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Modular homes are increasingly capturing interest as a fast and affordable housing option. The global market for modular homes is forecast to grow from $82.30 billion in 2020 to $139.03 billion in 2029. These houses are built from factory-made components and are then constructed on a permanent foundation on a building site. They must meet the Department of Housing and Urban Development standards, as well as local guidelines.

Not to be confused with manufactured homes (previously called mobile homes), which can be moved from location to location, a modular home can be a good alternative to what are known as stick-built or traditionally constructed homes.

Could one be right for you? Here are the pros and cons of these structures, to help you decide if this might be your next home sweet home.

What Are Modular Homes?

A modular home is constructed in a way that differs from a traditionally built home. Many of the components are made in a factory and then shipped to the property, where they are assembled on a permanent foundation.

The process is typically less expensive and faster than a stick-built home (meaning one that is assembled piece by piece at the site).

As briefly noted above, modular homes are permanent structures and are subject to local and federal standards.

Recommended: Mobile vs. Modular vs. Manufactured Homes

How Are Modular Homes Constructed?

One of the biggest differences from a traditional homes is the way modular homes are constructed. The house’s components are assembled in a factory and delivered to the homesite in one or more trips. The modules may be akin to three-dimensional boxes that are connected to one another and the foundation at the job site.

The benefit of constructing modular home components in a factory is the controlled environment. Because the parts are assembled under ideal conditions (perfect temperature, humidity, etc.), buyers can usually expect a consistent, high-quality build.

In addition, the actual build can move more quickly. Estimates of the time to build a modular home range from 16 to 31 weeks, depending on how customized the plans are and other variables.


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The Pros and Cons of Modular Homes

As with most things in life, there are pluses and minuses to modular homes. Consider these points to decide if one could be right for you. First, the upsides:

•  Modular homes are typically 10% to 20% less expensive than traditionally built homes.

•  They can be built up to 30% to 60% faster than stick-built homes.

•  Depending on the builder, they may be customized to suit your needs, both in terms of layout/square footage and finishes. You can get a very basic home or a truly luxe, mansion-like one.

•  They can be more energy-efficient than traditionally built houses, and the materials and building process may be more environmentally friendly as well.

•  They are considered better able to withstand environmental threats (flooding, hurricanes) than traditionally built homes.

That said, there are some disadvantages to modular homes to consider:

•  You need to add in some costs to your home-buying budget: the cost of the land, the foundation, and other related expenses. Yes, you are paying for those things when you buy a stick-built house, but the cost is already rolled into the price.

•  You will need to investigate how to finance your home. If it’s an already built home, then a home loan will work. But if you are building from the ground up? Rather than getting a mortgage (since you aren’t buying an existing home from a seller), you may want to look into construction loans. Some modular home companies offer their own financing and lending programs.

•  Depending on the modular home company, you may not be able to get every last detail you want. Shopping around can help you find the top features you want in your home.

Modular Home Risks

There are several considerations prospective modular homeowners should be aware of:

•  Finding land can be difficult in some areas. If you love modular homes but want to live in a suburb that has a hot housing market, you may be hard pressed to find a lot that works for you.
(You also may need a land loan to purchase your property if you do find a lot you love.)

•  It may be difficult to make changes once construction has started because so much of the home is pre-built.

•  Bias exists. Some people confuse modular homes with manufactured or mobile homes, which don’t have a foundation, and may therefore avoid them. This could mean a real estate agent might not show buyers a modular home that’s for sale, for example, due to this misperception.

How to Find Modular Homes for Sale

You can shop for pre-existing modular homes on major real estate websites like Realtor.com® and also on specialized sites that list this type of home.

To construct a modular home, you can look at such sites as modularhome.org and modularhomeowners.com. Also, with the growing popularity of modular homes, you may well be able to get a word-of-mouth referral from someone in your circle.

How to Choose a Modular Home

When considering a modular home builder, much will depend on the following factors:

•  Do you like the style of the houses they build? The floorplans?

•  Are their prices lining up with your budget? Do they offer financing, if you need it?

•  Where are they located? Is their factory somewhat close to you, which can help reduce transportation expenses?

•  Are you impressed with the quality of their work? Their customer service?

