but again, always look ahead to ensure that debt won’t eclipse the equity you’d stand to build).

Using Home Equity

So once you’ve built home equity, how can you use it?

For one thing, it adds to your overall net worth: The amount of equity you own in your home is value in your name, even if it’s not in cash. But you can also leverage your home equity in a variety of ways to glean actual spending power. Here’s how.

Home Equity for Your Retirement

Many people end up using home equity loans to fund their retirement, as certain types of these loans, such as reverse mortgages, don’t require repayment until the borrower moves out or dies.

That said, it’s important to think through the pros and cons of reverse mortgages, as borrowing against your home equity comes with risk. (For example, if the loan total ends up being more than the value of the home, heirs might lose the house, or need to refinance, if they can’t pay off the reverse mortgage in full.)

Home Equity to Purchase a New Home

Even if you end up moving, your home equity value can be borrowed against to help purchase a new home. In fact, some people end up taking out home equity loans to purchase a second or investment home.

Borrowing Against Home Equity

Along with the above-mentioned ways to use home equity, there are many other equity home loan types that can be used to liquify the cash wrapped up in your home and make it spendable.

Just be aware that these loans come with costs and risks. For example, if the housing market suddenly shifts and your home’s value decreases substantially, you may find yourself in a hole. In fact, if you can’t make the payments, you could even lose your home. Your home, after all, is the collateral for these loans.

Here are a few of the most common ways to borrow against your home equity:

•   A home equity loan offers a borrower a lump sum of cash up front in return for fixed payments on a regular basis throughout the life of the loan.

•   A home equity line of credit (HELOC), on the other hand, works kind of like a credit card: Those who take out HELOCs have the opportunity to tap into their equity and convert it to spendable cash as needed, up to a certain limit. Neither interest rates nor payments are usually fixed. Closing costs may be lower than those for a home equity loan, and sometimes waived entirely if you keep the credit line open for a number of years.

•   With a cash-out refinance, a borrower takes out an entirely new mortgage while borrowing a portion of their existing home equity in cash. Closing costs are involved. (Here are details for those deciding between cash refinance vs. HELOC.)

Calculating Home Equity

Phew! That’s a lot of information. To recap, here’s how to calculate your home equity:

Total home value – total mortgage balance left = home equity

Keep in mind, again, that “home value” isn’t the same as “purchase price.” To know for sure what your home value is in the current market, you’d need an up-to-date appraisal, but you can use estimates from Zillow or your favorite real estate agent.

The Takeaway

While nothing is a surefire ticket to wealth, building home equity is one of the most historically reliable ways to do so. And down the line, home equity can be leveraged for a variety of loans.

Still have questions? That’s understandable; homeownership is a complicated topic. To better understand mortgages, SoFi offers a help center for home loans.

If you decide that you’re ready to buy, take a look at mortgage loans with SoFi. You might find a competitive fixed-rate mortgage that’s just the right fit, with as little as 3% down for qualified first-time homebuyers.

Ready to get into your dream home? Check your rate today.

Photo credit: iStock/PC Photography

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

SoFi Mortgages
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.

Read more
A Guide to Mortgage Statements

A Guide to Mortgage Statements

If you get paperless mortgage statements or have autopay set up on your home loan, or even if you get statements in the mail, it might be easy to miss important information.

By paying close attention to exactly what’s included in your mortgage statements, you’ll avoid unpleasant surprises.

What Is a Mortgage Statement?

Maybe you became well versed on mortgage need-to-knows.

And you did the hard work of calculating your mortgage size, qualifying for a mortgage, and getting that loan.

Now comes the mortgage statement, a document that comes from your mortgage loan servicer. It typically is sent every month and includes how much you owe, the due date, the interest rate, and any fees and charges.

In the past, the information that was included and the format of a mortgage statement ran the gamut among lenders. Thanks to the Dodd-Frank Act, enacted in 2010, mortgage servicers must include specific loan information and follow a uniform model for mortgage statements.

Statements also include information on any late payments, how much you’ll need to pay to bring your balance into the green, and any late fees you’re dinged with. You can also find customer service information on your mortgage statement.

What Does a Mortgage Statement Look Like?

A mortgage statement has similar elements as a credit card or personal loan statement. As a picture is worth a thousand words, here’s a sample mortgage statement, courtesy of the Consumer Financial Protection Bureau:


What Is on a Mortgage Statement?

