Creative Transformations: Tiny House Remodel Ideas

The typical house in the United States averages 2,600-square-feet, but demand for manageable (read: smaller) spaces is rising. According to CNBC.com in 2017, homes less than 500-square-feet are clearly increasing in value. In fact, these tiny homes are appreciating twice as fast as more typical-sized homes in the overall real estate market, with the median list prices of tiny homes up 19% over the previous year.

Why? Well, people who live in these tiny houses often find that they enjoy not having such a big house, one where they might have needed to work overtime to afford the payments. But, what about when it comes time to remodel? Unique challenge exist when you need to creatively remodel tiny homes, especially with these homes typically ranging from 100 to 400 square feet. And that space, of course, needs to include the kitchen and the bathroom, the bedrooms and all of the plumbing, electrical, heating and cooling mechanics.

Fortunately, we’re up to the challenge! Here are tips on how to transform your tiny house design, whether you want an elegant look or one with rustic appeal.

Creative Tiny House Designs

CountryLiving.com shares images and overviews of 71 tiny house design possibilities, each style designed for maximized functionality. And, if you’ve ever worried that a spacious design can’t really be created, think again! Look at the spaciousness of this stunning home .

This home , meanwhile, is treehouse-inspired, one that makes the old new all over again. For example, it includes reclaimed wood, salvaged windows from a church, and a “funky dining table set crafted from old boats.” Looking for a sleeker design?

In just 200-square-feet, this home even includes a sliding glass door that houses a deck that can pop right out for outdoor dining.

And before we go on to share design tips for your own tiny home, we’ll bust another myth. Yes, you can use dark colors in tiny spaces. Just check out this tiny house design design. Now let’s do some reverse engineering.

Downsizing into a Tiny House

If you’ve recently purchased a small home and are ready to customize it for your needs, you may need to downsize more first. If you will be living in this home alone, then you can make those decisions yourself. If you will be living with others, it’s important to first make sure you all have the same goals for the home, and the same vision of what to keep and what to donate or sell.

In a tiny house, virtually everything needs a purpose—and ideally, can have multiple purposes. Dishes that are purely decorative, for example, are less likely to have a place in your home than beautiful ones that are also functional. Have an adorable cup that you love? Great, but will it double as a pencil holder?

Most people who downsize quickly realize that a good percentage of their belongings have been kept for sentimental reasons. Some people moving into tiny houses have found that, if they carefully photograph these items and then find an excellent new home for them, then a scrapbook containing these photos provides pleasure without taking up much space.

Keep furniture that is more durable because it will also likely have multiple purposes. A sofa, for example, may be what the family uses during the day and a guest sleeps on at night. An ottoman may also serve as a blanket or pillow storage unit.

If you find it hard to downsize certain belongings, get advice from someone who can be objective. Should you sell it? Donate it to a treasured charity? Or find a way to repurpose that item?

Tiny House Design Tips

Curbed.com points out how important it is to be logical with your tiny house remodel. Yes, creativity is important, but so is a logical, functional approach. So, think about how you plan to use your home. Do you, for example, intend to work from home?

Do you want to have space for guests to stay in your home overnight? Be ultra-clear about your top priorities because there is no room for error in these compact homes. Additonally, undergoing a renovation is also about adding value to your home. Use this Home Project Value Estimator to get an estimate on your project return.

As a second tip, think storage, storage, storage. HGTV.com suggests adding a sleeping loft and then using the space beneath the stairs leading to the loft for more storage. Drawers can be built into loft stairs and there can be a space reserved for hanging your clothes. You can store plenty beneath your bed, or even try drawers under your couch.

In your kitchen, you can hang appliances beneath cabinets to keep counter space free, add drawers to the kick plates of your cabinets—and even choose plug-in kitchen appliances (including a stovetop) that can be put away, as needed, for extra space. HGTV also encourages tiny home renovators to look up. All that wall space can contain storage cabinets and shelves, all the way up to nearly the ceiling, as needed.

Costs to Expect with a Tiny House

As with most questions related to cost, the answer is “it depends .” If you are the new owner of a tiny house, you’ll first want to make sure you have the right location for your dwelling. For example, some are like treehouses and if that’s what you bought, then you should already be aware of the associated costs.

