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When you bought your home, you probably got a mortgage to pay for it. That loan is your first mortgage; any other loans you take out against your home while you’re still paying off your first mortgage are second mortgages. Is a HELOC a second mortgage? What about a home equity loan? Yes, and yes. A home equity line of credit (HELOC) and a home equity loan both take a backseat to your primary mortgage. Read on to learn more about how second mortgages and home equity loans work.

What Is a Second Mortgage?

A second mortgage is a loan that’s secured by a home on which you already have an existing mortgage. Second mortgages are also referred to as junior liens or subordinate liens. A lien is a legal claim a creditor can make against a property to satisfy a debt.

Why do you need to distinguish a second mortgage from a first mortgage loan? The difference matters because of what happens to mortgage debt if a borrower ends up in foreclosure.

Say that a homeowner loses their job or can’t work because of a serious illness. They fall behind on payments to their primary mortgage, as well as on their home equity loan. If the home is eventually sold through foreclosure, any proceeds would go to the primary mortgage lender first. Anything left over would go to cover the second mortgage.

What Is a Home Equity Loan?

A home equity loan is a loan that’s secured by your home. In other words, your home is the collateral for the loan. Home equity loans are a way to tap into your home equity without selling the property. Equity is the difference between what you owe to your primary mortgage balance and your home’s fair market value.

Here’s how to calculate home equity:

•   Find your current mortgage balance (check your most recent statement).

•   Estimate your home’s fair market value using a free online valuation tool such as Zillow or Redfin.

•   Subtract your mortgage balance from your home’s value.

A home equity loan gives you a lump sum of money that you can use for virtually anything. Some of the most popular ways to use home equity include debt consolidation, home repairs and improvements, medical bills, and other large expenses.

Types of Second Mortgages

There are two primary types of second mortgages: home equity loans and home equity lines of credit (HELOCs). There is no difference between them in terms of how they rank as second mortgages, and most people who have a second mortgage have one or the other.

There are, however, a few other differences between a home equity loan and a HELOC.

•   A home equity loan lets you borrow a lump sum, which you pay back with interest, typically at a fixed rate. You begin paying back the loan as soon as you receive the funds.

•   A HELOC is a revolving line of credit that you can draw against as needed, only paying interest on the amount of your credit line you use. HELOCs often have variable interest rates, rather than fixed rates. You can borrow against the credit line for a period of time — say, 10 or 15 years — and in most cases you are only required to pay back the principal after that initial “draw” period.

Another type of second mortgage is a piggyback mortgage. When you “piggyback” loans, you take out a primary mortgage and a second mortgage (either a home equity loan or a HELOC) at the same time. Lenders may allow borrowers to piggyback mortgages to buy a home without having to pay private mortgage insurance (PMI).5 (SoFi offers first mortgages, home equity loans, and HELOCs, but it does not offer piggyback mortgages.)

Second Mortgage Example

Here’s an example of how a second mortgage — in the form of a home equity loan — works. Let’s say that you have a primary mortgage that you owe $320,000 on. Your monthly payments are $2,100, and you have 20 years left in your loan term.

You want to get a home equity loan to replace your roof and make some other improvements. You’re approved for a $50,000 home equity loan at 8.00%, with a 30-year repayment term. You’ll now have two mortgage payments to make:

•   $2,100 to your first mortgage

•   $367 to your home equity loan

Your home equity loan repayment term and interest rate determine your total cost to borrow. Choosing a shorter term can save money on interest but increase monthly payments, while a longer term can mean more interest paid but a lower monthly payment.

Difference Between a Second Mortgage and a Home Equity Loan

There’s no real difference between a second mortgage vs. a HELOC, or a home equity loan. Home equity loans and HELOCs create debt obligations, both of which are subordinate to any primary mortgage loan you owe. The only difference lies in how they’re structured.

If you’re pondering a second mortgage, consider whether you can afford the additional payments required and what type of loan to get. You might lean toward a home equity loan if you’d like to get a lump sum and you want the predictability of a fixed interest rate. HELOCs may offer lower rates and greater flexibility, but you run the risk of ending up with a higher payment if the rate increases.

Also, think about your purpose. If you need money to pay for a large expense like a wedding, for example, you might choose a personal loan or line of credit instead so that you don’t have to create second mortgage debt. If something were to happen and you fall behind on payments, your house wouldn’t be at risk for a personal loan.

Pros and Cons of Home Equity Loans

Home equity loans and HELOCs have advantages and disadvantages. Looking at both sides can help you decide whether to use your home as collateral for an equity loan.

Home Equity Loans Tips

Home equity loans can help you achieve your financial goals if you’re taking the right approach to use them. Here are a few tips for making the most of your home equity loan or HELOC.

•   Only borrow what you need. You might apply for a home equity loan and get approved for a substantial sum, but remember that you’ll have to pay that amount back with interest. Only borrow what you need to keep your loan payments and total costs as low as possible.