Deciphering what’s on a mortgage statement can help you know what to look for, how much you owe in a given month, how much you’re paying toward interest and principal, and how much you’ve paid year to date.

Let’s dig into all the different parts of a home loan statement.

Amount Due

This usually can be found at the top of your mortgage statement and is how much you owe for that month. Besides the amount, you’ll find the due date and, usually, the late fee you’ll get hit with should you be late on payment.

Explanation of Amount Due

This section breaks down why you owe what you owe. You’ll find the principal amount, the interest amount, escrow for taxes and insurance, and any fees charged. All of those will be tallied for a total of what you’ll owe that month.

Past Payment Breakdown

Below the section that explains the amount due, you’ll find a breakdown of your past payment: the date the payment was made, the amount, and a short description that may include late fees or penalties and transaction history.

Contact Information

This is typically located on the top left corner of the mortgage statement and contains your mortgage loan servicer address, email, and phone number should you need to speak to a customer service representative. Note that like student loan servicers, a mortgage loan servicer might be different from your lender.

Your mortgage loan servicer processes payments, answers questions, and keeps tabs on your loan payments, and how much has been paid on principal and interest.

You probably know what escrow is. If you have an escrow account, your mortgage loan servicer is tasked with managing the account.

Account Information

Your account information includes your account number, name, and address.

Delinquency Information

If you’re late on a mortgage payment, within 45 days you’ll receive a notice of delinquency, which might be included on your mortgage statement or be a separate document. You’ll find the date you fell delinquent, your account history, and the balance due to bring you back into good standing.

There might be other information such as costs and risks should you remain delinquent. There also might be options to avoid foreclosure. One possible tactic is mortgage forbearance, when a lender agrees to stop or reduce payments for a short time.

Understanding the Details

Your mortgage statement includes many details, all to help you understand what you’re paying in interest, the fees involved, and what your principal and interest amounts are. It’s important to look at everything to make sure you understand what information is included. If you have trouble deciphering the information, call your mortgage servicer listed on the document.

If you have an adjustable-rate mortgage, the mortgage statement also might include information about when that interest rate might change.

Important Features to Know

Besides the main parts of a mortgage statement, here are a few other key elements of a mortgage statement.

Delinquency Notice

As mentioned, you’ll receive a delinquency notice within 45 days should you fall behind on payments.
Besides how much you owe to get back in good standing, the delinquency notice might also include your account history, recent transactions, and options to avoid foreclosure.

Escrow Balance

If you have an escrow account for your mortgage, the balance will show how much you owe in homeowners insurance and property taxes.

Note that this is different from how much money you have in your escrow account and how much money is collected, which is typically included in your annual escrow statement.

If you don’t have an escrow account, your taxes and homeowners insurance owed will usually be separate lines.

Using Your Mortgage Statement

Now that we’ve covered all the elements of a mortgage statement, let’s go over how to use your mortgage statement and make the most of it.

Making Sure Everything Is in Order

Comb through your mortgage statement and make sure everything is accurate and up to date. Inaccurate information can lead to overpaying, potentially falling behind on payments, and headaches.

Keeping It for Documentation

How long do you need to hold on to your mortgage statements for documentation?

Keeping Annual Mortgage Statements

While you might not need to hold on to your mortgage statements for too long, make sure you have access to your annual mortgage statements for a longer period of time. In case you run into an IRS audit, you’ll be required to provide documentation for the past three years.

Making Your Payment

There are a handful of ways you can make payments on your mortgage.

Online. This is probably the most common and simplest way to submit a mortgage payment. It’s free, and once you set up an account online and link a bank account to draw payments from, you’re set. You can also set up autopay, which will ensure that you make on-time payments. In some cases, you might be able to get a discount for setting up auto-debit.

Coupon book. A mortgage servicer might send you a coupon book to use to make payments instead of sending mortgage statements. A coupon book has payment slips to include with payments. The slips offer limited information.

Check in the mail. As with any other bill, you can write a check and drop it in the mail. However, sending a payment by snail mail might mean that your payment doesn’t arrive on time. If you are going this route, send payments early and consider sending them via certified mail.

How Long Should You Keep Mortgage Statements and Documents?

Just as you’d want to hold on to billing statements for other expenses, you’ll want to keep your mortgage statements in case you find inaccuracies down the line. Plus, the statements come in handy for tax purposes and for your personal accounting.

So how long should you keep your mortgage statements? Because you can find your statements online by logging in to your account, you don’t need to hold on to paper statements for long. In fact, you can probably get rid of paper copies if you have access to them online. It might be a good idea to download the documents to your computer.

