paintbrush with green paint

The True Cost of Buying a Fixer-Upper: Essential Insights and Tips

If you’re considering buying a fixer-upper, you’re likely doing so, at least in part, because purchasing a home continues to be expensive. Post-pandemic, prices are still climbing, with a 4.7% uptick in November 2024 versus a year earlier. Adding to the high cost of homeownership is the fact that mortgage rates went from historic lows a few years ago to an average of 7.08% for a 30-year loan as of January 2025.

These economic factors are among the reasons why many people are drawn to fixer-uppers. They hope to find a lower-priced house that can be rehabbed, giving them a piece of the American Dream for less. Are you among their ranks? Here, learn more so you can make an informed buying decision.

Key Points

•   Renovating a fixer-upper isn’t necessarily a bargain. A thorough home inspection is crucial to identify what issues are present and budget for them.

•   The initial purchase price of the home is typically lower, but renovation costs can be unpredictable and vary by location.

•   It’s wise to budget for overages, typically 10% to 25%, to cover unexpected expenses and delays.

•   Common renovation projects include kitchen and bathroom remodels, and roof replacements, with costs varying widely but extending into the five-figure range.

•   Financing options include larger mortgages to reserve cash, home improvement loans, and HELOCs, depending on your financial situation.

Defining a Fixer-Upper

What exactly is a fixer-upper? It’s a home that’s in need of significant work. In many cases, these are older houses with much deferred maintenance or simply a lot of dated, well-worn features.

A fixer-upper might be a home from 100 years ago with an insufficient electrical and heating system, as well as a roof in need of replacement. Or it could be an apartment with a very old kitchen and bathrooms needing an overhaul. These residences might be livable, but they require an infusion of cash and work to make them comfortable by today’s standards.

Initial Purchase Price vs. Renovation Costs

If you’re thinking about buying a fixer-upper, it’s important to look carefully at the initial purchase price versus renovation costs. Granted, the price of the home is likely to be cheaper than that of a brand new home. The Federal Reserve Bank of St. Louis, for instance, found that the median price for an existing home was $388,000 vs. $420,800 for a new home in the most recent year reviewed, so buying an older home can already save you cash.

However, pricing renovation costs can be tricky. Among your considerations:

•  You will have to finance both the purchase of the property and the renovations. You may need to get a home loan and then access additional funds for the renovation.

•  Whether you are planning on doing the work yourself or hiring professionals, issues can often be uncovered as you go. Perhaps a bathroom you thought was fine as-is actually has deteriorating plumbing. Or maybe in the kitchen, the parts you need to repair the aging refrigerator are no longer available. These kinds of discoveries can blow your budget.

•  The location of your home will likely impact prices. Those in a small town, for instance, will probably pay less to get the work done than someone who lives in a pricey suburb of, say, San Francisco or New York.

•  You are likely aware that supply-chain issues can impact your renovation. As the saying goes, time is money. These kinds of delays can throw a wrench in your plans and lead you to spend more as you find ways to finish the job.

•  Don’t forget to think about whether you can stay on-premises during the remodeling process or if you will need to find temporary housing as your property is renovated.

As you contemplate these factors, it’s wise to do a full home inspection of a fixer-upper property, walk through with a contractor or two if you are planning on delegating the work, and draw up a budget to see how renovation costs will add to the initial purchase price.

Evaluating Renovation Expenses

Here’s a closer look at three common fixer-upper remodeling projects, with current costs.

Kitchen Remodel Costs

According to Angi, the home improvement site, the average cost of a kitchen remodel in 2025 is almost $27,000, but there’s a huge range of prices possible, including up to twice that amount or more.

The three elements that contribute most to the cost are the countertops, cabinets, and flooring. The more you lean into custom and luxury options, the higher the price will go. Also, the size of the kitchen will count as well, with bigger being more expensive, and the degree of dilapidation can matter, too.

Bathroom Renovation Costs

The average bathroom renovation ranges from $6,000 for smaller-scale fixes, such as primarily cosmetic updates, to $30,000 for a complete gut do-over, with the average price tag coming in at $12,115 in 2025, according to Angi. A big expense can be moving the plumbing lines. If you can keep the layout as-is, you could save up to 50%.

Roof Replacement Costs

A roof should typically last two to three decades on a home — or longer, if you choose the right material. The average cost for replacing a roof is about $9,511, but that will vary with the size of the home and the material you choose.

For instance, if you opt for a premium product, like natural slate, you’ll find that the average costs for a 1,500-square-foot roof can be $45,000 in 2025.

Recommended: How to Buy Homeowners Insurance

Hidden Costs in Fixer Uppers

It’s crucial to add up all the costs of potential renovations before you buy a fixer-upper house. You don’t want the dream of owning your own home to cloud your judgment about the work that’s needed. If you don’t do a deep dive on pricing before you buy, you may end up in your own version of The Money Pit movie.

Consider the following:

•  Assess the upfront cost of the home, and add up all potential material and labor needs — think both big and small, like plumbers, electricians, carpenters, all the way down to any new doorknobs you’ll buy along the way. Then, subtract that from the home’s renovated market value. Would this still be a profitable venture and a wise investment?

•  Keep in mind that the impact of inflation can push prices higher than what you believe they will cost during the time you are renovating.

•  It’s important to allow room in your budget and your timeline for overages. It’s not uncommon for home renovations to cost more and take longer than anticipated. It’s wise to have a cushion in your budget, at least 10% but preferably 20% to 25% to cover additional costs. Add wiggle room in your timing, too.

•  Lastly, as noted above, think about whether you will be able to occupy the home as it’s renovated. If you’ll be without heat or air conditioning, bathrooms, and/or a functional kitchen, you may have to pay to live elsewhere for a period of time.

Recommended: How Do Home Improvement Loans Work?