•   Compare lenders. Shop around to check out what different lenders have to offer for home equity loans. Look at the interest rates, repayment terms, fees, and loan amounts available to find the lender that aligns with your needs.

•   Get preapproved. Home equity loan or HELOC preapproval can give you an idea of what terms you’re likely to qualify for. Getting preapproved means a lender performs an initial assessment of your credit and finances; you’ll still need to follow up with a full loan application.

The Takeaway

Home equity loans and HELOCs can put cash in your hands, though they don’t work the same way. Before getting either type of second mortgage, consider the potential risks if you’re unable to keep up with the loan payments, and take time to research lenders.

SoFi now offers home equity loans. We also partner with Spring EQ to offer flexible HELOCs. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt.

FAQ

Is a home equity loan considered a second mortgage?

A home equity loan is a type of second mortgage because it is a loan that is secured by your home. Second mortgage loans are subordinate to primary mortgage loans if your home falls into foreclosure, meaning the lender on the primary mortgage gets repaid first if the home is sold.

How is a HELOC different than a second mortgage?

A HELOC is one type of second mortgage, but it comes in the form of a line of credit. You can borrow against your home equity line of credit as needed, and you only pay interest on the amount of your credit line you use.

How are the interest rates different for a home equity loan vs. a second mortgage?

Home equity loans tend to have fixed interest rates, which means the rate doesn’t change over time. Home equity lines of credit, another type of second mortgage, can have variable rates that go up or down following changes in an underlying benchmark rate. As a rule, second mortgage loan rates tend to be higher than primary mortgage loan rates.

Is a home equity loan better than a second mortgage?

A home equity loan is a type of second mortgage, so there’s no question of whether it’s better or worse. Getting a second mortgage, whether it’s a home equity loan or HELOC, could give you access to cash, but it also means pledging your home as collateral and adding a second payment to your monthly budget.

Can I qualify for both a second mortgage and a home equity loan at the same time?

A home equity loan is a type of second mortgage, so you really wouldn’t be applying for two separate things at the same time.

Photo credit: iStock/Rawpixel

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.

SOHL-Q225-039

That’s a good question. And the short answer, for now, is that a 2024 legal settlement created sweeping change to the real estate industry, putting the protocol for paying agents in flux. Planning to buy or sell a home in the near future? You’ll want to read up so you don’t overpay.

How Do Real Estate Agents Get Paid?

For agents — on the seller’s or buyer’s side — it’s long been business as usual to receive compensation via commission, as opposed to a set fee. Sellers typically paid commissions of 5% to 6% of a house’s price after what is known as the “closing” of a home they sold, and that money was split between the seller’s and buyer’s agents, plus other pros involved in the transaction. The higher the sales price, the more agents got paid.

But in 2024, the National Association of Realtors® (NAR), a trade association, and a number of real estate brokerages, settled a group of lawsuits. The settlements totaled nearly $2 billion. NAR paid $418 million in damages. The payout resulted from a legal filing contending that the real estate commission structure violated antitrust laws. NAR agents, it claimed, were receiving inflated commissions.

The lawsuits brought changes to the way homebuyers and sellers work with real estate agents on home purchases — and the way those agents are compensated.

Agents and Buyers or Sellers

In the lawsuit, homesellers from Missouri alleged that commission rates had been shared secretly and inappropriately among those who stood to profit. The sellers stated that the exchange of information had resulted in a lack of transparency about who homesellers were responsible for paying, and how much. They also said that this led to agents’ fees being inflated.

The lawsuits sparked NAR to revise protocols for the way homebuyers and -sellers work with real estate agents when a home goes up for sale. NAR Realtors® handle a huge percentage of U.S. home sales, so the reboot may significantly impact their transactions, and agent commissions, going forward. The changes could even save buyers and sellers money — but the details are still shaking out.

How will a Realtor you hire get paid in this new world? If you plan to buy or sell a home, it’s important to ask them, and to understand the details of compensation before entering into an agreement. Most likely, sellers will continue to pay their agents a commission for selling their house. Buyers who want to work with a buyer’s agent may have to pay for that expert’s assistance themselves, but only if the agent won’t receive any other commission.

Let’s take a closer look at how the changes affect costs for both homebuyers and sellers, beginning with examples of Realtors getting paid.

Real Estate Commission: Before the Settlement

We’ll start with how it used to work. Say a home sold for $500,000, with the commission being the formerly typical 6%:

Total commission fee: $500,000 X 6% = $30,000

The commission was generally split evenly between the two sides:

•   Listing agent side = $15,000

•   Buyer’s agent side = $15,000

Real estate agents also shared commissions with brokers who represented them. (A broker is an agent who has an additional license to supervise other agents.) The broker’s fee might have been 1% of the sales price, or $5,000, subtracted from the total to leave the seller’s agent with a commission of $10,000.