Other documents, such as your deed, deed of trust, promissory note, purchase contract, seller disclosures, and home inspection report, you should keep as long as you own the home.

Consider holding on to annual mortgage statements for several years, and in a safe place. It’s a good idea to store them on your computer and have hard copies on hand.

The Takeaway

It’s easy to gloss over mortgage statements, but not knowing what’s in them every month and not noticing any changes can result in costly mistakes. It’s also eye-opening to see how much of a payment goes to principal and how much to interest.

If you’re shopping for a home or home loan, you might want to consider an online mortgage application with SoFi.

Find your own rate. It takes just minutes.

Photo credit: iStock/Tijana Simic

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

SoFi Mortgages
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.

Read more
Condo vs Apartment: What Are the Differences?

Condo vs Apartment: What Are the Differences?

If you’re browsing the market for a rental, you’ve likely encountered a dazzling array of condos and apartments. During your search, you’ve probably wondered: “What is the difference between a condo and an apartment?”

Both apartments and condominiums share quite a number of traits but differ in ownership. Apartments are typically large residential complexes owned by a company and operated by professional property managers. Condos are also usually located in large residential complexes, but each condo unit is typically owned by a private owner who doubles as your landlord.

The question of condo vs. apartment gets more complex if you’re debating whether to buy a condo or rent an apartment.

What Is a Condo?

A condo is a residential unit within a collective living community, where each individual condo is owned by a private owner, but the cost of maintaining communal areas is shared by all owners.

While condos are often located in high-rise buildings, they can also take the form of a collection of standalone properties, each designated a “condo unit.”

One benefit to renting a condo is that they’re often close to restaurants, offices, and stores. They also allow you to deal directly with your landlord rather than a management office, which may mean more personalized attention for your needs.

For buyers, the entry price can be significantly lower than the cost of most single-family houses.

What Is an Apartment?

An apartment is commonly known as a rental unit within a building, complex, or community that typically is managed by a property management company, which serves as both landlord and leasing agent for all of the units on the premises.

(In big cities, “apartment” is sometimes used as shorthand for a condo or co-op unit. If you’re choosing between a co-op and a condo to rent or buy, you’ll want to know how they differ, and whether you’re ready to buy an apartment.)

Rental apartments may be located in high-rises but can also be found in larger homes that have been subdivided into separate units.

Apartments usually offer greater mobility than other property types, which makes them a flexible option if you’re only planning on staying in an area for a couple of years. A full-time management office or private landlord takes care of leasing, rent payments, and repairs.

Where They Differ

Now that we’ve covered the condo vs. apartment basics, let’s dive deeper into some key dimensions in where they differ.


Each unit in a condo development is usually owned by a private homeowner, who may or may not double as its landlord.

By contrast, apartments are often managed by a property management company that also owns the apartment complex. Effectively, this makes the company the landlord for the entire property.

Condo ownership

Apartment ownership

Private owner and possibly also landlord Property management company with full-time leasing & maintenance staff

Unless the condo owner retains the services of a property manager, prospective renters can expect to deal with the condo owner themselves when it comes to rental applications, monthly rent payments, and any maintenance issues that arise over the course of their lease.

Prospective apartment tenants will usually submit their application and rent payments through the apartment leasing office, while full-time maintenance staffers are on call to deal with any repairs.

Some landlords may be amenable to your desire to negotiate rent in order to take you on or keep you. Paring the rent is the main goal in such a negotiation, but you can always ask for other benefits in lieu of a rent reduction.

Property Taxes

Renters aren’t responsible for property taxes when it comes to both condos and apartments, making them a non-issue in the apartment vs. condo choice.

However, if you’re deciding whether to purchase a condo, understand that you’re responsible for paying property taxes for your unit every year. If you decide to rent your condo out, you should also expect to be taxed on any rental income you collect.


Condo design

Apartment design

Design and appliances vary widely from unit to unit depending on owner’s choice Uniform design and appliances across all units within a building

Regardless of structure type, condo owners retain the right to make cosmetic adjustments to the interior of their properties, so renters can usually expect more variety when condo shopping. This also applies to things like appliances and materials.

Apartments typically take the form of multiunit buildings or small housing collectives, but usually share similar, if not identical, layouts and designs regardless of which unit you choose.


The amenities of both apartments and condos vary widely and often depend on when and how they were built.