Financing Your Fixer Upper

These considerations can seem overwhelming, but remember, your goal is to bring out your home’s maximum potential, whether for you to enjoy or to capitalize on via a future sale.

You have a few options for how to finance the renovation of a fixer-upper:

•  You could put less money down and take out a larger mortgage. This would allow you to have some cash on hand to pay for the remodeling.

•  You can buy the house and then take out a home improvement loan, which is a kind of personal loan used to finance your home projects. You get a lump sum and pay it back over time with interest,

•  An alternative to a personal loan would be to purchase the fixer-upper and then apply for a home equity line of credit, or HELOC. These are revolving lines of credit that may offer attractive terms (low interest, long repayment). However, keep in mind you are using your home’s equity as collateral. You typically need 15% to 20% equity in your home to qualify.

•  Another option is a home equity loan vs. a HELOC. The difference is that a home equity loan typically distributes a lump sum of money, which is repaid in installments over a period of time.

Recommended: Home Equity Loan or Personal Loan: Knowing Your Options

DIY vs Professional Renovations

If you are considering buying a fixer-upper, a key decision is whether to do the work yourself or hire professionals to complete the job. Making that decision involves keeping the following in mind:

•  Timing: It’s important to look at the timeline of your project. Would you have the bandwidth to get the work done yourself? Or, thinking about the other option, can you find a qualified professional who is available to start when needed?

•  Skill level: Be honest. Are you confident that you have the skills needed to get the job completed and in a way that you’ll be happy with? Can you tackle retiling a bathroom or adding a home addition? Renovations aren’t for novices, and errors can be costly and possibly dangerous.

•  Budget: As you budget after buying a house, do you have money to hire professionals? If you don’t have deep pockets, you may feel your only option is to DIY the project. But, as noted above, there are ways to access funding to get the job done right, such as different types of home improvement loans, if hiring out winds up being the best decision.

Recommended: How to Apply for a Personal Loan

The Takeaway

As home prices continue to rise, a fixer-upper can offer good value for some home shoppers, whether they want to renovate the home themselves or hire professionals to complete the work. However, it’s important to evaluate your costs upfront to make sure you can handle both the purchase of the property and then financing the updates to make your renovation dreams come true.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What should I avoid when buying a fixer-upper?

When buying a fixer-upper, don’t be blinded by the property’s potential or guesstimate costs. It’s important to have a full inspection and be aware of such big-ticket expenses as structural damage, outdated plumbing and electrical systems, and any environmental issues (such as mold).

Is it cheaper to build or to buy a fixer-upper?

While a fixer-upper is typically cheaper than a home that’s ready for move-in, it’s hard to generalize whether it’s cheaper to build or buy a fixer-upper. Constructing a simple house in an area where land and labor are affordable could be a wise move, while building in a pricier area on, say, a challenging sloped lot could ratchet up expenses. Similarly, some fixer-uppers require little investment to make them livable, while others require a long and in-depth overhaul. Doing your research and running the numbers can usually provide guidance.

What is the most expensive part of remodeling a house?

Typically, the most expensive part of remodeling a house is renovating the kitchen and bathrooms. These rooms often require pricey appliances and fixtures, custom cabinetry, and the work of plumbers and electricians.


Photo credit: Stocksy/Karina Sharpe

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.


Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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

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

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

SOPL-Q125-020

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What Is an Assumable Mortgage & How Does It Work?

Assuming a mortgage means that the buyer of a home is able to take over the seller’s existing mortgage. When mortgage assumption is possible, it may help a buyer score a lower interest rate and save money in other ways as well. In times when interest rates are high or headed upward, an assumable mortgage can be quite a windfall.

But, reality-check time: Mortgages are only assumable in certain situations, and there are pros and cons to consider. If you’re home shopping and want to consider this option, read on to learn more, including what is an assumable mortgage, how to know if a mortgage is assumable, the benefits of an assumable home loan, and, of course, the downsides of an assumable mortgage.

Key Points

•   An assumable mortgage allows a buyer to take over the seller’s existing mortgage.

•   The buyer often must qualify with the lender for the assumable mortgage.

•   The buyer must cover the difference between the mortgage balance and the home’s value.

•   FHA, VA, and USDA loans are often assumable.

•   Assumable mortgages can save money on interest payments and closing costs.

What Does Assumable Mortgage Mean?

The meaning of an assumable mortgage is that the buyer, when purchasing a home, takes over the existing mortgage held by the seller. This means the buyer assumes responsibility for the loan’s outstanding balance, its interest rate, and making payments for the remaining loan term.

This can be an appealing option if, say, the seller’s mortgage has a considerably lower interest rate than is currently available. In this scenario, the buyer could stand to save thousands over the life of the mortgage loan.

However, a buyer may also need to finance the amount of equity the seller has in the home.

It’s important to note that not all mortgages are assumable. For those that are, it’s recommended that all parties know in advance what obligations they have when they agree to a mortgage assumption, just as with any other financial agreement.

Note: SoFi does not offer assumable mortgages at this time. However, SoFi does offer fixed-rate and variable-rate mortgages and special opportunities for first-time homebuyers. Learn more from the Home Loan Help Center.

How Do Assumable Mortgages Work?

With an assumable mortgage, the buyer will become the holder of the mortgage originally taken out by the seller. The buyer, as mentioned above, may have to clear certain qualification hurdles to do so.

But there’s more to answering the question, how does assuming a mortgage work: It’s also important to note that, as briefly mentioned above, the homebuyer must make up any difference between the amount owed on the mortgage and the property’s current value. That could mean the buyer pays cash to make up the difference or takes out a second mortgage.

An example: Say a house is valued at $350,000, and the home seller has a $225,000 balance on the home’s original mortgage. Under the terms of most assumable mortgage loans, the homebuyer would need to deliver $125,000 at closing to cover the difference between the original mortgage and the current estimated value of the home, usually determined by an appraisal.