•   Listing agent = $10,000 (2% of sales price)

•   Listing agent broker = $5,000 (1% of sales price)

•   Buyer agent = $10,000 (2% of sales price)

•   Buyer agent broker = $5,000 (1% of sales price)

Real Estate Commission: A Changing Approach

For a long time, agent commissions were more or less built into a home’s asking price. The seller’s agent would offer a percentage of the total commission amount to the buyer’s agent, normally mentioning it in the home listing’s fine print on the multiple listing systems (MLS). After closing, the seller’s agent would disperse the fee. That changed a little in 2024, when the court prohibited sellers’ agents from stating the buyers’ agent’s percentage share on the MLS.

The MLS comprises databases of homes for sale that only Realtors, agents, brokers, and other real estate industry people can access — and that is what caused concerns about transparency.

Now, conversations about commissions must take place outside the MLS. Sellers may offer to pay commissions to buyer’s agents, but an agent for the homebuyer may also request a percentage of the home price or a flat fee from their own client. A buyer using an agent is required to have a representation agreement with the agent, defining compensation, before touring homes.

Listing agreements now must specify the amount the seller will pay to the listing agent, as well as what the seller will pay to a buyer’s agent. With these revisions, sellers have some newfound control. They can offer equal commissions to both sides, or different amounts. A seller may decide not to offer a buyer’s agent a commission, leaving the buyer responsible for paying for their services.

An Agent’s Responsibilities

To earn a commission, real estate agents often take on a lot of tasks and responsibilities. Their duties include:

•   Providing market data and helping to set a listing price

•   Placing ads and putting up yard signs

•   Photographing the property

•   Listing the property in the MLS listings database

•   Scheduling showings

•   Placing lock boxes

•   Guiding first-time homebuyers

•   Smoothing over difficult relationships

•   Navigating offers and counter offers

•   Negotiating home contracts

Recommended: How to Find a Real Estate Agent

The State of Agent Commissions

Making a living through commissions can be challenging for real estate agents. But it can also be unmistakably rewarding.

With the changes, average rates of commission among Realtors and agents decreased somewhat, dropping from 5.64 percent to 4.96 percent in early 2025. This might mean a decrease in commission of a few thousand dollars for a median-priced home, according to a RISMedia survey of 1,300 agents.

Sellers’ agents may continue to receive their commissions, negotiated with the seller, who pays the real estate agent commission fee out of the payment they receive when the home sale closes. Since buyers’ agents are no longer entitled to payment from this money, homebuyers may need to negotiate with and pay their agents. This could in some cases make buying a home even more costly.

How Does It All Affect the Bottom Line?

If the sales price of a home is $500,000 and the sellers owe $250,000 on their mortgage, then the commission and other fees would be subtracted from the $250,000 that remains after the sellers pay off their mortgage.

To keep it simple, let’s say the total commission negotiated is 5%:

Total commission fee: $500,000 X 5% = $25,000

•   Listing agent side = $25,000

•   Buyer’s agent side = $?

Buyer’s agent commissions are simply in flux — both how much they should be and where they will come from. This agent’s commission might need to come out of the buyer’s pocket — although word on the street is that some brokers on the seller side have found workarounds.

Can a buyer come out ahead in this changed compensation structure? Maybe. A buyer’s extra costs could be compensated by lower listing prices on homes for sale. But that remains to be seen.

Can You Negotiate Who Pays the Real Estate Agent?

Yes. Realtor fees on both sides are negotiable. These ideas may help you reduce your fee if you are selling your home:

•   Barter. Do you have a photographer friend who can take photos of your home? Offer up skills in exchange for a lower commission.

•   Hire a newer agent. A newer agent may accept a lower commission to gain experience.

•   Pay attention to market conditions. If homes aren’t moving in your market, you may be able to negotiate a lower commission.

Take time to interview potential Realtors using these suggested questions. Be sure the commission stated in the listing agreement matches what you’ve agreed on before you sign.

How Should a Buyer Agent’s Commission Be Set?

If you are in the market for a new home, you may still decide to seek a buyer’s agent to guide you through the process and represent you in closing. Their efforts may be well worth their fee.

Look for an agent with a strong network — they may hear about quiet “whisper listings” before anyone else. Once you’ve chosen someone, be sure to discuss a fee structure and payment process with them before you sign on.

Whether these real estate agents will charge for their time by the hour or bill customers a flat rate — or if some will keep working on commission that is perhaps paid by the buyer — is a developing story under the new rules. But they are quite likely to want to be paid.

In lieu of a commission, buyers’ real estate agents might charge fees for showing homes, shepherding clients through making offers, signing contracts, negotiating inspections, and more. For buyers, this would add to a home’s cost.

Of course, if agent commission fees have all along been a component of a property’s price, then buyers were already paying them. But in that scenario, buyers could cover those baked-in costs with their home mortgage loan. New fees paid by a buyer to the agent would come from the buyer’s pocket.

