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The average cost across the United States to install central air conditioning was $5,882 as of mid-2023. That price can, however, fluctuate based on such factors as where you live, the size of your home, and what kind of unit you choose.

For instance, if you live in a 1,500 square foot home in Vermont, your air conditioning needs and costs will likely be quite different vs. those of someone who lives in a 5,000 square foot house in the desert.

Here, learn more about air conditioning costs, your options, and how to get the best possible price if you do choose to install central cooling.

What Factors Play a Role in Installing Central Air?

Many factors go into the cost to install central air conditioning, including the brand of AC you choose, the unit itself, and the overall size of your home. A central air conditioning unit alone can cost thousands of dollars. For instance, a split unit air conditioning unit will typically run between $1,900 and $4,200 on average; a packaged central air conditioning unit will be somewhat more, typically between $2,300 to $5,500. (More in a minute on the difference between these types of systems.)

If you add in the labor of an air conditioner contractor, the cost to install central air ranges from $3,883 and $7,918 on average. But that number can range depending on where you live, the type of AC system your home needs, and the condition of your existing air ducts.

According to HomeAdvisor , these are the average air conditioning unit costs with installation:

Size	Average Cost
3-ton	$3,400-$5,400
4-ton	$4,200-$6,200
14 SEER	$3,000–$6,000
16 SEER	$3,700–$9,000

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Pre-Installation Evaluation

Some helpful things to think about when evaluating your home for a new air conditioning system include a careful analysis of how big of a system your living quarters need. The price jumps quickly for larger units, so it’s often smart to make sure you’re not overdoing the cooling capacity for your project.

Ease of access for installing the bulky ducting system of a traditional air conditioning setup is important, so if you have a tight basement or attic crawl space, expect to pay more in labor costs than if you had more room to mount all the equipment and pipes easily.

Also, think about where you’d want to locate the duct feeding into the room. You might have to cut through hardwood or tile, for example, to gain an access point for the air to flow. Or there could be a spot in your house that needs a little more airflow and will therefore require multiple ducts into the room.

Though an AC installation typically just takes one day, if extensive cutting into floors or walls or ductwork is required, it could take several. If this might disrupt your quality of living, you’ll likely want to consider staying with family or friends as your central air is installed — or move into a hotel, the cost of which should factor into your overall air conditioning home renovation budget.

Recommended: Personal Loan vs. Credit Card

Types of AC Units

Affordability and preference help determine the type of air conditioning unit that you’ll need, which affects the overall central air cost. A traditional split system — with air conditioning on one side of the unit, heating on the other — is on the lower end of the pricing range vs. packaged units. In addition, more complex models that include heat-pump, hybrid, and geothermal functionality can run substantially higher.

Ductless air conditioning systems have been around for years and are rapidly entering the U.S. market from overseas. They can offer affordable efficiency as they cool living spaces. Ductless units have a central compressor and fan with standalone wall-mounted units that eliminate the need for ducting. Instead, a wall-mounted fan serves each room independently. Coolant and drainage lines are routed through the wall back to the centralized air conditioning assembly, making for a clean finish.


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

Ductwork

When planning central air installation, you should consider what kind of ductwork is best for your home. Ductwork falls into two categories — flexible or rigid — with many different options for materials within each. Flexible and rigid ductwork each has its own pros and cons regarding price, lifespan, efficiency, and flexibility.

The cost of ductwork can vary greatly. The national average cost for ductwork is $1,179, but can range from $454 to $2,056 or significantly higher depending on the job specifics.

The cost to replace old ductwork is higher since it involves both removing the existing materials and installing new ductwork.

Recommended: How Much Is My Home Worth?

AC Installation and Labor

While handy types may be tempted to tackle the central air installation on their own, it might be wise to find a contractor who is well-qualified to ensure that the job is done properly.

City codes departments typically require permits for work like central air installation that can be obtained easily by a state-licensed contractor. Handling refrigerant chemicals like Freon™ also require a license .