•  Which brands do they partner with? Many manufacturers work with certain vendors for windows, doors, appliances, etc.

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How to Finance a Modular Home

Financing a modular home will take different paths depending on whether the house is already constructed or you’re building it.

•  For already built homes, you may look into conventional mortgage loans and FHA, USDA, and VA loans, just as you would for any other property you are interested in.

•  If you are building your own modular home, then you will probably need to apply for a construction loan to have the funds to get your house over the finish line.

•  Some modular home companies offer financing options.

•  You might also see if a personal loan could help you afford a modular home. Some lenders will allow you to buy a property with the funds; check with your lender, and understand the interest rate you will be charged.

Are Modular Homes Worth It?

Whether a modular home is worth it is a very personal decision.

For some people, there may be no greater satisfaction than working with a modular builder to specify their dream home and seeing their home come together, usually more quickly and less expensively than with other building methods. They can collaborate with their builder and find a house plan that checks off all (or most) of the items on their home wish list.

Many people are thrilled with the eco-friendly aspects of these homes as well.

However, there are also people who find a vintage home more appealing or who would rather walk through an already-built home and know exactly what they are buying.

Recommended: How Much Does It Cost to Build a House?

Modular Home Tips

If you’re set on buying a modular home, here are things to consider:

•  Style of home. Modular homes come in various styles, from contemporary to log cabins. It can be wise for buyers to shop around and work with a modular home manufacturer that suits their taste.

•  Manufacturer location. The cost of transporting a modular home can be high. It may be essential for the budget-conscious modular homebuyer to work with a manufacturer close to the home’s final destination.

•  Custom builds. Some modular home manufacturers may offer more customizable options, from floor plans to finishes. Do your research, and find a builder who can check off most of the priorities on your wish list.

•  Timeline. Some modular homes go up relatively quickly, while other manufacturers could be dealing with back orders. If time is of the essence, choose your builder carefully.

The Takeaway

Modular homes are growing in popularity. Components (modules) are factory-built and then assembled on a foundation; this process can be faster and more affordable than buying a traditionally built home. They also often have environmental benefits.

However, they aren’t for everyone: Building your own home is very different than hitting the open houses, and financing a modular home likely takes you on a path that involves a construction loan. If, however, you fall in love with an already-built modular home, then you can usually apply for a mortgage from a number of lenders.

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.

FAQ

Is a modular home a good investment?

A modular home can be a good investment. They often offer energy efficiency which is a selling point. However, a modular home’s value will be dependent on the housing market in your area, just as it would be with any other kind of home.

Are modular homes dangerous?

The dangers of modular homes are minimal. As long as the assembly of the modular home complies with local building codes, modular homes are as safe as a traditionally built home.

Is the value of modular homes decreasing?

Modular homes appreciate and depreciate in a way that’s similar to traditional builds.

Where can you get financing for modular homes?

Among the possibilities for financing a modular home are a construction loan, financing from your builder, or a personal loan.

How long will a modular home last?

With proper maintenance and high-quality materials, a modular home should last as long as, or longer than, any traditionally built home. Some of the first modular homes, built in the early 1900s, are still standing today.

Photo credit: iStock/turk_stock_photographer

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Homeownership has long been a part of the American dream, and it opens the door to benefits like the mortgage interest deduction for those who itemize deductions on their taxes.

Itemizing typically makes sense only if itemized deductions on a primary and second home total more than the standard deduction, which nearly doubled in 2018.

Here’s what you need to know about the mortgage interest deduction.

What Is the Mortgage Interest Deduction?

The mortgage interest deduction allows itemizers to count interest they pay on a loan related to building, purchasing, or improving a primary home against taxable income, lowering the amount of taxes owed.

The tax deduction also applies if you pay interest on a condominium, cooperative, mobile home, boat, or recreational vehicle used as a residence. The deduction can also be taken on loans for second homes, as long as it stays within the limits.

States with an income tax may also allow homeowners to claim the mortgage interest deduction on their state tax returns, whether or not they itemize on their federal returns.

What Are the Rules and Limits?