This switcheroo may lead some homebuyers to think about shopping for a home without an agent’s help. If you go this route, be aware that you’ll need to spend significant time researching potential properties, scheduling viewings, and self-advocating, especially if you are attempting to buy in a seller’s market.

When Do Sellers’ Agents Receive Their Commission?

Sellers’ agents usually receive their commission after the home mortgage loan has been funded and the sale closes. Their brokerage receives a wire with the funds, and the agent’s portion of the commission is released to them shortly thereafter.

What Is Dual Agency?

Dual agency is when a real estate agent represents both the seller and the buyer in a transaction. It must be disclosed to both parties because real estate agents are bound by a fiduciary duty to serve their clients. An agent who represents both seller and buyer will earn more commission.

Buyers faced with having to pay a buyer’s agent out of pocket might choose to look at properties on their own. When they find a home they would like to buy, they may decide to make an offer directly with the listing agent. In this scenario, the listing agent becomes a dual agent. They may accept a lower fee, since they are also getting a commission paid by the seller. It might appear to everyone to streamline the process. It also creates a possible conflict of interest.

Many experts discourage buyers and sellers from entering a dual-agency sale with an agent. It’s also worth noting that the practice is illegal in several states.

Is Paying a Real Estate Commission Worth It for the Seller?

Hiring an agent is not required. And for many sellers, it’s painful to look at the closing documents and see how much of the sales price goes to different agents, title insurance companies, concessions, and so forth. But a lot of sellers find it worthwhile having someone to guide them through the complexities of real estate law, and sensitive issues that the sale of a home creates.

Recommended: How to Buy a House Without a Realtor

Alternatives to a Percentage-Based Commission

There are real estate brokerages that advertise services for a flat fee. Usually, the flat fee is very low and may only include a listing on the MLS with photos. They usually don’t offer to schedule showings or manage the listing in any other way.

The Takeaway

Working with a real estate agent when you’re a buyer requires asking a lot of questions and understanding the terms of compensation before you sign on for representation. You might be tempted to go it alone, and it can be done. But having an agent on your side to help you negotiate can give you peace of mind and, in many cases, help you land a better deal.

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 sellers pay Realtor fees?

Yes, sellers pay Realtor fees to the seller’s agent.

How long have the new rules been in place?

The post-settlement NAR rule change became official in August 2024. While aspects of it were immediately implemented, it also left some room for interpretation. New agent practices are slowly rolling out.

How much does a new Realtor make in Illinois?

According to ZipRecruiter.com, the average pay for a real estate agent in Illinois is $83,135. Salaries can range from as low as $58,100 up to $124,519 per year.

Photo credit: iStock/RyanJLane

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.

SOHL-Q225-018

Buying a home is a major life moment. It’s exciting, but also potentially stressful and confusing. Luckily, there are real estate agents to guide you through the process.

Finding a real estate agent who is well connected, hard working, and trustworthy can save consumers time and offer some much-needed peace of mind.

Benefits of Hiring a Good Real Estate Agent

A skilled real estate agent can help a buyer locate their dream home, navigate negotiations, and wrap up all that tedious paperwork. An agent with a strong professional network and familiarity with the housing inventory where you’re hoping to buy may even get early word of so-called “whisper listings” — properties that are about to come on the market.

First-time homebuyers may find an agent’s guidance to be especially helpful. But even seasoned buyers can benefit from expert advice. (If you do feel confident you have the skills to go it alone, buying a house without a real estate agent is possible.)

But you also should know that a 2024 legal settlement created sweeping change to the real estate industry, and the protocol for agents getting paid is still in flux. Revisions by the National Association of Realtors® to the way homebuyers and sellers work with agents on home purchases — and the way those agents are compensated — affect homebuyers and -sellers as well.

If you plan to buy (or sell) a home, it’s important to ask any agent you’re considering hiring how they will be compensated for their work, and to understand the details of an agent’s commission before entering into an agreement.

How to Find a Good Real Estate Agent

In many housing markets, a dizzying number of professionals are standing by to help with your home purchase. Take these steps to choose smartly.

Learn the Terms

Before launching a search for the perfect real estate agent, it can be helpful to brush up on the job titles you may encounter.

Most commonly, consumers will come across real estate agents, Realtors®, and brokers, all of whom can act as agents, but who can have varying levels of experience, education, and certifications.

•   Real estate agent: Holds a license to practice real estate.

•   Realtor®: To have this designation, an agent must be a member of the National Association of Realtors®, which is a trade association.

•   Broker: A real estate agent must complete a certain amount of working hours, have additional education, and may have demonstrated leadership abilities among other agents in order to qualify as a broker.

Keep It Personal

A little networking can go a long way when looking for a good real estate agent.

Asking trusted friends, family members, or neighbors which real estate agent they worked with is a great place to start. Additional avenues that can lead to finding a good real estate agent may include:

•   Checking out local magazines and area “best of” lists featuring real estate agents.