Many websites offer contractor and price-compare quotes in your area. Angi and Thumbtack both can be good places to start your research. A referral from someone you know also can be a great way to find a vetted air conditioning contractor.

You might also search online communities and neighborhood forums to find a reliable air conditioning contractor. There’s a good chance that someone locally has had similar issues and might be able to recommend a professional contractor to handle your air conditioning installation job.

Recommended: The Top Home Improvements to Increase Your Home’s Value

The Takeaway

The cost to install central air conditioning is, on average, almost $6,000. While that’s a considerable expense, it can include the labor involved in addition to the price of the unit by itself. And it can give you peace of mind knowing you have a new central air system to keep you cool and likely improve the resale value of your home if you plan to list your house or refinance in the future. For this reason, it may be wise to look into your financing options, such as taking out a personal loan.

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

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

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Photo credit: iStock/Pramote2015

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.

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

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

Third-Party Brand Mentions: No brands, 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.

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The average cost of finishing a basement in 2023 is $22,850, but there is a huge variation in pricing depending on your specific project. Of course, the square footage makes a difference, as does the particular configuration of your basement, as well as whether you are simply finishing the space for storage purposes or adding an extra bedroom and bathroom as living space.

Whatever your goal, you will most likely increase the resale value of your home while adding to your usable space. The following guide will help you understand the considerations, the cost, and how to get the work done.

The Costs of Finishing a Basement

The cost of finishing a basement has a lot of variables, as most home upgrades do. Weighing what you can afford versus what you want is critical here. While it might be nice to have all the bells and whistles of a sky-is-the-limit home renovation, there are many things that will affect the bottom line during a reconstruction event like finishing a basement.

The national average cost of finishing a basement is $22,850, but there’s a wide range (as there is with the cost of home remodeling projects of all kinds). In this case, it can swing from $4,700 to $41,000. Your number could rise based on where you live and whether you plan to add features such as running water, custom cabinets, or countertops.

Ultimately, the final cost to finish a basement depends on how extensive the work is, as well as the square footage in the planned remodel. Typically, a small basement is considered to be a 300- to 700-square-foot space. Do you have more than 2,000 square feet to finish? Then that’s an oversized amount of space.

According to the home improvement site Angi, a simple process of finishing a basement will cost between $7 and $23 per square foot. However, if you are doing a full remodel, you can expect to spend $30 to $75 per square foot.

You can also use online tools to help you estimate the cost of your remodeling project.


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How to Plan Your Basement Project

The first thing you need to think about when finishing a basement is how you primarily plan to use the space. If it’s mostly for storage, you’ll want to include closets, cabinetry, and a shelving system in your plans.

Or do you intend to use it as a bonus room or lounge? If your basement’s primary function is as a gathering space, you’ll want to wire it so that you have internet, cable, and plenty of lighting and outlets.

Due to their subterranean nature, basements also require waterproofing. The below-grade format of a basement demands special attention be paid to exterior drainage, interior surface materials, and air ventilation, in addition to ensuring a safe way to exit the space during an emergency, like an egress window.

With proper planning, it’s possible to mitigate some of the major expenses associated with building below ground, so do your homework before the rainy season comes. Local government code departments often have building standards to guide the process.

As part of your efforts to keep the finished basement dry, you’ll probably want to install a sump pump for extreme weather events. Built into the floor with an automatic pump, sump pumps give peace of mind for when you’re out of town or have an excess of rainfall.

If you’re finishing a basement to use as an apartment or in-law suite, you’ll need added features like a bathroom and kitchenette. Installing both a bathroom and kitchenette can quickly cause the price to mount with the added costs of cabinets, countertops, appliances, and fixtures, so weigh the decision to add those features carefully against how much use you think they will truly get. Or consider going the budget route, forgoing top-of-the-line furnishings and appliances, if cost is a concern but you need those spaces to complete your basement.