The passage of the Tax Cuts and Jobs Act of 2017 was a game-changer for the mortgage interest deduction. Starting in 2018 and set to last through 2025, the law greatly increased the standard deduction and eliminated or restricted many itemized deductions.

For the 2025 tax year, the standard deduction is $30,000 for married couples filing jointly and $15,000 for single people and married people filing separately.

If you itemize deductions, you’re good to go and can deduct the interest. There’s further good news, as you may also be able to deduct interest on a home equity loan or line of credit, as long as it was used to buy, build, or substantially improve your home.

The loan must be secured by the taxpayer’s main home or second home and meet other requirements. For tax purposes, a second home not used for income is treated much like one’s primary home. It’s a home you live in some of the time.

The IRS considers a second home that’s rented some of the time one that you use for more than 14 days, or more than 10% of the number of days you rent it out (whichever number of days is larger). If you use the home you rent out for fewer than the required number of days, it is considered a rental property—one that you never live in, and not eligible for the mortgage interest deduction.

Generally, your interest-only mortgage is 100% deductible, as long as the total debt meets the limits.

According to the Internal Revenue Service, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of debt. Higher limitations ($1 million, or $500,000 if married filing separately) apply if you are deducting mortgage interest from debt incurred before Dec. 16, 2017.

You can’t deduct home mortgage interest unless the following conditions are met:

•   You must file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040).
•   The mortgage must be a secured debt on a qualified home in which you have an ownership interest.

Simply put, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you can’t pay the debt, your home can then serve as payment to the lender to satisfy the debt.

A qualified home is your main home or second home. The home could be a house, condo, co-op, mobile home, house trailer, or a houseboat. It must have sleeping, cooking, and toilet facilities.

Know that the interest you pay on a mortgage on a home other than your main or second home may be deductible if the loan proceeds were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.


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How Much Can I Deduct?

In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

The IRS says that if all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.)

1. Mortgages you took out on or before Oct. 13, 1987 (called grandfathered debt).

2. Mortgages you (or your spouse if married filing jointly) took out after Oct. 13, 1987, and prior to Dec. 16, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

(There is an exception. If you entered into a written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and you purchased the residence before April 1, 2018, you are considered to have incurred the home acquisition debt prior to Dec. 16, 2017.)

3. Mortgages you (or your spouse if married filing jointly) took out after Dec. 15, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.

What Are Special Circumstances?

Just like you need to understand your home loan options, you need to know the special situations where the IRS says you might or might not qualify for the mortgage interest deduction.

You can deduct these items as home mortgage interest:
•   A late payment charge if it wasn’t for a specific service performed in connection with your mortgage loan.
•   A mortgage prepayment penalty, provided the penalty wasn’t for a specific service performed or cost incurred in connection with your mortgage loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

Is Everything Deductible?

The government is only so generous, and there are many costs associated with homeownership. Some of them are not tax deductible under the mortgage interest deduction, like homeowners insurance premiums.

One caveat: You might be able to write off a portion of insurance, as well as utilities, repairs, and maintenance, if you have a home office and deduct those expenses on Schedule C.

Also not on the list for inclusion in the mortgage interest deduction are title searches, moving expenses, and reverse mortgage interest. Because interest on a reverse mortgage is due when the property sells, it isn’t tax deductible.


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How to Claim the Mortgage Interest Deduction

An itemizer will file Schedule A, which is part of the standard IRS 1040 tax form. Your mortgage lender should send you an IRS 1098 tax form, which reports the amount of interest you paid during the tax year. Your loan servicer should also provide this tax form online.

Using your 1098 tax form, find the amount of interest paid and enter this on Line 8 of Schedule A on your tax return. It’s not a heavy lift but gets a tad more complicated if you earn income from your property. If you own a vacation home that you rent out much of the time, you’ll need to use Schedule E.

Furthermore, if you’re self-employed and write off business expenses, you’ll need to enter interest payments on Schedule C.

The Takeaway

You can take the mortgage interest deduction if you have one or more mortgages and itemize deductions on your taxes. Keep in mind that it’s typically only worth taking if the write-offs exceed the standard deduction.

As with all matters that affect your taxes, you’ll want to consult with your financial advisor about claiming the deduction.

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.

FAQ

Do you get a bigger tax return if you have a mortgage?