We’ve listed some common amenities that are offered for each; keep in mind that there’s often overlap:

Apartment amenities

Condo amenities

Fitness center

Laundry room

Community room

Parking space

Community pool

Park & playground

Generally speaking, condos are more likely to offer customized amenities, like state-of-the-art appliances and granite countertops, that reflect the tastes and habits of their owners. Condo owners are incentivized to make improvements, as it allows them to charge more.

By contrast, apartments are more consistent in design and quality across units. In big apartment complexes, each unit is usually a copy of its neighbors. Depending on your tastes and budget, you can find a variety of apartment types, from luxury to economy.


Apartments and condos of similar quality and in the same area should rent for around the same cost.

Both condos and apartments often charge the following fees:

•   Application fee

•   First and last month’s rent

•   Security deposit

•   Credit and background check

•   Pet fees and deposit

•   Parking fee

Renters may find that condo owners may be more willing to negotiate on things like fees than apartment management teams, as these are private owners trying to keep their units rented out for income purposes.

A buyer of a condo will pay monthly fees that may cover insurance for and maintenance of common areas, water and sewer charges, garbage and recycling collection, condo management services, and contributions to a reserve account.


Condos usually have a greater sense of community than apartments, given that their residents are likely to stay around longer. In many cases, residents consist of the condo owners themselves.

By contrast, renters living in apartments often intend to stay for only a couple of years. While that’s not to say that there aren’t occasional resident get-togethers at some apartment complexes, you’re less likely to encounter the same faces over several months.

If you’re renting a condo, expect to abide by rules set by the homeowners association. These can sometimes be fairly strict. Apartments have their own set of rules that may be less stringent.

Renting and Financing

Financing a condo allows you to lock in your monthly mortgage payments at a steady long-term rate and gives you the chance to start building equity. In exchange, you’ll be required to make a down payment and be responsible for any taxes, insurance, and HOA fees, among other costs.

By contrast, renting an apartment involves one monthly rent payment, in addition to any utilities you’re responsible for. Of course, when you leave the apartment, you leave with just your security deposit, if all payments have been made and no damage has been done.

Deciding whether it’s better to buy a condo or to rent — or to get a house or condo — are complicated decisions that depend on your personal finances and your lifestyle. If you’re thinking about settling down, have a stable job with steady income, and have enough saved up for a down payment with cash to spare, buying a condo or house may be the right choice for you. However, if you’re still exploring, have variable income with limited savings, and are not sure whether you like an area yet, it may be best to continue renting.

For those trying to decide between renting an apartment and financing a condo or house, this mortgage help center can help provide answers.


Condo rental maintenance

Apartment maintenance

Landlord hires third-party contractors to make repairs On-site maintenance staff makes repairs

Most apartments have an on-site building supervisor who can address maintenance issues. Given that the owner of a large apartment complex oversees all of the units, they’re incentivized to employ someone full time to attend to the day-to-day affairs. This often means that apartment owners can react faster than condo owners, who sometimes don’t even live on the premises.

By contrast, condo units are usually owned by landlords, and most of them hire a third-party contractor to come in and make repairs as necessary. In some cases, condo owners may be handy and handle the repairs on their own.

If you buy a condo, you’ll have a regular maintenance fee that covers the shared parts of the property, but because condo owners typically own just the interior of their unit, any repairs in the condo unit will be separate. (It’s a good idea to pore over the covenants, conditions, and restrictions to see exactly what is part of your unit or part of the common elements.)


In terms of rules, every condo landlord is likely to have a different set of rules. However, there are some rules set by the condo board that apply to all residents and common areas, typically in the form of noise restrictions, pets, conduct, and trash pickup.

By contrast, apartments typically have a uniform set of guidelines that apply to all residents. The rules usually are stricter regarding smoking, pets, and modifications you can make to the apartment.

Condominium vs Apartment: A Side-by-Side Comparison

To help sum it all up, here’s a table comparing the condo and apartment traits discussed above.



Ownership Private owner Property management company, if a large complex
Property taxes Paid by condo owner Not applicable
Design Customized by owner Uniform across all units

Parking space

Community pool

Green space

Fitness center

Laundry room

Community room

Sometimes a pool


First and last month’s rent

Security deposit

Credit and background check

Application fee

First and last month’s rent

Security deposit

Pet fees

Community Typically condo owners and long-term residents Typically shorter-term renters
Renting & Financing

Condo renters:

Monthly rent


Condo owners:

Mortgage payment


Property taxes

HOA fees


Monthly rent


Maintenance Private owner hires third-party contractors for repairs and maintenance On-site maintenance staff

Condo vs Apartment: Which One May Be Right for You?