Recommended: 10-Step Guide to Building Your Own Home

Budget

How much it costs to finish your basement will ultimately come down to the features you add and how the work is done. Consider these factors when making a budget:

•   Labor. This may cost $25 to $100 per hour, and you might also need a plumber or electrician to do some specialized work, which could increase the price (as anyone who’s rewired or needed to pay to fix a plumbing leak knows). Typically, labor costs will be 25% of the total project cost.

•   Permits. According to Angi, getting the proper permits for your project can run between $1,200 and $2,000.

•   Materials. The cost of materials, such as flooring, insulation, and drywall, will make up the bulk of your project budget. Expect to pay anywhere from $5.25 to $21 per square foot depending on the specifics of your remodeling.

Other areas where your basement costs may add up include if you opt for high-end materials, if you hire a professional for interior design assistance with the layout or furnishing plans or if you add furniture to the space.


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

How to Save Money on Basement Remodeling

There are many ways to save money on basement remodeling, the first being doing the labor yourself. If you’re simply going for a basic basement remodel for storage, this is a project you likely can DIY even without a lot of prior home renovation experience.

You might, for example, want to add corner shelves, install a pegboard system for mounting your tools, or build a wire rack system to store your bulky items — all basement finishing tasks you can tackle yourself without hiring outside labor.

If finishing your basement requires extensive electrical work and/or plumbing, however, you’ll likely want to call in a licensed professional to do that work.

If you’re on a tight budget, you might rethink installing a kitchenette or a bathroom, which are where your basement refinishing costs often add up quickly. A budget-friendly option for cabinetry could be purchasing from a resale shop or using old cabinets from another part of your house that you can refresh with an inexpensive coat of paint.

Recommended: The Top Home Improvements to Increase Your Home’s Value

The Takeaway

A basement remodel could serve multiple purposes — adding living space or storage to your home — while simultaneously improving your quality of life and the resale value of your home. There are a lot of considerations to take into account, including keeping an inherently moist environment dry and comfortable, and additional safety measures that you’ll need to factor into the overall budget. With the average basement finishing project costing almost $23,000, you may also need to consider financing options, such as a personal loan to use for home improvement.

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.

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Photo credit: iStock/PC Photography

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.

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.

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There’s a lot that goes into making homes safe and comfortable. After plumbing and electric, many homes in warm and cold climates alike have heating, ventilation, and air conditioning (HVAC) systems to regulate temperature and air quality.

Installing or updating HVAC systems typically requires ductwork to effectively move air from the system to vents throughout a home or building. There are several factors that impact the cost of HVAC ductwork, including the size and layout of a home, materials used, and type of system.

This guide will give you the basics of how HVAC ductwork operates and key cost considerations.

What Is Ductwork?

In the broadest sense, ductwork can be defined as the channels used for transferring heated and/or cooled air through the rooms and zones of a home or building.

In many cases, HVAC systems need separate supply and return ducts to circulate, filter, and treat air continuously. Supply ducts bring air from the furnace, geothermal pump, or other type of system to blowers and vents to heat or cool an area. On the flipside, return ducts transport untreated air back to the HVAC system.

Some of the most common HVAC systems that need ductwork include:

•   Geothermal or ground source heating and cooling

•   Central air conditioning

•   Furnaces

•   Central gas heating

Between these different systems and a home’s unique characteristics, ductwork can be handled in a variety of ways.

Recommended: How to Winterize a House

Installing New Ductwork

Figuring out how to install ductwork varies in complexity and cost between new construction and finished and furnished homes.

Additional steps that may be necessary for a finished home, such as cutting holes in existing walls, ceilings, and floors, may likely drive up the price of labor and require more materials and time for installation. Depending on where the system is placed, ducts may be run through closets, attics, basements, or up stairwells.

Since different homes require different amounts of ductwork, it’s helpful to think of cost on a linear foot basis. New ductwork can cost about $40 to $65 per linear foot, with the variation coming down to costs for materials and labor.