Having a mortgage won’t necessarily help your taxes, though it might. When you have a mortgage, you may be able to deduct the interest you pay on that mortgage if you itemize on your federal income tax return. However, for itemizing to be worthwhile, your combined items would have to exceed the amount of the standard deduction, and your mortgage interest deduction, even in combination with other potential deductions, may not reach that threshold.

Is mortgage interest 100% deductible?

For loans taken out before December 16, 2017, qualifying mortgage interest may be deductible up to $1,000,000. For loans on or after that date, the limit is up to $750,000. The exception is that if you signed a legally binding mortgage contract on or before December 15, 2017, with the intention of closing by January 1, 2018, you can also deduct up to $1,000,000 (as long as you closed by April 1, 2018).

Can I deduct mortgage interest if I take the standard deduction?

No. If you want to deduct your mortgage interest, you must itemize your federal income tax and file a Schedule A.

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

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As of 2025, only 26% of people say now is a good time to buy a house according to a Gallup poll. This is probably due to high home prices and high interest rates. The median home price currently sits at $438,357 and mortgage rates as of May 2025 are 6.86% for 30-year fixed-rate mortgages and 6.01% for 15-year FRMs.

We’ve seen higher interest rates in the past year, so now may not be the worst time to buy. However, whether or not now is a good time to buy a house depends heavily on your unique financial situation and local market dynamics.

Determining When You’re Ready to Buy

Before you assess the current real estate market and pay close attention to interest rate fluctuations, it’s important to understand your financial and personal situation.

Here are a few factors you may want to consider before deciding if a new home is a good play right now.

Making Room in the Budget

When buying a home, the first thing you’ll need to budget for is a down payment.

While 20% of the home’s value is the benchmark, you may only need 3.5% if you apply for an FHA loan. But even 3.5% can be a chunk of change. If you want to buy a $200,000 house, 3.5% is $7,000.

Your home-buying budget should be large enough to cover a down payment as well as closing costs, which typically include homeowners insurance, appraisal fees, property taxes, and any mortgage insurance.

Remaining Consistent

How long do you plan to live in the city where you’re eyeing a home? If you plan on staying in the home long-term, now could be a good time to buy because staying put will give your home time to appreciate (subject to market fluctuations).

Since mortgage lenders pay close attention to job consistency and a steady income, you may also want to consider your job security. Especially during uncertain times, it’s crucial to feel confident knowing you can make your mortgage payments every month.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Checking Your Financial Profile

It’s a good idea to check your financial profile. Doing so may help you secure better financing terms when you purchase a home. Lenders will review your credit history, debt-to-income ratio, and assets, among other factors, to determine your eligibility for a mortgage.

Lenders review your credit history to gauge your creditworthiness and the level of risk to lend you money. They look at your debt-to-income ratio to indicate how much of your income goes toward debt payments every month.

If your ratio is high, it can show you’re overleveraged, which may mean you’re not in a position to take on more debt like a mortgage. You may also face a higher interest rate.

Last, a mortgage applicant can list assets like cash and investments. The more assets you have, the less risky lenders view you.

Weighing Renting Vs. Buying

You may want to compare renting vs. buying a home.

If renting a home in your community is less expensive than buying, you may want to hold off on a home purchase. Conversely, if renting is more expensive, you may be more eager to purchase a new home.

Overall, if you find that these factors point you in the direction of homeownership, it’s possible you’re ready to buy a home and can begin determining the perfect time to pounce.

Observing Interest Rates

When determining if now is a good time to buy a house, buyers should look closely at interest rates.

Financial institutions charge interest to cover the costs of loaning money when they offer you a mortgage. The interest rate they charge is influenced by the Federal Reserve, but mortgage-backed securities are considered to be the main driver.

When interest rates are low, borrowing money is less expensive for the borrower. As interest rates rise, borrowing money becomes more costly. The government has been holding rates steady recently.

But keep in mind that the rate and terms you qualify for will depend on financial factors including your credit score, down payment, and loan amount.

And, if interest rates go down after you purchase your home, you can always choose to refinance your mortgage in hopes of getting a lower rate.