•   Reviewing local real estate association websites.

•   Considering agents who are listed often on for-sale signs in the area.

How to Choose a Real Estate Agent

Once you’ve made a list of possible agents, you’ll want to do your homework.

Leave No Stone Unturned

Just as “location, location, location” is an important factor in buying property, research, research, and more research will help in the search to find a good real estate agent. This is also the time to think seriously about your finances and to start the process of lining up a home mortgage loan, as your real estate agent will ask about your price range.

Recommended: How to Get a Mortgage in 2025

Looking up reviews on websites like Zillow (click on “Find an Agent”) or Realtor.com (“Find Realtors”) can be a good place to find a good real estate agent.

When reading reviews or considering references, it can be helpful to seek answers to the following questions:

•   Does the agent have good communication skills?

•   Is the agent easy to touch base with, and do they have ample availability?

•   Did they show interest in the process even after a deal was under contract?

•   Are they known to regularly have disagreements with other agents?

If you find a real estate agent online or as a result of the agent’s marketing efforts, ask for references before making a decision.

Following a Hiring Process

Narrow the field to a handful of possible agents, then interview them before making a decision.

This process can feel similar to hiring an employee. The interview can give you an idea of what it will be like to work with an agent. Here are some sample questions to ask when interviewing agents:

•   How long have you worked as a real estate agent? Experience is key, especially for first-time buyers or sellers who need extra guidance in a hot market.

•   How many clients do you usually have at once? Their answer will help determine how much time they have to devote to each client and how accessible they will be.

•   Do you work with a team? For busier agents, having team members who can provide assistance can be helpful.

•   What areas do you cover? Finding an agent who is familiar with the area you’re looking in can give you a leg up in your search.

•   How do you prefer to communicate? Make sure your communication styles mesh well together, whether that be over text, phone, or email.

(Selling a home? The interview questions are different. You’d want to ask how the agent would market the home, what fees might be included, and how they would price the home based on recent sales in the area.)

Recommended: 15 Questions to Ask When Interviewing Realtors

When It’s Time to Buy

Some real estate agents may request that homebuyers sign a contract known as an agency agreement. Before making any real estate working relationship official, take a close look at the contract to ensure there are no unpleasant surprises down the road.

The agreement may obligate you to only work with the agent for a set period of time. These contracts are not always required, but they provide the real estate agent with more assurance that they will be paid for their services.

Those selling a home also sign a contract, known as a listing agent contract, with the real estate agent who is listing their home. Typically, these agreements include the commission (usually as a percentage of the sale price), listing duration, cancellation clause, responsibilities, disputes, ownership, expiration date, and details regarding dual-agency restrictions in the states where it is allowed.

Good Real Estate Agents’ Tips

You think you’ve found a qualified real estate agent to assist you in buying a house. What now? A good agent will accompany you on home tours, advise you when you are ready to make an offer, and recommend other professionals to assist you in the process, such as a home inspector.

The home-buying process can be complicated and a good real estate agent should hold your hand every step of the way. Your agent will submit your offer on your behalf and provide you with a list of the documents you need to buy a house, including mortgage documents, that you will need for the closing.

The Takeaway

Finding a good real estate agent can be key to closing the best deal as a buyer. A thorough research and interview process can help you land an agent you feel, well, at home with — and who will work hard for you.

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.

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FAQ

What do buyers want most from real estate agents?

Buyers most want an agent who will help them find the right home, so a well-connected agent familiar with the community and its housing inventory is a top priority.

What is an offer to purchase a home called?

An offer to purchase contract, also called a real estate purchase agreement, contains the address and description of the property, as well as the purchase price, down payment information, other deal terms, and an expiration date. It helps ensure that the buyer and seller are in agreement about the deal.

How do I get the best out of my real estate agent?

Knowing what you are looking for in a home, knowing your budget, and communicating openly about what you like and dislike can help ensure best results. Keep in mind that your real estate agent works on commission: Be organized, only visit properties you are truly interested in, and come to appointments on time.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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.

SOHL-Q225-022

Laundry rooms are important, but they’re often not the prettiest of rooms. They also tend to be sandwiched into small spaces or hidden in inconvenient areas of the home. No wonder some homeowners consider remodeling them.

But whether you should undertake a laundry room remodel depends on the size of the space, the kinds of new appliances you want to install, and any special décor touches you’d like to add, among other factors.

A remodel might be worth it if it creates a perky and efficient space or a room that has multiple functions.

Before Starting Your Laundry Room Remodel

If you’ve been thinking about giving your laundry room a clean start, you’ve probably got a lot of ideas and inspiration swimming in your head.

Before embarking on your project, think through what you’re hoping to accomplish by asking yourself the following questions.

What’s the Scope of the Project?