Whether a condo or apartment is right for you depends on your preferred rental experience. If you’re looking for something that feels a little more akin to home and don’t mind dealing directly with your landlord when discussing repairs and rent payments, a condo may be the better option for you.

On the other hand, if you prefer dealing with a full-time staff of property managers, want something more structured, and don’t mind cookie-cutter corporate apartments, an apartment may be the better rental option for you.

Prospective condo buyers will also want to keep their finances and monthly budget in mind when deciding if they want to rent or buy. While the idea of building equity is appealing, it’s not for everyone. You’ll want to thoughtfully evaluate your ability to make monthly payments and whether you want to stick around an area.

The Takeaway

In the condo vs. apartment comparison, you’ll pay similar costs when renting properties of similar quality. Things get more complex if you’re debating whether to buy a condo or rent an apartment, as there are myriad added costs for condo owners in exchange for the chance to build equity.

If you’re in the market to buy a condo, getting a quick rate quote may lead to getting a mortgage with SoFi.

SoFi’s line of fixed-rate mortgages are available for primary residences, second homes, and investment properties, including condos.


Why are condos more expensive than apartments?

In general, condos and apartments of comparable quality cost around the same amount to rent.

A condo owner, however, will likely face higher monthly costs than an apartment renter, thanks to the added costs that come with owning a property, including mortgage payments, taxes, insurance, and HOA fees. Over time, the added expense may be offset by the equity built through mortgage payments.

Which retains more value, condos or apartments?

Over the long run, buying a condo will retain more value because of equity build-up. However, unless you plan to own the condo for several years, renting an apartment may save you more money in the short run because renting avoids the ownership and closing costs that come with buying a condo.

Can I get a loan to buy a condo or co-op apartment?

A qualified buyer can finance a condo with a government-backed or conventional mortgage loan.

Getting a loan for buying into a housing cooperative is more difficult. The buyer is purchasing shares that give them the right to live in the unit — personal property, not real property. That’s one reason that most lenders do not offer financing for co-ops, and the few that do may restrict where they lend.

Photo credit: iStock/Michael Vi

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

SoFi Mortgages
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.

Read more
A Guide to Reverse Mortgage Pros and Cons

A Guide to Reverse Mortgage Pros and Cons

If you’re at or nearing retirement age and looking for a way to generate cash flow, a reverse mortgage can seem like a great idea — especially given all the star-studded ads for them floating around prime-time TV.

And in some cases, a reverse mortgage can be a helpful financial tool to turn much of your home equity into spendable cash, but there are downsides to consider, too.

In this article, we’ll walk through the pros and cons a homeowner would be smart to weigh in order to make an informed decision about the most popular kind of reverse mortgage: the federally insured home equity conversion mortgage (HECM).

Reverse Mortgages 101

Here are the basics of how reverse mortgages work.

A reverse mortgage is a loan offered to people who are 62 or older and own their principal residence outright or have paid off a significant amount of their mortgage. You usually need to have at least 50% equity in your home, and typically can borrow up to 80% of the equity, based on the home’s appraised value.

The lender uses your home as collateral in order to offer you the loan, although you retain the title. The loan and interest do not have to be repaid until the last surviving borrower moves out permanently or dies. A nonborrowing spouse may be able to remain in the home after the borrower moves into a health care facility for more than 12 consecutive months or dies.

Fees and interest on the loan mean that over time, the loan balance increases and home equity decreases.

Pros of Reverse Mortgages

A reverse mortgage offers seniors the opportunity to turn what may be their largest asset — their home — into spendable cash. There are a variety of ways in which this can be attractive.

Securing Retirement

Many seniors find themselves with a decent amount of their net worth rolled up in their home but without many income streams. A reverse mortgage is a relatively accessible way to cover living expenses in retirement.

Paying Off the Existing Home Loan

While you have to have some of your home loan paid down in order to qualify for a reverse mortgage, any remaining mortgage balance is paid off with reverse mortgage proceeds.

No Need to Move

Those who take out reverse mortgages are allowed to remain in their homes and keep the title to their home the entire time. For established seniors who aren’t eager to pick up and move somewhere new — or downsize — to lower expenses, this feature can be a godsend.

No Tax Liability

While most forms of retirement funding, like money from a traditional 401(k) or IRA, are considered income by the IRS, and are thus taxable, money you receive from a reverse mortgage is considered a loan advance, which means it’s not.