Another important aspect of how assumable mortgage loans work are the two models possible: a simple mortgage assumption or a novation-based mortgage assumption.

Simple Assumption

In a typical simple mortgage assumption, the buyer and seller agree to engage in a private transaction.

•   This means that the mortgage lender is not necessarily aware of the transfer of the mortgage and therefore the new buyer does not go through the mortgage qualification and underwriting process with the lender.

•   The home seller usually just transfers the title of the property to the buyer after the buyer agrees to take over the remaining mortgage payments.

•   If the buyer misses monthly payments or defaults on the original mortgage loan, the lender could hold both parties responsible for the debt, and the credit scores of both buyer and seller could be significantly damaged if the debt isn’t repaid. In this scenario, an assumable mortgage home for sale could wind up being problematic for both parties.

Novation-Based Assumption

Unlike a simple mortgage assumption, where mortgage underwriting usually isn’t directly involved, an assumption with novation means the lender is involved.

•   The lender vets the buyer and agrees to the loan transfer.

•   This means the buyer agrees to assume total responsibility for the existing mortgage debt and remaining payments.

•   Under those terms, the original mortgage lender releases the home seller from liability for the remaining mortgage loan debt. The new documentation, such as a deed of trust (if used), will be in the buyer’s name alone.

What Types of Loans Are Assumable?

There are many different types of mortgage loans but not all are assumable. Typically, home loans that operate outside the federal government’s mortgage loan environment, such as conventional 30-year mortgages issued by private lenders, are not assumable. (How do you know if a conventional mortgage is assumable? It will likely be an adjustable-rate loan, and the seller will have to check with their lender to be sure.)

Certain kinds of mortgages that are insured by the government and issued by private lenders are, however, assumable. A seller usually must obtain lender approval for the assumption, or in the case of U.S. Department of Agriculture (USDA) loans, agency approval. And the buyer must qualify. These loans include:

•   FHA loans: The Federal Housing Administration (FHA) insures these mortgages, which are popular with first-time homebuyers. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA mortgages are assumable.

•   VA loans: Home loans guaranteed by the Department of Veterans Affairs (VA) are also assumable, and — perhaps surprisingly — the buyer does not have to be a veteran or in the military. It’s important to understand VA loan assumption clearly before proceeding. Note: The seller of these loans may remain responsible for the mortgage if the buyer defaults.

•   USDA loans: Loans guaranteed by the Department of Agriculture (USDA) are assumable only if the current owner is up to date on payments.

One last note about the options above: While assumable mortgages can be part of a wrap-around mortgage, they are not one and the same.

When a mortgage is assumed, the buyer pays the lender every month. With a wrap-around mortgage, which is a kind of owner-financing, the buyer pays the seller.

Why Do Assumable Mortgages Exist?

Actually landing an assumable debt can be beneficial for both a buyer and seller, but the mortgage lending industry may not make it easy to cut a deal. Why? Because as history attests, mortgage lenders may lose money on assumable mortgages.

In the late 1970s and early 1980s, when interest rates were at the highest levels in modern history, assumable mortgage deals were attractive to buyers who could take over a seller’s mortgage at the original loan interest rate. In many cases, this would yield a bargain vs. the then-current rate for a new mortgage. (How high did rates go? In October 1981, 30-year fixed-rate mortgages hit an eye-watering peak of 18.45%.)

Mortgage companies, however, could see that they would lose money if home buyers chose a lower-rate assumable loan over a higher-rate new mortgage loan. That’s one reason mortgage companies began inserting “due on sale” clauses, which mandated full repayment of the loan for most home transactions.

As the FHA and VA began issuing more mortgage loans to homebuyers, they offered more relaxed rules allowing assumption transactions. Mortgages could transfer to the homebuyer as long as they demonstrated the ability to repay the remaining home loan balance, usually after a thorough credit check.

Pros and Cons of Assumable Mortgages

Assumable mortgage loans have upsides and downsides.

Upsides of an Assumable Mortgage

First, consider these pluses:

•   A lower rate may be possible. The buyer may save significant money on the loan if the original mortgage’s interest rate is lower than current rates.

•   Closing costs are curbed. The buyer might also benefit because closing costs are minimized in private home sale transactions between a buyer and a seller.

•   No appraisal is needed. With no need to get a new mortgage on the property, a home appraisal isn’t required for a mortgage assumption, which can save time and money. The buyer could request an appraisal as part of the general home purchase agreement, however.

Downsides of an Assumable Mortgage

Now, the minuses:

•   Upfront cash may be required. To meet the terms of an assumable mortgage, the buyer may need to have a substantial amount of upfront cash or take out a second mortgage to close the deal. This usually occurs when the property’s value is greater than the mortgage balance. The seller has perhaps built up considerable equity over the years.

•   Second mortgages can be problematic. Second mortgages aren’t always easy to obtain, as mortgage lenders may be reluctant to issue a second home loan when the original mortgage still has a balance due. And a second mortgage probably carries closing costs, meaning the seller needs to shell out more cash.

•   The property may be in distress. In some cases, the home seller may be eager to get out of a home that is proving to be too expensive for their budget. Simply put, they might be behind on payments. In that event, the mortgage lender may require the mortgage to be made current (meaning getting up to date on payments) before it will approve an assumable mortgage.

•   FHA loans may carry an add-on. If the home seller puts down less than 10% of the home’s cost when getting an FHA loan, there will be a mortgage insurance premium for the entire loan term. This would add to the buyer’s monthly costs.