But many tiny houses are built on wheels. So, in that case, do you have a lot where the home can be placed? Or do you need to buy one? Or, is your plan to take the tiny home on the road, much like an RV, and reside in an RV park?

That last option tends to cost about $500-$1,500 per month and often includes utilities such as electricity, water hookups, trash services, and WiFi availability (something you’ll need to independently address if you’re on a single lot). You’ll need to investigate RV insurance and have a vehicle that can pull your new dwelling, one with a trailer hitch and brake controller.

Then, costs really depend upon how much you plan to remodel. The average cost in the United States to purchase a tiny home is $59,884. This can vary greatly, based upon where you live and how customized the home is. This price was calculated by averaging costs provided by 25 tiny home builders in 13 different states in 2017.

Using a Personal Loan for Your Tiny House Remodel

It can be tempting to put the costs for your remodel on one or more of your credit cards but, unless you can quickly pay off the balances, the interest will just keep accumulating, typically at a high rate.

A better solution? A personal loan at a much lower rate and flexible terms that allow you to pay off the balance over a period of time that works for you. Applying for a personal loan is quick and easy, especially with a lender like SoFi, who offers no-fee personal loans – that means no prepayment penalties, origination fees, or even late fees.

You’ll want to make sure you borrow enough money for any upgrades you might want to make. This is where it really makes sense to explore your options and, if possible, talk to other owners of these tiny homes to find out what splurges are really worth the extra investment. In this tiny house cost breakdowns from 2016, you’ll see these three examples of no-regrets splurges:

1. Wood stove and flue that provides desired aesthetics, as well as efficiency and off-grid capabilities ($4,495)
2. Propane heat blanket that offers extra warmth in cold climates ($380 each)
3. Windows and vented skylights that allow you to see the stars ($4,000)

Decide which upgrades, customizations, and luxuries you really want and then figure out how much you’d need a personal loan for using this Home Improvement Cost Calculator.

Then, check out SoFi.com to see if a home renovation loan is right for your tiny house remodel, ditching high interest credit cards. We can’t wait to hear about the creative transformation you have planned.


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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How Timeshare Financing Works for Vacation Property

Dreaming of swaying palm trees and fruity drinks topped with tiny turquoise umbrellas, or escaping to a ski villa up in the mountains? While many of us would love to own a vacation home in our favorite destination, the expense is not always feasible. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice. Here’s a look at what timeshares are and some timeshare financing options.

What Is a Timeshare?

A timeshare is a way for multiple unrelated owners to own a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of one’s own.

Timeshares are a popular way to vacation. In fact, 9.9 million U.S. households own a timeshare, according to the American Resort Development Association (ARDA). The average price of a timeshare in the United States is $22,942 . Though this figure can vary widely depending on the location, the size and quality of the property, the length of stay, time of year, and the rules of the contract.

How Do Timeshares Work?

Timeshares usually fall into two broad categories: deeded or non-deeded. With a deeded ownership structure, each owner owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they are allowed to use it. For example, a property that sells timeshares in one-week increments, would have 52 deeds, one for each week of the year.

Non-deeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year, or a floating period that allows you greater flexibility in choosing when to use the property. Your lease will expire after a predetermined leasing period.

Timeshares may also offer one of a handful of options for timeshare use periods. They may be fixed-week, meaning you can use the property during a set week each year. There may be floating weeks which allow you to choose when you use the property depending on availability. A timeshare may offer fractional periods that allow you to use the property for a longer period. And finally, you may be able to purchase points that you can use in different timeshare locations at various times of the year.

Choosing a Timeshare

When you purchase a timeshare, you’re sharing the property with a number of other timeshare owners and you typically have the right to use the property at the same time every year.

You can trade days with other owners and sometimes even try out other properties around the country (or around the world) in a trade. In addition to the initial purchase price, you’ll also be required to pay your share of the maintenance fees that cover the costs of property upkeep and cleaning. These maintenance fees often increase over time with hikes in cost of living. There are also service charges that timeshare owners may have to pay, such as fees due at booking.

Once you’ve considered the financial responsibilities that come with the timeshare and your budget, choosing the right place often comes down to where you want to be and what you need in terms of space and amenities.

Are Timeshares a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they are not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time—and can easily get to—you may end up spending less than you would if you were to purchase a vacation home.