On average, retrofitting an existing home without ducts can run $2,400 to $6,600.

If you’re building a new home, including plans for HVAC ductwork from the getgo could reduce the overall installation cost. For starters, it would bypass the need to retroactively cut holes throughout a home for ducts and vents.

Additionally, it may be easier to design systems that utilize fewer linear feet since ductwork can be installed before walls and floors are completed.

Replacing Ductwork

If your home is already fitted with ductwork, replacing a portion of it or the entire system might be necessary due to leaks, cracks, or reduced efficiency over time. Since ducts are usually kept out of sight behind walls and ceilings or in attics and basements, accessibility is a key factor in repairing a system.

The replacement process involves both removing the existing materials and installing new ductwork. Replacing ductwork can cost from $25 to $55 per linear foot depending on the location of the existing system and choice of materials for the new ductwork.

Replacing ductwork in a home between 2,000 and 2,500 square feet can run $2,800 to $5,600; for a 3,000 to 3,500 square foot home, it can ring up between $4,200 and $7,800.

Exposed ductwork can be easier for you to reach and replace on your own, but a professional contractor may be necessary for more complicated repairs and getting to concealed HVAC systems.

Additionally, a skilled professional could likely complete the job in less time than a DIYer might, and time may be a more pressing factor than money in the middle of a cold snap or during a heatwave.

The U.S. Environmental Protection Agency’s EnergyStar program recommends getting quotes from contractors with North American Technical Excellence (NATE) or Building Performance Institute (BPI) certification to get the job done right on the first try.

Recommended: The Cost of Buying a Fixer-Upper

Ductwork Materials

There are several types of materials to consider when planning how to install ductwork in a home. Broadly speaking, ductwork can be categorized as flexible or rigid, with options for materials within each category. Each comes with tradeoffs in terms of price, lifespan, efficiency, and flexibility.

Flexible Ductwork

True to its name, flexible ductwork is characterized by its ability to bend, which can come in handy when installing inside tight and tricky spaces.

In most cases, aluminum or non-metallic materials like plastic, polyester, and PVC are used for flexible ductwork. Let’s take a look at how they compare.

Flexible Aluminum: Costs between $4 to $7 per linear foot (excluding labor).

Pros:

•   Ideal for installing in hard-to-reach places

•   Longer lifespan than non-metallic flexible ductwork

•   Generally cheaper than rigid ductwork

Cons:

•   Poor energy efficiency without added insulation and sealing

•   Needs to be reinforced to minimize kinks and bends to improve airflow and efficiency

Flexible Polyester: Costs between $1 to $5 per linear (excluding labor)

Pros:

•   Useful for compact spaces

•   Generally one of the cheapest options

•   Resistant to mold and rust

Cons:

•   Prone to tearing and less durable than flexible aluminum

•   Needs to be reinforced to minimize kinks and bends to preserve airflow and efficiency

Rigid Ductwork

Rigid ductwork can be made from several materials, such as fiberglass and galvanized steel or aluminum. These options can also vary in shape (e.g., cylindrical or rectangular) and size. Additionally, there are differences in cost and features for each type of rigid ductwork.

Sheet Metal Ductwork: Made from galvanized steel or aluminum, these materials usually cost anywhere from $8 to $15 per linear foot.

Pros:

•   Greater durability than other materials

•   Can produce less noise than flexible ductwork

•   Less susceptible to mold and mildew

Cons:

•   Difficult to install if there isn’t space for long, straight lines of ductwork

•   Adding insulation may be required for greater energy efficiency

•   More expensive than flexible ductwork

Fiberglass Duct Board: Consisting of metal ductwork lined with fiberglass, this option costs between $5 and $10 on average.