Here’s how this intel stacks up in chart form:

Pros of Assuming a Mortgage

Cons of Assuming a Mortgage

Possibility of a lower interest rate than market rate, saving money over the life of the loan Buyer must make up difference if home value exceeds mortgage balance
Reduced closing costs Home may be in distress
Home appraisal not necessary FHA loans usually carry mortgage insurance premium

Examples of Assumable Mortgages

If you’re hoping to find an assumable mortgage, it will most likely be a government-insured or -issued loan, as mentioned above; perhaps one offered as a first-time homebuyer program. Here’s a bit more about these mortgages and how a loan assumption would work:

•   Federal Housing Authority (FHA) loans: These government loans, which are insured by the FHA, may be assumable. Both parties involved in a mortgage assumption, however, must qualify in certain ways. For instance, the seller must have been living in the home as a primary residence for a period of time, and the buyer needs to be approved via the usual FHA loan application process.

•   Veterans Affairs (VA) loans: If a seller has a loan backed by the VA, it may indeed be assumable. A buyer who wants to take over the loan can apply for a VA loan assumption and doesn’t need to be a current or former member of the military service.

•   U.S. Department of Agriculture (USDA) loans: To assume a USDA loan on a rural property, a buyer will have to show an adequate income and credit to be approved by the USDA.

Recommended: Buying a Home with a Non-Spouse

Who Are Assumable Mortgages For?

Assuming a mortgage can be a good option for those who are property shopping in a time of high or rising interest rates and would like to take over the seller’s lower-rate loan. This can help save money, and it can also spare the buyer some of the time, energy, and money needed to apply for a new loan.

In addition, an assumable mortgage may work best for buyers with access to cash, as they will probably need to cover the difference between the mortgage amount and the value of the home they are buying.

Who Are Assumable Mortgages Not For?

Those purchasing a home that currently has a conventional mortgage will most likely not be able to take over that loan.

Additionally, if a mortgage is assumable, it’s important to recognize this scenario: If there’s a considerable gap between the mortgage amount and the property’s value, the buyer needs to bridge that. That means either ponying up a chunk of cash or finding a second mortgage, which may not be financially feasible for some prospective homebuyers.

How to Get an Assumable Mortgage Loan

Here are some points to consider if you are contemplating assuming a mortgage:

•   First, confirm that the loan is assumable. For most conventional mortgages, assumption is not an option.

•   If assumption is possible, the homebuyer must apply for the assumable mortgage and be vetted for creditworthiness and the ability to meet all the contractual requirements. It’s vital that the buyer show that they have the financial assets needed to qualify for the loan. Even in a simple assumption (more on that below) the buyer may need to reassure the seller that they are creditworthy.

•   Recognize that the buyer will need to make up any difference between the amount owed and the home’s current value. This means that if the seller of a $300,000 home has a $100,000 mortgage that’s assumable, the buyer would need to be able to come up with $200,000 to assume that loan, either by paying cash or by getting a second mortgage. Obviously, this scenario could present a significant financial hurdle for many prospective homebuyers.

•   If the mortgage lender or agency signs off on the deal, the property title goes to the homebuyer, who starts making monthly mortgage payments to the lender or mortgage servicer.

•   If the lender denies the application, the home seller must move on, and the buyer would likely resume shopping elsewhere.

Recommended: How to Buy a Multi-Family Property

The Takeaway

If you can’t find a property with an assumable mortgage or don’t feel this financing option is right for you, rest assured there are other ways to finance your purchase.

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 Mortgages: simple, smart, and so affordable.

FAQ

Is it a good idea to assume a mortgage?

Assuming a mortgage can have benefits. If you find an assumable-mortgage home for sale, you might be able to take over the seller’s mortgage at a lower rate than what’s currently offered by lenders, thereby saving you money over the life of the loan. Closing costs and schedules might also be leaner. However, mortgage assumption is not always possible, and if it is, you may have to make up the difference between the mortgage amount and the home’s current value.

What is required to assume a mortgage?

To assume a mortgage, the seller must have a loan that allows for assumption. These are usually government-insured or -issued mortgage loans. In addition, you may have to submit credentials to the lender and be approved. You may also have to pay the difference between the mortgage amount and the property’s market value.

How much does it cost to assume a mortgage?

Typically, when you assume a mortgage, you may pay some closing costs, but these could be lower than on a new loan. In addition, there may be a one-time funding fee; for instance, on a VA loan, this amounts to 0.5% of the existing mortgage balance. Last but not least: The buyer usually has to pay the difference between the remaining balance on the mortgage and the current value of the home.

What mortgages are assumable?

Government loans such as FHA, USDA, and VA loans are often assumable. Conventional loans (those issued by private lenders and not via a federal government mortgage loan program) are usually not assumable. When in doubt, the mortgage holder should inquire with their lender.


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.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Building a Houseboat: Step-By-Step Guide

What to Know About Building a Houseboat

You can’t be lily-livered to want to build a houseboat, a self-propelled boat with a cabin. It will take a lot of time and more than a few doubloons.

Houseboat kits are a thing, and an alternative to building your own boat is buying a used houseboat and modifying it.

This piece will help you navigate how to build a houseboat and more.

Key Points

•   Building a houseboat is a significant time and financial investment.

•   Options include building from scratch, using a prefab kit, or renovating a used houseboat.

•   Costs range from a few thousand dollars to well over $35,000.

•   The process involves finding a location, obtaining approvals, and installing systems.

•   Research local regulations and ensure you have the necessary space and resources.

First Off, Can You Build a Houseboat Yourself?

As long as you have the time and money, which can mean securing financing, yes, you can build your own houseboat.

Small houseboats may only have one or two rooms in their cabins, with people using them to fish or enjoy time on a river. Larger ones may be used somewhat like a summer home, with several rooms included. Houseboats of just about any size have a sort of porch on the ends, perhaps covered with awnings.

Although they have this in common with another type of house, the floating home, which is permanently moored, houseboats are designed for quick connection and disconnection with a marina’s electrical, water, and sewer services.