Financing a Timeshare

When you buy a home, you typically finance it with a mortgage. When you buy a car, you can finance it with an auto loan. But timeshare financing has no direct market. The developer of the resort may offer you financing, but beware: these offers often come with very high interest rates, especially for buyers with lower credit scores. In fact, ARDA reports that the average interest rate on a timeshare financing loan is 14% over 10 years, with rates reaching as high as 20%.

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Because a home equity loan uses your house as collateral, it is likely that you will be given a lower interest rate compared to the rate on a timeshare loan offered at a developer pitch. Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets IRS requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you are taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan or vacation loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence is not at risk in the event of default, and securing an unsecured personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.

Awarded Best Personal Loan of 2022 by NerdWallet.
Apply Online, Same Day Funding


The Takeaway

Timeshares are often thought of as a way to guarantee vacation time in your favorite location each year without having to buy a second home. If you do your homework and weigh the risks, they can be a good way to vacation with family and friends and make a lot of memories along the way.

Thinking about using a personal loan for timeshare financing? Check out SoFi to check your rate in just a few minutes.

FAQs

Can I rent my timeshare to someone else?

Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases your timeshare resort will allow you to rent out your allotted time at the property.

Can I sell my timeshare?

Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Can I transfer ownership of my timeshare or leave it to my heirs?

You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.


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Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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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How Much Home Equity Can You Tap Into?

If you’re a homeowner, chances are you’ve been offered a home equity loan once or twice before. And we get it, those little flyers that come in the mail offering you a ton of cash on the spot can be pretty appealing. But just remember, there’s a lot of hidden information in that fine print.

A home equity loan can certainly be a good option, especially for those looking to make major improvements to their current home. But before you dive deep into a loan that puts your house on the line, you need to have all the facts. Here are seven key points to help you understand the wild world of home equity loans, and to help you consider if using your home as collateral is really worth it.

Home Equity Loan Definition

If you’re looking for a home equity loan explainer, you’ll find that the term is actually a catch-all for several different types of loans including fixed-rate home equity loans, home equity lines of credit (HELOCs), and cash-out refinancing.

Each of these loans come with their own unique perks and downsides, but essentially, a home equity loan allows a homeowner to use their house as collateral for cash. That cash typically comes as a lump sum, fixed-rate loan paid to the consumer all at once. Then, that consumer pays back the loan plus interest over time. Or in the case of a home equity line of credit, the loan functions as revolving debt.

Who is a home equity loan good for?

A home equity loan is typically good for those who want to take out a large sum of money for home renovation projects, especially if the renovations could potentially increase the value of the house. Others use these home equity loans to pay off other large debts, such as student loans. To get an estimation of the resale value of your next home improvement project, use SoFi’s Home Project Value Estimator.

“Most families with student loan debt would do better using home equity to eliminate that debt, instead of resorting to using credit cards as a short-term solution,” Helen Huang, Senior Director of Product Marketing for SoFi’s Home Loan products, said in a previous statement. “Mortgage interest rates are often lower than student loan interest rates. So homeowners can use that to their advantage. Paying off student loans with equity means making only one payment per month, which not only simplifies life, but can also save borrowers money.”

Really, this course of action is popular for those looking to borrow $25,000 or more, and those who are sure they can pay back the loan within a reasonable amount of time.

What is My Current Home Equity?

How much home equity can you tap into? It boils down to this: If your home is valued at more than what you currently owe on your mortgage loan, you have equity.

For example, if you withdrew a $300,000 mortgage several years ago, and have since paid back $100,000 of what you owe, you then have $100,000 in available equity from your home. That means you can borrow against that $100,000 for home improvements, student loans, or other bills using a home equity loan. Even if you haven’t paid off a lot of your home, you may want to check if it has appreciated, because if your home has gone up in value, your equity has increased.

To get this loan, you can contact a mortgage lender, who will order an appraisal of your home to find out its current worth. Then, next steps would be to gather your tax information, pay stubs, and bank statements for the home equity application process.

What’s the Difference Between a Home Equity Loan and a HELOC?