Some upgrades involve small improvements like new paint and cabinetry, while others call for tearing through walls, moving plumbing, or even relocating your laundry room to another area of the home.

Appliances should also be considered. Will you need a new washer and dryer, or do you plan on using the ones you currently have?

What Do You Plan to Use Your Laundry Room For?

While most laundry rooms are used solely for handling laundry, others also act as mudrooms and storage for cleaning supplies, sports gear, and bulk shopping items like bottled water, paper products, and pet food.

What your laundry room is used for will affect the laundry room remodel ideas available to you.

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

How Often and When Do You Do Laundry?

If you have a large family and do washing and drying frequently, that will influence the design of your new laundry room. You may need ample counter space for folding, a fold-down ironing board, or bins to hold each person’s clean clothing.

If you tend to do the laundry during the day, you might want to consider adding a window for some natural light. And if you’re more likely to wash clothes in the evening, under-cabinet lighting may help.

What Are Your Must-Haves?

Some homeowners might want bins and baskets to keep things tidy. Others may be looking to add features like a sink or build out their laundry room to accommodate more counter space.

Whatever your desire, it’s a good idea to list the elements that you can’t live without so you can build them into your budget.


💡 Quick Tip: Don’t overpay for your mortgage. Get a great rate by shopping around for a home loan.

How Much Can You Spend?

The scope of your project will dictate your budget and how you plan to pay for your remodel.

Some homeowners could see a laundry room remodel as a way to increase their home’s value and opt to borrow to pay for the project. Others might choose to keep things scaled down so they don’t spend beyond what they have on hand. A home improvement cost calculator can help you figure out how much your project might run you.

Laundry Room Remodel Ideas

Now that you’ve got the foundation of your project mapped out, it’s time to envision how your laundry room remodel will take shape. That will depend on the following factors.

If You Have Limited Space

Small laundry rooms can still pack a punch, thanks to creative ways to maximize your available space. You can do that by tucking laundry baskets under counters, adding a rod under cabinets to hang clothes, and using wall space for hooks to hang laundry bags or baskets that can hold clothespins, detergent, and dryer sheets.

Don’t forget that laundry rooms don’t need to be actual rooms; if you’re short on space, consider tucking your washer and dryer into an unused closet and installing a farmhouse door for easy access.

Depending on its size, you can then use the prior laundry room as a guest room, home office, nursery, or kids’ playroom.

Recommended: What Are the Most Common Home Repair Costs?

If You’ll Be Using the Room for More Than Cleaning Clothes

The list of ways to use a laundry room is endless, and will largely depend on each household’s needs.

•   Got a large dog? You might consider installing a pet-washing station, especially if you are already planning on undertaking plumbing work.

•   Need a quiet place to conduct conference calls at home? A fold-down workstation meets both communication and laundry needs.

•   Larger families may tuck an additional fridge in the laundry room.

•   People who love to entertain may find storage for plates and glassware in the laundry room.

Your Budget

A laundry room remodel can quickly add up if new plumbing, cabinetry, and construction work are involved.

If you find yourself running beyond what you’re willing to spend, think of creative ways to get the laundry room you want without breaking the bank.

That might entail painting cabinets instead of replacing them, using open shelving instead of custom built-ins, and opting for durable paint in place of tiled backsplashes.


💡 Quick Tip: A home equity line of credit brokered by SoFi gives you the flexibility to spend what you need when you need it — you only pay interest on the amount that you spend. And the interest rate is lower than most credit cards.

DIY vs Calling In an Expert

Many homeowners are comfortable with do-it-yourself projects. In a laundry room remodel, these might include painting, replacing cabinetry, and installing shelving and hanging rods.

Other projects — moving water lines, installing new sinks or drywall, and demolition — require hiring a contractor. Mapping out which projects you will need to outsource will affect your budget and may also affect the scope of your project.

Paying for It

Smaller laundry room remodels, like those that require just a new coat of paint or a retrofitting of shelving to maximize storage space, can be done with fairly little outlay, especially if you do it yourself or have a friend or family member lend a hand.

Larger ones, or those that call for extensive demolition, architectural work, or the services of a general contractor, will be more expensive, of course.

The size of the project — and therefore how much money you’ll need—matters, as does your timeline for paying back any loan.
Here are some options:

•   Cash may be a viable choice, especially for smaller projects.

•   A home equity loan allows you to draw on the equity in your house to get a lump sum upfront, which can finance larger or multiple projects.

•   A home equity loan of credit (HELOC) also leverages your house equity but gives you a revolving line of credit you can draw on if and when you need it.

The Takeaway

Laundry room ideas for remodeling range from DIY tweaks to major overhauls. A laundry room remodel may increase the value of your home or simply make life a little easier. Start by listing what you want to achieve and how you’re going to pay for it.

SoFi now offers home equity loans. Access up to 85%, or $350,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.

FAQ

Where do I start renovating my laundry room?