Pros:

•   Built-in insulation improves energy efficiency and temperature control

•   Easy to cut and seal

•   Well suited for installing between a building’s rafters or floor joists

Cons:

•   Over time, they can release fiberglass particles into the air and be susceptible to mold and mildew

•   Can be difficult to clean

•   Often the most expensive option per linear foot

Recommended: Strategies to Lower Your Energy Bill When Working From Home

Sealing and Insulation

Depending on the structure of a home, the type of HVAC system, and other factors, sealing and insulating ductwork may be necessary for health and safety concerns. It might also improve the efficiency of a system, thus potentially lowering your energy use, and may help pay for itself through lower utility bills.

If combustion is involved in your HVAC system, which is generally the case for furnaces and central gas heating, harmful gases like carbon monoxide are generated in the process. Sealing ductwork can further safeguard that such gases are not circulated into the living space of home instead of being emitted outside.

While professional contractors are recommended for sophisticated ductwork insulation and sealing jobs, homeowners may choose to take a DIY approach to sealing near vents and other ductwork connection points with metal tape. These locations, especially vents, can be more accessible and are more common locations for leaks.

How Often Should Ductwork Be Replaced?

While we may immediately notice when the power goes out or the plumbing is backed up, it’s harder to tell if we’re getting the most out of a heating and cooling system.

Maintenance and cleaning can help extend the lifespan of ductwork and heating and cooling systems, but a time will come when replacement is a safer and more financially sound choice.

Erring on the side of caution, you may want to have a heat pump or air conditioner (including ductwork) replaced if it’s more than 10 years old. For a furnace, the estimated lifespan is around 15 years.

To keep your ductwork in tiptop shape, there are some maintenance tasks, like changing air filters monthly, that can be done on a DIY basis. More complex procedures, such as cleaning blowers, checking electrical connections, and lubricating mechanical parts, may be better handled by a professional contractor.

Having a maintenance checklist handy can be helpful for staying on top of your cleaning and maintenance schedule, as well as making sure a contractor checks all the boxes when inspecting your HVAC system.

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

The Takeaway

Whether saving ahead or responding to a sudden home repair cost, there are options available for paying for HVAC ductwork.

Installing energy-efficient heating and air conditioning systems may qualify for a residential energy property tax credit. Additionally, some states and utilities offer incentives and rebates.

Although helpful, these incentives and tax credits still leave a portion of the cost to the homeowner. It can sometimes be difficult to save for potentially pricey repairs like these if a budget is already stretched thin.

One financing option you might consider is an unsecured home improvement loan. This is a personal loan designed to be used for home upgrades and repairs, and typically comes with a fixed interest rate, set term, and regular monthly payments. Unlike a home equity loan or line of credit, personal don’t require you to have equity in your home or use your home as collateral.

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.

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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.

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.

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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Is your bedroom cluttered, depressing, and lacking warmth and coziness? If so, perhaps it’s time for a bedroom remodel, an awakening of a room that can range from paint to structural changes.

If you’re a homeowner looking to spice up or calm down your bedroom, know that bedroom remodels can have a return on investment of 40% to 80%, according to HGTV.

The steps you can take to renovate rooms aren’t too onerous and can often be done without the help of a contractor or other professional. Let’s take a look at the cost to remodel a bedroom, bedroom remodel ideas, and how to pay for a bedroom remodel.

How Much Does It Cost to Remodel a Bedroom?

The amount of money you put into a bedroom remodel depends on what you’re trying to achieve. Do you simply want to change up your décor, including your bed, bedside tables, and desk? Or do you want to paint the room a different color and add some window treatments?

You may also be looking at more extensive changes, such as ripping up carpeting and putting in new flooring, installing new windows, or building custom cabinetry in your closet.

The good news is that most bedroom remodels are less costly than renovations that entail taking down walls, rewiring electrical systems, and installing pipes, though some bedroom remodels may call for these types of tasks.