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Timing the Real Estate Market

Essentially, to time any market, you want to aim to buy low and sell high. If you’re going to buy a property, you’ll want to ideally buy when there are more sellers than there are buyers—a buyer’s market.

In a buyer’s market, buyers have an abundance of homes to choose from. This may also give you leverage to ask for more concessions from sellers eager to close a deal, such as a seller credit toward your closing costs or help covering the cost of repairs.

Conversely, in a seller’s market, real estate inventory is low and demand is high, which may drive up home prices.

To identify the current market conditions, you may want to visit real estate websites like Zillow, Redfin, Realtor.com®, or Trulia to look at inventory in your area or ZIP code.

Typically, it’s a buyer’s market if you see more than seven months’ worth of inventory.

If you see five to seven months of inventory, you’re in a balanced market that isn’t especially beneficial to buyers or sellers.

It’s a seller’s market when there is less than five months’ worth of inventory.

Recommended: How Does Housing Inventory Affect Buyers & Sellers?

Understanding Local Economics and Trends

Because prices can vary vastly vary from area to area, real estate is often considered a location-driven market. This means that general rules of thumb might not be valid in every region or city.

Also, local economics may play a role in housing demand. For instance, if a large company decides to move its operations to a city, that city may experience a housing boom that creates a spike in home prices.

That’s why hopeful buyers will want to pay close attention to the economic happenings and housing trends in their desired location.

The Takeaway

If you find a home that seems right for you, your employment is stable, and you can get a home loan with a good interest rate, buying may make sense. Then again, with interest rates and home prices still being on the high side, comparing the costs of renting and buying may be called for.

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.

FAQ

Should I buy a house before rates drop?

House prices are predicted to continue rising, though at a slower rate. If you buy a house later, you’ll probably be paying more for it. If, however, you get a mortgage now and rates go down, you can consider refinancing to get the benefit of the lower rate.

What time of year is it cheapest to buy a house?

Generally speaking, you may be able to get the cheapest deal on a house in the winter. That’s because winter tends to be the slowest season for home sales and that may give you some leverage to bargain with homeowners who are in a hurry to sell. Of course, prevailing market conditions at the time will also play into how good a price you can get.

Is it better to buy a house during a recession?

There may be advantages and disadvantages to buying a house during a recession. The house price and the interest rates are likely to be lower than they might be when the economy is stronger. However, your individual financial position and job security may not be as strong during a recession, which can lead to financial stress.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

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Reasons for paying off your mortgage early include eliminating monthly mortgage payments, saving money in interest, reducing financial stress, and more. But, just because you can pay your mortgage off early doesn’t necessarily mean you should.

Should You Consider an Early Mortgage Payoff?

It can be tempting to rush to pay off your home loan when you have the ability to, especially if you’ve struggled with debt management. And why wouldn’t you want to pay off your mortgage? Getting rid of debt could potentially increase cash flow.

When it comes to your mortgage loan, paying it off early depends on your unique financial situation and goals — there is no one right answer.

Reasons Not to Pay Your Mortgage Off Early

While it may seem like there are no reasons not to pay off your mortgage early, that is actually not the case. Here are a few reasons why it may not be a good idea to pay off your mortgage loan early:

You Have a Competitive Interest Rate

Unless you’ve reached all of your financial goals, it may not make the most sense to pay off your mortgage early when you have a competitive interest rate.

For example, if you are saving to send your child to college or you’re trying to rebuild your emergency fund after a home repair, those projects might take priority.

You could also possibly earn more by investing your money as opposed to paying off your loan. If that’s the case, it doesn’t make sense to pay off your mortgage early unless you want the peace of mind that comes with no mortgage debt. Investment decisions should be based on specific financial needs, goals, and risk appetite.

You Would Have Nothing Left in Savings

If you only have enough in the bank to cover your mortgage, it is not advisable to pay it off. Having an emergency fund is necessary and may take priority over not having a mortgage payment.

You Might Face a Prepayment Penalty

Make sure to review your mortgage terms closely. Some lenders charge an early payoff penalty, usually a percentage of the principal balance at the time of the payoff.

You Might Miss Out on the Mortgage Tax Deduction

For many people who itemize, having a mortgage helps push their itemized deductions higher than the standard deduction. It’s worth discussing the mortgage tax deduction with your accountant or other tax professional before you resolve to pay your mortgage off early.