Typical Costs of Building a Houseboat

How much does it cost to build a houseboat? Well, as is the case with the cost to build a house, it depends. Costs will vary based on the size of the boat, the materials used, fixtures included, and so forth.

A small basic houseboat may cost from somewhere around $10,000 to build, while a somewhat larger one can range from $35,000 up to $100,000. (That said, there are luxury houseboats worth millions, so the sky’s the limit if the budget permits!)

How Long Will It Take to Build a Houseboat?

The time investment will depend on the size of the boat, the materials used, your level of building experience, how much help you have — and perhaps even the weather. One estimate suggests that building your own houseboat will take 600 hours.

Pros and Cons of Building a Houseboat from Scratch

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Pros:

•   When you build something yourself vs. finding a contractor, you can save on labor costs.

•   You can pick the design you’d like and, when possible, make customized choices.

•   You can benefit from the satisfaction of DIY.

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Cons:

•   This can be a big job.

•   If this is the first time you’ll build a houseboat, there can be a learning curve.

•   You’ll need to ensure that you have space to build, ideally near water.

How to Build a Houseboat

Steps include the following:

•   Find a spacious location to build

•   Request approval to build

•   Design your own houseboat

•   Build or buy a hull

•   Purchase materials

•   Start building

•   Install plumbing and electrical

Here’s more information about each step.

Find a Spacious Location to Build

Even a small houseboat can take space in which to build, so make sure you have enough room for the boat and for any workers.

Plus, consider how, once the boat is constructed, you’ll get it to the waterfront. Where do you plan to dock the houseboat? Is there sufficient building space near the dock to solve two problems at once?

Request Approval to Build

The U.S. Coast Guard’s Boating Safety Division provides information about relevant federal laws and regulations, Coast Guard directives, state boating laws, and more. Be sure to follow those while also checking in with your city and county government agencies to dot your local I’s and cross your T’s.

Design Your Houseboat

Determine the design. Check local associations, Google “houseboat plans,” and/or ask the owners of a houseboat what they recommend.

Plans are pretty affordable and can save you plenty of hassle, so pick the one that fits your budget and dovetails with your vision.

Recommended: How Do Home Equity Lines of Credit Work?

Build or Buy a Hull

The hull is the heart of the houseboat’s design and engineering ability, and also the part of the houseboat where you can walk around. The quality and appropriateness of the hull determine how well it floats and how stable and durable the boat will be.

As you seek out building plans for the houseboat, examine what’s involved in building the hull and then make your style decision from there. The hull may be a V-bottom, a flat bottom, multihull, or pontoon style, the most popular for a houseboat.

Pontoon boats can be spacious and more likely to provide a smooth, comfortable ride. They can be easy to maintain and may be a good choice for family use.

On the other hand, pontoon boats aren’t built for speed or easy maneuverability. They typically come with an outboard engine, and it can be hard to find another kind.

Purchase Materials

Just as you wouldn’t want to run out of egg whites when preparing a soufflé, you won’t want to run out of important building materials for your houseboat.

A personal loan could come in handy. You might be able to borrow up to $100,000.

Another possibility, for some homeowners, is a home equity line of credit (HELOC) or home equity loan. The interest rate will be lower than that of unsecured loans.

Make a list, check it twice, and then make sure you buy the right quality and quantity. Buying parts bit by bit can be more expensive, create more stress, and delay the project.

Start Building

This is what you’ve been waiting for, right? Now is the time to take the materials you’ve purchased and, by following the plans you’ve chosen, actually build your houseboat. Perhaps you’ll need to reach out for help, or maybe you’ve got this all by yourself. Either can work!

Install Plumbing and Electrical

With a houseboat, you can navigate the waters rather than being moored in place. Electrical wiring and plumbing will allow you to have access to electricity and use toilets. Waste will go into a holding tank that, when you get to a marina, can be removed by attaching your electrically powered pump to the marina’s system.

Are Houseboats Cheaper Than Houses?

Because houseboats range from a few thousand dollars to over $1 million, the answer is that some, but certainly not all of them, are cheaper than a house.

Expenses will continue to flow after the build. Most houseboat owners will pay mooring fees, liveaboard fees, insurance, and pump-out fees. But they may catch a tax break: A boat can be a main or second home, allowing owners the mortgage interest deduction if they itemize.

Recommended: What Is a Home Equity Loan and How Does It Work?

Can You Get a Houseboat Prefab Kit?

You can! It may make sense to explore those options to see if one fits your needs and budget — and compare that to the cost of building your houseboat from scratch.

Other Ways of Getting a Houseboat Other Than Building From Scratch

Here are two methods:

•   Buy an old houseboat and renovate it

•   Buy a new houseboat

Buy an Old Houseboat and Renovate It

You can save money by buying a used houseboat, especially if you have the know-how to make any necessary repairs and modify it. Or, depending on what needs to be done, you might still come out ahead financially if you buy an old houseboat and have an expert renovate the vessel.

Buy a New Houseboat

Just as when you buy a car, truck, or RV, when you buy new, you can benefit from the warranty and enjoy your new houseboat without worrying about what parts have worn down.

The Takeaway

How to build a houseboat? You could try building one from scratch or using a prefab kit, or you could buy a used houseboat and renovate it. What’s most important is choosing what fits your budget and enhances your lifestyle. How to launch your houseboat plans? One way is a HELOC brokered by SoFi that has a lower interest rate than unsecured loans.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can you live permanently on a houseboat?

Yes. Some marinas allow full-time liveaboards. Otherwise, check with your state’s anchoring regulations to see how long you can remain in a certain spot with the houseboat and what you’d be required to do.

Do houseboats retain their value?

Boats in general decrease in value, especially during the first couple of years and then gradually after that. That said, pontoon houseboats can last for decades. So when looking at what you’d invest and then dividing that cost by 30, 40, or even 50 years of potential use, you may consider this a good investment even without lots of resale value.