With a bedroom remodel, you’re less likely to be doing major construction that requires hiring licensed professionals like a carpenter, plumber, or general contractor. And even if you have to rely on the services of a vendor, there are likely other aspects of the project you can tackle yourself.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Simple Bedroom Remodel Ideas

Decluttering is a tried-and-true way to visually open up a room. That means organizing books and magazines, laundry or piles of clothes, and furniture. Here are some other ways.

Painting

House-paint companies boomed during the pandemic, ARTnews pointed out. Gray — all 50 shades — were out. Warm tones and deeply saturated color were in.

Some of the major brands and independent companies offer online color consultations. And then, if you feel up to the task, you can avoid hiring a painter by painting your walls yourself.

You’ll want to take stock of the current trim and match a color to it. You’ll also want to consider how the room changes color depending on the time of day. Sometimes a room that looks white in the evening can take on a yellowish tint during the light of day.

You’ll want to make sure you have all the equipment you need to get the work done efficiently and well. This includes paintbrushes, a paint roller and pan, rags, sandpaper, and drop cloths.

The great thing about paint is, if you feel you’ve done a poor job in spots, you can always paint over it.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Flooring

What you do with your floors is going to depend largely on personal taste. Your choices include wall-to-wall carpeting, wood or wood-engineered flooring with or without area rugs, and tile or ceramic flooring, which works best in humid climates.

You’ll want to think about how your flooring will complement the rest of the room, including furniture. You’ll also want to take your comfort into consideration. Carpeting, for example, muffles sound, while wood flooring does not.

Some people don’t like walking barefoot on anything besides carpet, for example, while others prefer the look of bare floors.

Cost may also come into play here as wood flooring is generally more expensive than carpeting, topping at $14 per square foot. Carpeting typically runs upward of $11 a square foot, HomeAdvisor notes.

Furnishings

While some homeowners may want to keep the bedroom furniture they’re currently using, others choose to sell or donate what they have and start over.

If you’re in the latter group, you’ll want to consider the paint and flooring you’ve chosen when looking for a new bed and headboard, bedside tables, desk, and dresser.

Looking online for bedroom remodel ideas can be a low-cost way to design your bedroom décor, with many blogs and websites linking to online retailers for easy purchase.

Social media sites like Houzz and Pinterest have scores of photos and boards delineated by room, color, and style to help you brainstorm.

If your budget allows, this might be an area to bring in the help of an interior designer. An interior designer may be able to see things you don’t, such as whether you need a large desk for working from home, a bench at the end of the bed for sitting, or a changing table if you plan to grow your family in the near future.

More Extensive, and Expensive, Bedroom Remodels

While bedroom remodels are typically less wide-ranging than those of a kitchen or bathroom remodel, you may opt for larger changes that can drive up your cost.

These include altering the function and structural design of a room, which may require the use of a professional.


💡 Quick Tip: Compared to credit cards and other unsecured loans, you can usually get a lower interest rate with a cash-out refinance loan.

Structural Changes

If you own a home or are looking to buy, the lack of an ensuite bathroom might be a big deal. Maybe you’d like to be able to pad into the bathroom in the middle of the night without tiptoeing through the hallway.

Depending on the layout of the bedroom and the rooms near it, this may necessitate turning a closet into a bathroom or building a door through a wall that conjoins your bedroom with that hallway bathroom.

Either way, you’re probably looking at hiring a plumber, carpenter, electrician, and contractor. While this type of remodeling affords you more options than sticking with your current footprint, it comes with added costs to be aware of.

Lighting and Fans

Adding recessed lights requires the work of a licensed electrician, who may have to work around obstacles like heating ducts, and will charge for both installing and wiring each light.

Ceiling fans, while pretty and useful, will likely also require hiring a professional installer to burrow through your ceiling, connect to electricity, and complete the necessary patchwork afterward.

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

Paying for It

Having a budget and payment plan is key, no matter the size of your bedroom remodel. Some changes are so small that homeowners can pay upfront.

Those with more extensive remodels might use a home equity loan or home improvement loan.