There is another option in the home equity loan game known as a HELOC, or a Home Equity Line of Credit. A HELOC also uses your home’s value as collateral. However, instead of receiving a lump sum payout like you would with a traditional home equity loan, a HELOC works more like a credit card. This means people can instead borrow money on a rolling basis up to the credit limit —which is the equity on their home — and pay back the balance all at once or over time.

Interest rates on HELOCs are usually variable, meaning the rate can fluctuate with the market. So, unlike the fixed-rate home equity loans, you could end up paying more over time. HELOCs, like home equity loans, are also most often reserved for those looking to cover the cost of a major renovation.

How is a HELOC Calculated?

When taking out a HELOC, people can typically access to up to 85% of the value of their home, minus the amount they still owe on their mortgage. So, using the same example above, if you took out a $300,000 mortgage several years ago, and have since paid back $100,000 of what you owe, you then have $100,000 in available equity from your home. But, with a HELOC you’d only be able to take 85%, or 85,000 of that equity as a line of credit.

And you can draw from it for five to 10 years, depending on your lender and your “draw period.” During that time, you typically make interest-only payments. Once the draw period is complete, you can start repaying the loan in full, with a repayment term of up to 20 years.

Borrowing Money without Borrowing against Your Home

Remember, there’s no such thing as a free lunch. With a home equity loan or a HELOC you are literally putting your house on the line. So, if you aren’t positive you can pay back the line of credit or the loan, you may want to think about other options.

If you’re only in the market for a one-time, small cash infusion, consider taking out a SoFi personal loan instead. With a personal loan, people can borrow money for any kind of personal use, including home improvement projects, paying off credit card debt, or paying for a vacation.

Related: Find out how much it would cost to renovate your home with SoFi’s Home Improvement Cost Calculator.

And with a personal loan, you don’t have to put up any collateral, meaning you do not have to put your home on the line to take out anywhere from $5,000 to $100,000.

To repay the loan, consumers make monthly payments of principal plus interest over a given amount of time. The best part of these loans may be the fact that if you find yourself out of work, SoFi will temporarily pause your payments and even help you find a new job so you can get back on your feet. So, rather than risking the roof over your head, check to see if a personal loan meets your needs first.

Thinking of making some home improvements? SoFi home improvement loans can help you finish that new kitchen sooner—and maybe even save you money along the way.


SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.

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How Timeshare Financing Works

It goes a little bit like this: You’re on a much-needed vacation with your family, having daiquiris on the beach while the kids have the time of their lives playing in the surf. Everybody is happy— you want to come back here every summer.

Then, a timeshare salesman approaches you in the resort lobby and offers you a free three-course dinner at a top restaurant in exchange for hearing out his pitch: a timeshare on this very beach, a great investment opportunity, and a deal that’s on the table for one day only.

The high-pressure timeshare salesman has become a cliché of resort towns everywhere, and with good reason. The timeshare loans they sign vacationers up for often have a high rate of default. But timeshares are still a popular way to vacation, and there are savvy ways to finance a timeshare. In fact, according to the American Resort Development Association (ARDA), 9.2 million U.S households own a timeshare. And some even own several timeshares.

So, are timeshares a good idea? It depends on how you think about it. If you’re looking for a vacation spot you can use whenever you want, you are likely in for an expensive disappointment. But if you’re looking for a vacation spot you can come back to time and again in your favorite location, it might make financial sense.

Staying in resorts and eating out can get expensive. Buying a vacation home can be even more expensive. If you understand that you’re purchasing a timeshare not as an investment but as a vacation experience—to spend time in with family and friends, it may actually be less costly and less stressful than other vacation options.

While purchasing a timeshare comes with risks, there are ways to be smart about timeshare financing. In this article, we’ll walk you through some timeshare financing options, so you can understand how it works and make a decision that’s right for your budget.

How to Finance a Timeshare Responsibly

When you buy a home, you typically finance it with a mortgage. When you buy a car, you can finance it with an auto loan. But there’s no direct lending market for timeshares, and on top of that, they usually don’t increase in value over time.

So what are your timeshare financing options? First, let’s look at how not to finance a timeshare. The first option most interested buyers are faced with is developer financing. Typically, a timeshare resort developer works with a lender that offers high-interest personal loans, and they encourage you to make a decision right away while you’re at the presentations. According to ARDA, buyers pay an average of $20,000 for a timeshare interval, though prices can range from depending on the property.