Heirs Have Options

Heirs can sell the home, buy the home, or turn the home over to the lender. If they choose to keep the home, under HECM rules, they will have to either repay the full loan balance or 95% of the home’s appraised value, whichever is less.

Thanks to FHA backing, if the home ends up being worth less than the remaining balance, heirs are not required to pay back the difference, though they’d lose the house unless they chose to pay off the reverse mortgage or refinance the home.

Cons of Reverse Mortgages

As attractive as all of that may sound, reverse mortgages carry risks — some of which are pretty serious.

Heirs Could Inherit a Loss

While heirs may not be forced to pay the shortfall of an upside-down reverse mortgage, inheriting a home in that scenario could come as an unpleasant surprise. Keeping a home in the family is an accessible way to build generational wealth and ensure that heirs have a home base for the future, so the potential for them to lose — or have to refinance — the house can be painful.

Losing Your Home to Foreclosure

Unfortunately, losing your house with a reverse mortgage is a possibility. You’ll still be required to pay property taxes, any HOA fees, homeowners insurance, and for all repairs, along with your regular living expenses, and if you can’t, even with the reverse mortgage proceeds, the house can go into foreclosure.

Reverse Mortgages Are Complicated

As you probably realize this far into an article explaining the pros and cons of reverse mortgages, these loans aren’t exactly simple — and even if you understand the basics, there may be caveats or exceptions written into the documentation.

Before applying for an HECM, you must meet with a counselor from a HUD-approved housing counseling agency. The counselor is required to explain the loan’s costs and options to an HECM, such as nonprofit programs, or a single-purpose reverse mortgage (whose proceeds fund a single, lender-approved purpose) or proprietary reverse mortgages (private loans, whose proceeds can be used for any purpose).

Impacts on Other Retirement Benefits

Although your reverse mortgage “income” stream isn’t taxable, it may affect Medicaid or Supplemental Security Income benefits, because those are needs-based programs. (Proceeds do not affect Social Security or Medicare, non-means-tested programs.)

Costs of Reverse Mortgages

Like just about every other loan product out there, reverse mortgages come at a cost. You’ll pay:

•   A lender origination fee

•   Closing costs

•   An initial and annual mortgage insurance premium charged by your lender and paid to the FHA, guaranteeing that you will receive your expected loan advances.

These can be rolled into the loan, but doing so will lower the amount of money you’ll get in the reverse mortgage.

Reverse Mortgage Requirements

Not everyone is eligible to take out a reverse mortgage. While specific requirements vary by lender, generally speaking, you must meet the following:

•   You must be 62 or older

•   You must own your home outright (or have paid down a considerable amount of your primary mortgage)

•   You must stay current on property expenses such as property taxes and homeowners insurance

•   You must pass eligibility screening, including a credit check and other financial qualifications

Is a Reverse Mortgage Right for You?

While everyone interested in a reverse mortgage needs to weigh the pros and cons for themselves, there are some instances when this type of loan might work well for you:

•   The value of your home has increased significantly over time. If you’ve built a lot of equity in your home, you probably have more wiggle room than others to take out a reverse mortgage and still have some equity left over for heirs.

•   You don’t plan to move. With the costs associated with initiating a reverse mortgage, it probably doesn’t make sense to take one out if you plan to leave your home in the next few years.

•   You’re able to comfortably afford the rest of your required living expenses. As discussed, if you fall delinquent on your homeowners insurance, flood insurance, HOA fees, or property taxes, you could lose your home to foreclosure under a reverse mortgage.

There are options to consider. They include a cash-out refinance, home equity loan, home equity line of credit, and downsizing to pocket cash.

The Takeaway

A reverse mortgage may be a way to turn your home equity into spendable cash if you’re a qualified senior, but there are important risks to consider before taking one out.

Reverse mortgages are just one of many different mortgage types out there — all of which can be useful under the right circumstances.

SoFi offers a range of tools for both potential and current homeowners, including a mortgage calculator tool and a home loan help center with details on everything from basic real estate terminology to housing market trends by city.

Additionally, check out the mortgage loan options through SoFi, including a cash-out refinance and a home equity loan. Please note, not all loan programs are available in all states.

It’s easy to find your rate and explore the options.

Photo credit: iStock/Prostock-Studio

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

SoFi Mortgages
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.

Read more
TLS 1.2 Encrypted
Equal Housing Lender