The Takeaway

A bedroom remodel can be a fun project from start to finish. After all, we spend a lot of time in our personal spaces, so it’s an opportunity to renovate a room to your exact specifications.

A home improvement loan could be just the ticket for a bedroom remodel.

Or if you’re a house hunter and have your eye on a home with bedrooms that could use some invigoration, know that SoFi offers home loans and mortgage refinancing.

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.

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*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.

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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If you’re buying a home and have a down payment of less than 20%, you may have to pay for private mortgage insurance (PMI) or a mortgage insurance premium (MIP). This insurance does represent an additional charge you must pay for part or all of the life of the loan, but it can unlock homeownership for you.

Private mortgage insurance may be required for conventional home loans, those not backed by the government. Mortgage insurance premium is always a part of FHA-insured loans, at least for a number of years.

Each is intended to protect lenders against losses if borrowers default. Here’s a guide to how they work, how they differ, how much they cost, and when they can possibly be dropped.

What Is Mortgage Insurance Premium?

Borrowers pay MIP if they’re securing a loan backed by the Federal Housing Administration, no matter the down payment amount or loan term.

MIP runs for the loan’s full term or 11 years. There’s a one-time upfront premium of 1.75% of the base loan amount, which can be rolled into the loan, and an annual premium divided by 12 that is part of the monthly mortgage payment.

A key reason people choose FHA loans is the ability to put down as little as 3.5%.

Additionally, if your heart pounds with excitement when you think about buying a fixer-upper and making it beautiful and functional again, FHA offers the FHA 203(k) home loan for that — something that many lenders won’t do, especially if the home isn’t in good enough shape to be lived in.

With an FHA 203(k) loan, a single source of funding, the interest rate may be slightly higher than other mortgage rates, and the loan can require more coordination. It makes sense to choose contractors to rehab the home who are familiar with the program’s requirements.

Recommended: Different Types of Mortgage Loans, Explained

How Much Is MIP on an FHA Loan?

The ongoing annual MIP of 0.45% to 1.05% is divided by 12 and added to your monthly mortgage payment. What you’ll pay depends on your loan-to-value (LTV) ratio (think: down payment) and length of the loan.

Taking out an FHA loan for the common 30 years, or anything greater than 15 years, will result in the following rates for 2023 (measured in basis points, or bps):

Base Loan Amount	LTV	Annual MIP
≤ $726,200	≤ 95%	50 bps (0.50%)
≤ $726,200	> 95%	55 bps (0.55%)
> $726,200	≤ 95%	70 bps (0.70%)
> $726,200	> 75%	75 bps (0.75%)

Here’s an example: Let’s say you borrow less than or equal to $726,200 and have a down payment of 5% or less. You’ll pay an annual MIP of 0.50%. On a home loan of $300,000, that’s $1,500 per year, or $125 per month. (0.0050 x 300,000 = 1,500, divided by 12.)

Some homeowners can pay off their loans quicker so they choose a shorter term, such as 15 years. As a result, they can take advantage of lower MIP, like this:

Base Loan Amount	LTV	Annual MIP
≤ $726,200	≤ 90%	15 bps (0.15%)
≤ $726,200	> 95%	40 bps (0.40%)
> $726,200	≤ 78%	15 bps (0.15%)
> $726,200	78.01% – 90%	40 bps (0.40%)
> $726,200	> 90%	65 bps (0.65%)

So if you were to borrow less than or equal to $625,500 and put down 10% or less, you’d pay an annual MIP of 0.15%. On a $300,000 home loan, that’s $450 a year, or $37.50 a month.

💡 Quick Tip: SoFi Home Loans are available with flexible term options and down payments as low as 3%.*

Can You Get Rid of MIP?

Maybe.

If you took out an FHA loan before June 3, 2013, you may be able to cancel MIP if you have 22% equity in your home and have made all payments on time. (FHA lenders do not automatically cancel your MIP once you reach that home equity threshold. You’ll need to ask.)