Begin with the big picture of your project and its purpose. Consider what you need from your laundry room. Do you want it to maximize efficiency as you wash, dry, and fold? Do you want it to double as storage space for bulk items or out-of-season coats? Do you want it to provide space where you can work on craft projects? Once you work out your needs and priorities, you can focus on the features you’ll need to make the space work for you.

How long does it take to remodel a laundry room?

The length of time remodeling your laundry room requires depends upon how extensive your remodel is, whether you need professional help or can do it yourself, and whether permits are required for the work you want, among other factors. If you’re repainting or adding a few shelves, you may be able to do it in a weekend. If you’re hiring contractors for work that involves your plumbing or electrical systems or requires them to move walls, it could take as much as four to six weeks.

How much does it cost to move a laundry room?

The price tag for moving your laundry room can vary a lot, depending on where you live and how well set up the new location is for plumbing and electricity — and, of course, what you want to have in your laundry room. The cost can run from $500 to $5,000 or more.

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Thinking about installing a new deck, replacing a front door, or even adding an extra bedroom to your home to help increase its resale value? Considering that your home is one of the biggest investments you’re likely to ever make, it makes sense that you’d be interested in increasing its value with some upgrades.

But as you probably guessed, not all remodeling projects provide the same return on investment (ROI).

Using Remodeling Magazine’s Cost vs. Value 2024 report, which compares the average cost of 23 remodeling projects in 150 housing markets, let’s look at some of the most popular home improvements based on estimated ROI, time commitment, and cost.

Things to Consider Before Starting a Home Improvement Project

It’s important to note that national averages only tell part of the story. Labor and supply costs, styles, and consumer preferences can vary by location. So before you dive into a project, you might want to consider hiring a contractor, real estate agent, or appraiser to come to your house and give an opinion on which upgrades might provide the most value based on where you live.

You may also want to factor in any immediate needs that a remodeling project can help satisfy. Let’s say, for instance, you’d like to add an extra bathroom. While you may only recoup part of your expenses, having an additional washroom may be worth the cost of a renovation.

Top Home Improvement Projects to Help Increase Your Home Value

Looking to prioritize your wish list? These remodeling projects earned top spots on the Cost vs. Value report.

Garage Door Replacement

Average Cost: $4,513

Resale Value: $8,751

Costs Recouped: 193.9%

General Time Commitment: A few days

Removing an old garage door and replacing it with an attractive, sturdy new one could return every dollar of your initial investment — and then some, according to the Cost vs. Value report. It’s an effective way to improve your home’s appearance from the outside while increasing your home’s functionality for years to come.

With an average cost of $4,513, which includes the door and the cost of labor, it’s also a relatively affordable renovation. While most homeowners would likely hire someone to help install the new garage door, it is something that you could potentially do on your own (with the help of a friend) over the course of a weekend.

If you hire someone to install the door for you, they will likely come to your home twice: first, to take measurements and give you a quote, and then again to install the door.

Entry Door Replacement (steel)

Average Cost: $2,355

Resale Value: $4,430

Cost Recouped: 188.1%

General Time Commitment: One week

A new, safe front door is an attractive quality to prospective homebuyers. Replacing your entry door and jambs with a steel door, “including clear dual-pane half-glass panel, jambs, and aluminum threshold with composite stop,” should get you a good bang for your buck, according to the Cost vs. Value report.

Even better, you and a friend can probably handle installation on your own, though you can certainly hire an installation expert. If you decide to go the pro route, they’ll likely need to come to your home to take initial measurements and then return for the installation. Another option is to measure and order the door yourself and just get help with the installation.

Recommended: 32 Inexpensive Ways to Refresh Your Home

Manufactured Stone Veneer

Average Cost: $11,287

Resale Value: $17,291

Cost Recouped: 153.2%

General Time Commitment: One month

Removing the vinyl siding and adding a stone veneer to the bottom third of your home’s street-facing façade is an effective way to help increase the value of your home, returning 102.3% of the cost of renovation. First impressions matter when it comes to selling a home, and stone veneer is a popular look right now.

Whether you tackle this project yourself or hire a handyperson to help with the installation, this project will take several days to complete. If you choose to hire someone, understand that the construction days might not be successive, so the exterior of your home could be under construction for several weeks to a month or longer.

Minor Kitchen Remodel (Midrange)

Average Cost: $27,492

Resale Value: $26,406

Cost Recouped: 96.1%

General Time Commitment: Four to eight months

When it comes to kitchen remodels, less may be more, at least when it comes to ROI. According to the Cost vs. Value report, major kitchen remodels recoup anywhere from 38% to 49.5% of costs. Meanwhile, a smaller upgrade recoups 96.1% of costs.

What does a minor remodel include? Think faster-turnaround jobs like installing a new sink and faucet or replacing items like cabinet fronts, cooktop, oven range, refrigerator with new models, countertops, or floors.