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. Another option, however, is to plan ahead. If you’re ready to purchase a timeshare, secure financing beforehand so that you have the funds in hand when you negotiate the sale. This way you have time to shop around for a good financing deal—and possibly save up some money to put toward the purchase as well.

Choosing a Vacation Home

When you purchase a timeshare, you’re sharing the property with a number of other timeshare owners and typically have the right to use the property at the same time every year.

You can trade days with other owners and sometimes even try out other properties around the country (or around the world) in a trade. In addition to the initial purchase price, you’ll also be required to pay your share of the maintenance fees that cover the costs of property upkeep and cleaning. These maintenance fees often increase over time.

Once you’ve considered the financial responsibilities that come with the timeshare and your budget, choosing the right place often comes down to where you want to be, and what you need in terms of space and amenities.

Since selling a timeshare can be difficult and sometimes involve a financial loss, you’ll want to make sure you’re purchasing a timeshare in a place that your family will want to return to for a long time—and can easily get to. That way you don’t end up paying for a place you don’t use.

Preparing Financially for a Timeshare

A good financial scenario to be in when buying a timeshare is to have a steady income that will allow you to keep up with maintenance fees and travel to your timeshare each year. If you plan to finance the purchase, look over your financial profile and creditworthiness.

Your income, creditworthiness, the term of the loan and other factors, will determine the rates that lenders will offer you. Resolving any issues impacting your credit score may help improve your financial profile.

You’ll also want to consider your budget over the next few years. Are there any other major purchases you are planning to take on? Do you anticipate a new added cost like a new family member? Any type of financial shift in coming years should be accounted for before you finally sign on.

Smarter Ways to Finance a Timeshare

There are a few alternatives to financing a timeshare with financing offered by a developer. Of course, you can wait and save up the cash to purchase the timeshare outright. If you’re looking to finance the purchase, there are still several good options.

One option is to use a current credit card. This option often involves less paperwork, but does come with a high cost in terms of interest rates. This option should be used if you are putting most of the purchase price down in cash up front and just need to put the last little bit on a credit card. You should also only do this if you are certain you can pay off the remainder in a relatively short amount of time.

Taking out a home equity loan is another option. With a home equity loan, you are borrowing money against the value of your home. These loans can be relatively easy to secure from a lender, because your home is often used as collateral.

They also come with potentially much lower rates than other types of loans . There are a few drawbacks, however: There’s more red-tape and risk as you’re putting your home on the line. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence.

Securing a personal loan at a competitive interest rate can be an even better solution for financing a timeshare. Depending on your financial profile, you may qualify for a much lower interest rate than financing from a developer or a high interest rate credit card would offer. A personal loan also allows you to choose terms that work for you. On top of that, a personal loan is relatively easy to secure.

Timeshares are often thought of as a way to guarantee vacation time in your favorite location each year without having to buy a second home. If you do your homework and weigh the risks, they can be a good way to vacation with family and friends and make a lot of memories along the way.

Thinking about using a personal loan to finance a timeshare? Check out SoFi.com and check your rate in just a few minutes.


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

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How Much Mortgage Can I Afford?

If you’re considering buying a home, you’ve probably done some research on home prices and how much home you can afford. This is a common first step. Generally, folks like to kick off the process by looking at home prices in their neighborhood of choice. And while it’s fine to scan Zillow for the perfect A-frame in your favorite area, shopping around doesn’t actually help you figure out what you can afford.

First-time home buyers can be bamboozled by the true cost of buying a home, because there’s a lot more to consider than just principal and interest. Before buying a home, you should crunch and become familiar with the numbers for the total cost of your mortgage, including insurance, taxes, fees, bills, furniture, and so on. Only with a good grasp of what each line item will run can you make an estimate about the size of the mortgage, and therefore the home you can afford to buy.

Post-Redfin dreamin’, your next step is to determine how much you are willing to spend each month on all housing costs—without even knowing what those might be. Your total housing costs, ideally, should be no more than 28% of your total gross pay (before taxes). So where does 28% put you? Let’s find out by calculating your total mortgage costs.

Calculate Your Total Mortgage Cost

If you have been looking at homes, you’ve probably plugged your information into a mortgage calculator at some point. This is a fine place to start, but as mentioned, this number is far from all-inclusive. Still, it’s good to be familiar with the tool.