How long do houseboats last?

Pontoon boats are known to last so long that people use them their entire lives. The average lifespan is 30 to 40 years, with some lasting 50 years or longer.

Can you get a loan to finance a houseboat?

Although it may be challenging to find a loan program specifically for houseboats, you can contact banks, credit unions, and online lenders to see if their boat financing program includes houseboats. Or, if buying one, check with the dealer.

Other options include a HELOC, home equity loan, or personal loan to pay for your houseboat.


Photo credit: iStock/Cucurudza

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


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


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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What Are Fixed-Rate Mortgages and How Do They Work?

With the median U.S. home listing price sitting at $400,500 in January 2025, most people will need a mortgage to fund their purchase, and the majority of them will choose a fixed-rate loan, in which the interest rate does not fluctuate over the life of the loan.

But if you’re preparing to take the homeownership plunge, how do you know which kind of loan is right for you and what are the pros and cons of fixed-rate mortgages? Let us be your guide.

Key Points

•   Fixed-rate mortgages offer a consistent interest rate and monthly payment throughout the loan term.

•   These loans are especially popular among first-time homebuyers.

•   Fixed-rate loans are available in terms of 10, 15, 20, and 30 years.

•   Shorter-term mortgages have higher monthly payments but lower total interest.

•   Refinancing a fixed-rate mortgage is possible but involves additional costs.

What Is a Fixed-Rate Mortgage?

The fixed-rate mortgage definition is, as its name suggests, a mortgage loan whose interest rate is fixed across the lifetime of the loan. The rate is stated at the time the documents are signed and does not change at any point throughout the loan term (provided that all payments are made in full and on time).

Fixed-rate mortgages are the most common type of mortgage. According to the National Association of Realtors® 2024 Profile of Home Buyers and Sellers, 64 percent of all buyers use a fixed-rate mortgage, with this type of mortgage being slightly more common among first-time homebuyers than repeat buyers. Fixed-rate mortgage terms can be 10, 15, 20, or 30 years. A mortgage calculator can help you work through the different monthly payments for each and see what best suits your situation.

How Does a Fixed-Rate Mortgage Work?

Once you sign your home loan documents and close on your purchase, you’ll begin making a monthly mortgage payment. With a fixed-rate loan, you can expect to pay the same amount each month. How much of your payment goes toward the principal vs. interest will change over the life of your loan — typically more of your payment goes toward interest at the outset of the loan, with more going toward the principal nearer to the end of the term — but the overall payment amount will remain the same. You can see the breakdown of your payments in your loan’s mortgage amortization table.

How are fixed mortgage rates determined? Monetary policy actions by the Federal Reserve and overall economic factors (such as inflation) influence the rates lenders offer in broad strokes. The specific rate each individual borrower is offered is additionally affected by factors such as the loan amount, loan type, and loan term as well as borrower credit scores and financial profile.

Fixed-Rate Mortgages vs. Adjustable-Rate Mortgages

If you’re deciding between a fixed-rate vs. adjustable-rate mortgage (or ARM), the difference is that with an ARM, the interest rate can move up or down according to the market. The rate is calculated according to the index and margin — the index is a benchmark interest rate based on market conditions at large, and the margin is a number set by the lender when the loan is applied for.

You may see options like a 5/1 ARM, which means the rate is set for the first five years of the loan and then adjusts annually after that.

Long story short: A fixed-rate mortgage offers you a predictable interest rate and monthly payment, whereas an adjustable-rate mortgage can shift over the course of the loan term according to external factors, like inflation affecting the APR or the actions of the Federal Reserve.

It is, however, important to understand that your total monthly housing bill can still change, even with a fixed-rate mortgage, if, for example, your property taxes or homeowners insurance rates change or if you miss several payments.

Recommended: Home Loan Help Center

Types of Fixed-Rate Mortgages

There are a few variables to fixed-rate mortgages.

•   Conventional Loans: Conventional fixed-rate mortgages are offered by banks, credit unions, and other lending institutions. They typically have stringent requirements about credit score and debt-to-income ratio (or DTI) that an applicant must meet.

•   Government-Insured Loans: FHA, USDA, and VA mortgages tend to have less tough requirements and target certain kinds of homebuyers, like those with lower income, in the military (past or present), and living in rural areas. They may offer no or low down payment and other perks, too.

•   Conforming and Non-Conforming Loans: Mortgages can also be considered “conforming” or “nonconforming,” depending on whether or not they meet the guidelines established by the Federal Housing Finance Agency (commonly known as Fannie Mae and Freddie Mac). For 2025, the conforming loan limit for one-unit properties is $806,500, or $1,209,750 in areas deemed “high cost.”

Of course, homes costlier than these limits exist, and it is possible to take out a mortgage to buy one. Those loans are considered “nonconforming” and are also sometimes called “jumbo loans.”

Because the loans are so large, eligibility requirements tend to be more stringent, with borrowers usually needing a down payment well above 3%, cash in the bank, and a solid credit score.

Fixed-Rate Mortgage Term Lengths

You can’t answer the question “what is a fixed-rate mortgage?” without looking closely at mortgage term lengths. The term length that a buyer chooses for a fixed-rate mortgage can have a significant effect on the overall costs of the loan, so it’s helpful to understand how term lengths and costs intersect.

30-Year Fixed

The most common term length for a fixed-rate mortgage is 30 years. Repaying the loan (plus interest) over three decades means paying more interest over the life of the loan than you would if you chose a shorter term length, but the longer term also makes for a lower monthly payment than a shorter term. This is one reason it’s such a popular choice. A chart showing 30-year mortgage rate trends can help you see how current rates compare to historical highs and lows.