You Have Other High-Interest Debt

If you have other high-interest debt, such as credit card debt, personal loans, or student loans, it may make sense to pay those off in full prior to paying your mortgage off early. Home loans typically have the lower interest rates of other forms of debt and are considered “good debt” by lenders. It only makes sense to pay off your mortgage early if you have no other debts in your name.

When an Early Payoff May Make Sense

On the flip side, there are some situations in which paying off a mortgage early might make more sense than waiting. Reasons to pay off your mortgage early may include:

You’ve Met All of Your Financial Goals

If your emergency savings account is right where you feel it needs to be and you’re diligently contributing to your retirement accounts, there may be no reason not to pay off your mortgage early.

Another idea, however, is to purchase an investment property instead of paying off your mortgage early. This can create a monthly cash flow in addition to the value of the property potentially appreciating over the years.

You’re Interested in Being 100% Debt-Free

Sometimes, just the idea of having loan payments can be mentally taxing, even if you’re in a good place financially. Money is not just about numbers for many; it’s also about emotions.

If paying off your mortgage loan early relieves anxiety because it’s helping you become debt-free, then that might be something to consider.

Of course, reflecting on why you want to become debt-free is important when thinking about paying your mortgage off. If, for example, it’s because you’re approaching retirement and will no longer be getting a steady paycheck, it might make sense to pay off your mortgage.

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

Ways to Pay Off a Mortgage Early or Faster

If you’ve decided it makes sense for your financial situation to pay off your mortgage early, here’s how you can do it:

Lump sum. The easiest way to pay off your mortgage early is by making one lump-sum payment to your mortgage lender. Contact your lender prior to making the payment so you can make sure you’re paying exactly what you owe, including any possible prepayment fees.

Extra payments. You could potentially pay more toward your mortgage principal each month if you got a raise at work or you’ve trimmed some fat in your budget.

If you make extra payments toward your mortgage, it could lead to paying off the loan faster than if you were just to make the set payment each month. Make sure to contact your lender prior to making extra payments, though, so you know the extra amount is being applied toward the principal amount only, not the principal and interest.

Refinancing. Another option for paying off your mortgage early is refinancing. Refinancing your mortgage means replacing your current mortgage with a new one, ideally with a better rate and/or term.

If you shorten your loan term from 30 years to 15 years, for example, it may increase your monthly payments but in turn allow you to pay your mortgage off faster. Home loans with shorter terms often come with lower interest rates, too, so more of your monthly payments will be applied to the loan’s principal balance.

The Takeaway

Should you pay off your mortgage early? Maybe. If your retirement account is fully-funded, you have no other high-interest debts, and you’re interested in becoming 100% debt-free, it may make sense to pay off your mortgage early. However, if you do not have fully funded retirement and emergency savings accounts or you could make more money by investing rather than paying off your mortgage debt, it could be best to hold off on paying your mortgage off early.

One way to save on interest and possibly pay off your mortgage early is by refinancing. Refinancing can allow you to lower your interest rate and shorten your loan term, if desired.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

Is it ever worth paying off your mortgage early?

It can definitely be worth paying off your mortgage early in some circumstances. If you have enough money in your emergency fund and your retirement savings, and you can’t make more money investing elsewhere, it may make sense to pay your mortgage off early. And if you’re in good shape financially and averse to debt, it can make sense to pay your mortgage off early for peace of mind.

Is there a tax disadvantage to paying off your mortgage early?

If you pay off your mortgage, you will no longer be able to take a deduction on your mortgage interest. It is possible that this could mean you can’t itemize, which might increase the amount you have to pay in taxes.

What happens after you pay off your mortgage?

Once you’ve paid off your mortgage, you fully own your home and don’t have to make payments on it every month. You will, however, have to pay property taxes and homeowners insurance.

Do extra payments automatically go to principal?

No, when you pay extra money on your mortgage, it does not necessarily go to principal. Not all lenders accept principal-only payments, but you can check with yours to see if they do and find out what the process is. After you start making the payments, it’s a good idea to check and make sure they are being applied properly.

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

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