When creating your budget, you’ll probably want to factor in the cost of expert help, such as an electrician, plumber, and contractor. You’ll also want to be realistic about how long you can devote to the project — and be without a working kitchen. Expect several months at minimum for a remodel.

Wood Deck Addition

Average Cost: $17,615

Resale Value: $14,596

Cost Recouped: 82.9%

General Time Commitment: Three to six months

Nothing beats enjoying family and friends on a deck in your backyard on a sunny day. Potential buyers are typically rightfully happy to pay extra for a deck, and a wooden deck installation could recoup half of what you spend. And ideally, you’ll get the chance to enjoy the deck before you sell your home.

A deck installation is a pretty large project. It will likely need to pass an inspection and adhere to your city’s building codes, and it could increase your property taxes and home insurance costs. So it pays to get the job done right the first time, which may mean enlisting the help of a designer or architect. These pros can map out an initial plan, and a contractor can handle the building.

An online home renovation cost calculator can help provide you with a rough idea of how much a wooden deck — and any other home upgrade project — could cost.

HVAC Conversion/Electrification

Average Cost: $18,800

Resale Value: $12,422

Costs Recouped: 66.1%

General Time Commitment: Anywhere from 1-2 days up to several days, depending on whether your home requires structural changes

Replacing a fossil fuel-burning HVAC system with one that runs on electricity isn’t cheap. Nor is it one to try to DIY. But according to the Cost vs. Value report, you could stand to get back roughly two-thirds of what you put in. Homeowners who decide to make the conversion may also notice a savings in their heating and cooling bills. And there are environmental benefits to consider as well.

Unless you’re a licensed HVAC technician, this is a project best suited for the professionals. Consider speaking with a few different HVAC installation teams to compare potential systems and cost options.

Remodeling Projects With the Lowest Potential ROI

While these upgrades may not deliver the biggest returns, they could still be worth exploring if they fit your budget and lifestyle needs.

Primary Bedroom or Bathroom Addition

Average Cost: $164,649 for midrange; $339,513 for upscale

Resale Value: $58,484 for midrange; $81,042 for upscale

Cost Recouped: 35.5% for midrange; 23.9% for upscale

General Time Commitment: Four to eight months

Adding on a primary bedroom or bathroom may enhance your living experience, but it might not add much to your bottom line. Despite the project’s hefty financial and time commitment, it generally fails to deliver even one-third of the investment.

However, while not a great return, a home addition project of this size could change to the value of your home. For example, a $300,000 home that adds a primary suite for $164,649 could potentially return about $58,000 on the investment. A home that sells for $358,000 instead of $300,000 is a 19.3% increase in the home’s value. If you were to get enough use from the addition to justify the other cost you can’t recoup, it could still be a fine investment.

Again, these figures are purely hypothetical, and the value of expanding your home can depend on a multitude of factors. And if you decide to move ahead with a primary bedroom or bathroom addition, you’ll want to think through how you’ll finance the project. Some options include applying for a home improvement loan, using home equity, dipping into your savings, or using credit cards.

Recommended: Homebuyer’s Guide

Bathroom Addition

Average Cost: $58,586 for midrange; $107,477 for upscale

Resale Value: $20,334 for midrange; $34,997 for upscale

Cost Recouped: 34.7% for midrange; 32.6% for upscale

General Time Commitment: Four to eight months

A bathroom remodel tends to be cheaper than a primary bathroom addition, and it generally sees a slightly better potential ROI. But again, a bathroom addition or any large remodeling project should be considered in terms of both ROI and what you want to get out of your home while you are living in it. And that’s a calculation that only you and your family can make.

The Takeaway

Home renovation shows make upgrades look quick and easy. And while sometimes they can be, in many cases, renovations can be costly and time-consuming. As you consider which ones to make, you will likely want to factor in your return on investment (ROI).

Not all remodeling projects provide the same level of ROI. Projects such as replacing a garage door or adding a stone veneer to your home’s façade tend to see better ROI than adding an extra primary bedroom or bathroom. But ROI is only one consideration. You should also need to consider what you want to get out of your home and whether the time and cost of taking on a big project are worth it.

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

FAQ

What home improvements offer the most value?

According to the Remodeling Magazine’s Cost vs. Value 2024 report, the top three home improvement projects that have the best ROI are: replacing the garage door (193.9% of costs recouped), replacing the entry door with a steel version (188.1% of costs recouped), and adding manufactured stone veneer to the home’s exterior (153.2% of costs recouped).

Which home improvement is least likely to increase the value of your home?

Wallpapering, built-in electronics, wall-to-wall carpeting, and a swimming pool are examples of projects that typically don’t increase the resale value of your home.

Does new flooring increase home value?

New flooring can potentially boost the value of your home, especially if your current flooring is worn or in poor condition. Hardwood flooring often provides significant ROI, though luxury vinyl plank and tile flooring can also add value.

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.

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