15-Year Fixed

A shorter term means higher monthly payments but less interest paid over the life of the loan, which is a critical consideration when choosing between a 30-year and a 15-year mortgage. For example, if a homebuyer borrowed $350,000 at 7.00% with a 30-year loan, the monthly payment amount would be $2,328.56 and the total interest paid would be $488,281.14. But borrowing the same amount at the same rate with a 15-year term would mean a monthly payment of $3,145.90 and total interest paid of $216,261.81. A 15-year mortgage term, or other shorter-term fixed-rate loan, may be a good choice for those who can afford to comfortably make the higher monthly payment.

Other Terms

As noted above, a fixed-rate mortgage term can also be 10 or 20 years. To see how changing the term length affects the monthly payment amount and the total interest paid over the life of the loan, try plugging different term lengths into a mortgage calculator.

Example of a Fixed-Rate Mortgage

Here’s an example of how a fixed-rate mortgage might work if you buy a house for $428,700 with 20% down and take out a 30-year fixed-rate home loan. Your mortgage principal will be $342,960, and at a rate of 6.72% with a solid credit score of 740+, your monthly payment (not including any taxes or insurance) will be $2,217.

As we’ve seen, when you make your loan payments, at first most of the money goes towards interest. This is because the interest is “front-loaded,” to use the industry lingo. Perhaps 90% of your payment will be paying interest and 10% will be applied to the principal. As you get to the end of your loan payment, these figures may well be reversed. That is, 10% of the $2,217 goes towards interest and 90% toward the principal.

Pros and Cons of Fixed-Rate Mortgages

Fixed-rate mortgages are more common among homebuyers because of the predictability they offer. Still, there are both drawbacks and benefits to pursuing this kind of home loan.

Benefits of Fixed-Rate Mortgages

Because homebuyers who take out fixed-rate mortgages will know their rates at the time they sign on the dotted line, these loans provide long-term predictability and stability — which can help people who need to fit their housing expenses into a tight budget.

Fixed-interest mortgages, and other types of fixed-rate loans, shield borrowers from potentially high interest rates if the market fluctuates in such a way that the index significantly rises.

Drawbacks of Fixed-Rate Mortgages

Although fixed-rate mortgages are more predictable over time, they tend to have higher interest rates than ARMs — at least at first. Sometimes an ARM might have a lower interest rate but only for a relatively brief introductory period, after which the rate will be adjusted.

If the index rate falls in the future, homebuyers who opt for a fixed-rate loan might end up paying more in interest than they would have with an ARM.

Because lenders risk losing money on fixed-interest mortgages if index interest rates go up, these loans can be harder to qualify for than their adjustable-rate counterparts.

How to Calculate Fixed-Rate Mortgage Payments

Now that you know what a fixed-rate mortgage is and how it functions, you might wonder how much it could cost you. If you are curious about what fixed-rate mortgage payments would look like at different home price points, for varying terms, you use an online mortgage calculator or, for an even more detailed look at what you’ll pay each month, check out a mortgage calculator with taxes and insurance.

When Is a Fixed-Rate Mortgage the Right Choice?

Fixed-rate mortgages offer long-term predictability, which can be a must for those who need budget stability. Furthermore, fixed interest rates can be beneficial for those who plan to stay in their home for a longer period of time — say, at least seven to 10 years.

Here’s why: Homebuyers with 30-year fixed-rate loans may need that long to build home equity (remember: during the initial years of the loan most of your payments go toward interest, not equity).

Finally, if homebuyers suspect that interest rates are about to rise, a fixed-interest loan can be a good way to protect themselves from those increasing rates over time.

That said, there are some instances in which an ARM may be a better choice. If a homebuyer is planning to sell in a short amount of time, for example, the low introductory interest rate on an adjustable-interest loan could save them money (as long as they can sell the property) before the rate can tick upward.

Recommended: First-Time Homebuyer Guide

The Takeaway

Fixed-rate loans, in which the interest rate holds steady for a loan term of 10, 15, 20, or 30 years, are popular in part because their costs are predictable. But when you’re in the market for a home, shopping for the right loan is almost as important as shopping for the house itself, so an adjustable-rate mortgage might be worth a look too, especially if you need a lower monthly payment and don’t plan to stay in the home for very long.

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 Mortgages: simple, smart, and so affordable.

FAQ

Can you refinance a fixed-rate mortgage?

Yes, you can refinance a fixed-rate home loan. Because refinancing means taking out an entirely new loan and involves some upfront costs, it’s important to make sure that these costs don’t outweigh the savings you will enjoy due to, say, a lower interest rate or a shorter loan term (two of the chief reasons people opt to refinance).

What is the average fixed-rate mortgage?

Mortgage rates can change daily, so if you want to know the current average fixed-rate mortgage number, it’s best to check online. For most of the last two and a half years (dating back to mid-2022) the 30-year fixed rate has been between 6.00% and 7.00%.

Are most mortgages fixed rate?

Fixed-rate mortgages have been more popular than adjustable-rate mortgages since the housing market crisis in 2007, largely because they offer borrowers a predictable payment schedule. Over the last 15 years, the share of adjustable-rate mortgages originated has been between 4 percent and 25 percent of all new home loans.


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.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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house next to a condo

House or Condo: Which is Right For You? Take The Quiz

If you’re thinking about buying a home in the not-too-distant future, you may be wondering what kind of property to purchase. Would a single-family house be better, or perhaps a condo unit?

Some important factors: Do you prefer being in a city, perhaps in an apartment or townhome, or are you all about a house with a picket fence? Do you like handling your own gardening and picking your own front-door paint colors, or would you like to delegate that? Do you like neighbors close by or prefer privacy? Does your household include furbabies?

These are some of the considerations that may impact whether a house or a condo is right for you. Each option has its pros and cons, and of course, finances will play a role too.

Key Points

•   Houses typically cost more but are considered better long-term investments.

•   Condos reduce maintenance and utility costs, but fees apply.

•   Houses offer more privacy and living space.