If you purchased or refinanced a home with an FHA loan on or after June 3, 2013, and your down payment was less than 10%, MIP will last for the entire loan term.

If you put down 10% or more, you’ll pay MIP for 11 years.

Here’s a chart that sums it up. For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP as follows:

Term	LTV	Previous	New
≤ 15 years	≤ 78%	No Annual MIP	11 Years
≤ 15 years	78.01% to 90%	Canceled at 78% LTV	11 Years
≤ 15 years	> 90%	Loan Term	Loan Term
> 15 years	≤ 78%	5 Years	11 Years
> 15 years	78.01% to 90%	Canceled at 78% LTV and 5 Years	11 Years
> 15 years	> 90%	Canceled at 78% LTV and 5 Years	Loan Term

One way to get rid of MIP is to refinance the FHA loan into a conventional loan with a private lender. Many FHA homeowners have enough equity to refi into a conventional loan and give mortgage insurance the heave-ho.

What Is Private Mortgage Insurance?

PMI is typically required when you’re putting less than 20% down on a conventional conforming loan. Most conventional mortgages are “conforming,” which means they meet the requirements to be sold to Fannie Mae or Freddie Mac.

One kind of nonconforming loan, the jumbo loan, which starts at over half a million for a single-family home, does not always require PMI.

Usually, homeowners choose to pay PMI monthly, rather than annually, and it is included in monthly mortgage payments. A few may opt for lender-paid mortgage insurance, but for that convenience a homebuyer will usually pay a slightly higher interest rate.

Although PMI adds costs, it can allow you to qualify for a loan that you otherwise might not. And it can help you to buy a house without putting 20% down.

How Much Does PMI Cost?

PMI varies but often is 0.5% to 2% of the total loan amount annually. The premium amount depends on the type of mortgage you get, LTV, your credit score, and more. It also depends on the amount of PMI that your loan program or lender requires.

According to an Urban Institute report, PMI may be more economical than FHA loans for borrowers with a FICO score of 720 or above and who put 3.5% down.

When Can You Stop Paying PMI?

Buying a home may require you to pay a PMI premium, but there are four methods available to stop paying it.

First, there is a legal end to PMI. Under the Homeowners Protection Act, also known as the PMI Cancellation Act, your lender is required to cancel PMI automatically once your mortgage balance is at 78% of the home’s original value. “Original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time you refinanced). Which figure is used for the original value can vary by state.

Second, you can reappraise your home, which will likely result in a new value. Thus, you can ask your servicer to cancel PMI based on your built equity and the current value. Owners of homes that appreciated, either over time or thanks to home improvements, may benefit from this. You may need to be proactive with your lender and meet specific eligibility requirements to help make that happen.

Third, you may be able to refinance your mortgage. If you have at least 20% equity, you can possibly qualify for a conventional loan without the need for PMI.

Finally, the Consumer Financial Protection Bureau notes another way in which PMI can be canceled: If you’re current on your payments and you’ve reached the halfway point of the loan’s schedule, even if your mortgage balance hasn’t yet reached 78% of the home’s original value.

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

What About Refinancing?

If you have a mortgage that includes PMI or MIP and your property value has increased significantly, one option to consider is refinancing.

Some borrowers may find that they are now able to qualify for a conventional home loan without mortgage insurance.

Refinancing holds appeal because of the possibility of locking in a better rate and reducing your monthly payment. Equity-rich homeowners sometimes like a cash-out refinance.

But as with your original mortgage, you’ll face closing costs if you refinance.

What about a “no cost refinance” you might see advertised? You’ll either add the closing costs to the principal or get an increased interest rate.

The Takeaway

Glass half-full: Private mortgage insurance and mortgage insurance premium open the door to homeownership to many who otherwise could not buy a property. Glass half-empty: PMI and MIP can really add up.

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.

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*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.

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