With any mortgage calculator, you will be asked to input hypotheticals, like the cost of your future home, your down payment, and the interest rate on your home loan. You’ll also need to choose which type of loan you plan to take out; It will likely be a 30-year fixed-rate mortgage.

Using your hypotheticals, the calculator will tell you what you’re likely to pay each month. It should also provide the breakdown between what is paid to interest versus what goes toward the principal. An amortization graph shows how payments shift from being very interest-heavy at the beginning to covering mostly principal toward the end of your loan.

Calculate Your Potential Mortgage

Factoring Insurance and Taxes Into Your Mortgage

Have you heard of the acronym PITI? It stands for principal, interest, taxes, and insurance. It’s is often pronounced “pity” and is therefore used endlessly in corny jokes by folks in the finance biz. Anyway, the PITI acronym includes the four major costs that every homeowner must pay. With our mortgage calculator, we determined the “P” and “I” of PITI. Next, let’s consider the “T” and second “I.”

Mortgage Taxes:

Property taxes are determined by your state and county, and they are based on the assessed value of your home and land. Generally, property taxes are paid to your city, county, and local school board. Because each county has their own methods for calculating and assessing property taxes, you’ll have to check with a realtor or look online at the county’s website to get a better idea of what they might run you. To help your calculations, 1% is a rough national average for property taxes. That means you’d probably pay $5,000 in annual property tax on a $500,000 home.

Homeowners Insurance:

Homeowner’s insurance depends on several factors like the value and condition of the property, and how much coverage you need. For example, a home in a state with a history of tornadoes or hurricanes will likely charge more than a state that’s less prone to such natural disasters.

As with property taxes, homeowner’s insurance may be collected by your lender and deposited into your escrow account, and other times you take care of the bill on your own. (You’ll want to ask your lender to be sure.) The national average for homeowner’s insurance in 2016 was $1,083 per year, or $90 per month.

Keeping Track of All Other Mortgage Fees

Private Mortgage Insurance:

If you put less than 20% toward your down payment, you may have to pay Private Mortgage Insurance. Why? Essentially, borrowers who put down less than 20% are considered a slightly higher risk because they do not have as much equity in the house.

The cost of PMI is usually determined by your credit score, the percent of your down payment and the amount of coverage required by your lender. Your lender will be able to provide you with an estimate. In general, you can expect your monthly PMI payments to run from $25 to $75 per $100,000 you borrow. The Homeowners Protection Act requires that lenders cancel your PMI when your loan-to-value ratio reaches 78%.

HOA Costs:

Homeowner’s Association fees are charged by condominiums, townhouses, and other shared-community developments, and are used to maintain common areas, provide security, manage amenities, and enforce HOA rules. HOA fees can vary depending on a number of factors, so it’s important to educate yourself on the costs and coverage before buying a property. The HOA for a single-family home in a closed neighborhood might run $50 per month, but a villa in an upscale ski town could cost $1,500 per month.

Utilities:

Don’t forget your monthly bills. For utilities, research what similar-sized homes in the area are spending on energy, garbage, water. Factor in cable, Wi-Fi, and any other utilities you’re accustomed to.

Closing Fees:

Though not a monthly fee, you’ll also want to be prepared to cover closing costs, which may include loan origination fees, appraisal fees, title insurance , taxes, deed-recording fees, and other charges.

Closing costs can run anywhere from 1% to 5% of the value of the mortgage loan, and can be paid by either the buyer or the seller. And remember, it is always, always recommended that potential homebuyers build up a significant emergency fund for repairs. When you’re a homeowner, there’s no one else to come and deal with rusty pipes or broken heaters!

Are You Ready to Afford a Mortgage?

Feeling overwhelmed by all the expenses we just laid out? The good news is there are ways to save money on these costs: You can and should shop around for homeowner’s insurance rates. Improving your credit score will get you a better interest rate on your home loan, which could save you thousands. Not all lenders are created equal, and you should get quotes from several financial institutions before deciding who you want to work with.

Are you ready to explore SoFi’s competitive mortgage rates with no hidden fees? Get a rate quote in just a few minutes (and no, it won’t hurt your credit score).


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.
SoFi Mortgages not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com for details.

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