•   Condos often include shared amenities, and many offer urban perks.

•   Condo values appreciate more slowly than those of houses.

To decide which might suit you best, take this house vs. condo quiz, and then learn more about some key factors.

Next, you might want to take these pros and cons into consideration as well.

Pros and Cons of Buying a House

A top-of-mind question for many people is, “Isn’t a house more expensive than a condo?” Cost is a factor, especially when buying in a hot market, and there can typically be a significant difference between a house and a condo when you are home shopping.

The median sales price of existing single-family homes was $404,400 in the fourth quarter of 2024, according to St. Louis Fed data, compared with a median existing condo price of $359,000 in December 2024, according to the National Association of Realtors®.

Now that you know that price info, look at these pros and cons when buying a house vs. a condo.

Pros of Buying a House

Among the benefits of buying a house are the following:

•   More privacy and space, including storage

•   A yard

•   Ability to customize your home as you see fit

•   Room to garden and create an outdoor space, just as you want it to be

•   Control of your property

•   Pet ownership unlikely to be an issue

•   Sometimes no homeowners association (HOA) or dues

•   Generally considered a better investment

Cons of Buying a House

However, you may have to contend with these downsides:

•   Potentially higher initial and ongoing costs

•   More maintenance inside and out

•   Typically higher utility bills

•   Potentially higher property taxes and homeowners insurance

•   Possibly fewer amenities (such as common areas, a gym, etc.)

If, after taking the quiz and weighing the pros and cons, buying a house feels like the right choice, you can start brainstorming about size, style, location, and price; attending open houses; and looking online.

Learning how to win a bidding war might also come in handy, depending on the temperature of the market.

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

Questions? Call (888)-541-0398.


Pros and Cons of Buying a Condo

A quick look at how condos work before diving in: Condominium owners share an interest in common areas, like the grounds and parking structures, and hold title to their individual units. They are members of an HOA that enforces community rules. Being a member of a community in this way is a key difference between a condo and a house.

Pros of Buying a Condo

Here are some of the upsides of purchasing a condo:

•   More affordable

•   Amenities included (this might include common rooms, a fitness center, and other features)

•   Potentially less expensive homeowners insurance and property taxes

•   Repairs and upkeep of the property typically taken care of

•   Typically lower utility bills

•   Security, if the community is gated or patrolled

•   Access to urban perks

Cons of Buying a Condo

Next, consider the drawbacks of condo living:

•   Less privacy

•   Typically no private yard

•   Rules and restrictions (about noise levels, outside wall colors, pets, and more)

•   Typically less overall space

•   HOA fees

•   Limited parking

•   Slower appreciation in value

Plus, the mortgage interest rate and down payment are often higher on a condo vs. a house of the same value, though that isn’t always the case, especially for a first-time buyer of an owner-occupied condo.

Conventional home loan mortgage lenders sometimes charge more for loans on condo units; they take into consideration the strength of the condo association financials and vacancy rate when weighing risk.

Mortgages backed by the Federal Housing Administration (FHA) are available for condos, even if they are not part of an FHA-approved condominium project, with a process called the Single Unit Approval Program.

An FHA loan is easier to qualify for and requires as little as 3.5% down, but you’ll pay upfront and ongoing mortgage insurance premiums.

Condo vs House Pros and Cons

What Are the Costs of a House or Condo?

As mentioned above, houses tend to cost more than condos. But here are a few other ways to look at the financials when comparing a condo vs. a house:

•   Condos tend to have lower list prices than houses which may mean a smaller mortgage. However, you also need to factor in monthly maintenance fees and HOAs so you get the full picture.

•   Condos may have assessments from time to time. These are additional charges to fund projects for the unexpected expenses, such as a capital improvement to the entire dwelling.

•   Homeowner fees are growing along with inflation, so when you make your purchase, understand that these charges are not static.

•   Before buying into an HOA community, it’s imperative to vet the board’s finances, including its reserve fund, how often it has raised rates in recent years, whether it has collected any special assessments or plans, and whether it’s facing any lawsuits.

•   If you are buying a house, keep in mind that maintenance and upkeep are your responsibility. This can mean everything from replacing a hot-water heater that’s reaching the end of its lifespan to dealing with roof repairs.

•   Down payments will vary due to several factors. For a condo, a down payment is typically around 10% but can vary considerably from, say, 3% to 20%.

•   With a house, a down payment could be from 3.5% with an FHA loan to the conventional 20% needed to avoid private mortgage insurance, or PMI. Those who qualify for VA loans may be able to buy a house without a down payment.

•   If you are buying a house, make sure to scrutinize property taxes and factor those into your budget. Those are not fixed and can rise over time.

Another smart move: Check out this home affordability calculator to get a better feel for the bottom line.

When Is a Good Time to Buy?

You may know what you’d like to buy (condo vs. a house) and where (in what neighborhood), but do you feel as though now is the right time? If so, fantastic.

You might decide, though, that you want to rent for a while longer under certain circumstances, which can include:

•   Hoping to wait out an overheated market and looking at price-to-rent ratios

•   Wanting to save more money for the down payment and closing costs (the bigger your down payment, the lower your monthlies will likely be)

•   Needing to boost your credit score first

•   Wanting to pay down credit card debt or other debt, which improves your debt-to-income ratio or DTI

•   Needing more time to look at houses and condos before deciding which path to take

Check out local real estate
market trends to help with
your home-buying journey.


The Takeaway

The condo vs. house decision depends on a multitude of factors. Reviewing the pros and cons of buying a condo vs. a house can at least give you a direction to start your search. And so can such givens as knowing that you want to be in a certain location (downtown in a condo instead of in a house on a couple of acres), or that you have lots of dogs and therefore want your own yard, and so forth.

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 Mortgages: simple, smart, and so affordable.


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.

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


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


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

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