SoFi

When most of us think of homeowners insurance, we think about getting coverage for major home repairs — the big-ticket items the insurance company can pay out for in the event of a loss or damage. We’re talking about things like a tree falling over in a storm and wrecking your roof or a robber making off with your electronics and jewelry.

Sure, you need that kind of protection, but your homeowner’s insurance policy should also include a very important kind of coverage beyond that: loss of use coverage. This is also sometimes known as additional living expenses (ALE) coverage or Part D coverage. Loss of use coverage is an important part of your home insurance (and some rental insurance policies) that kicks in when your home is rendered uninhabitable. Let’s say in the example above, where your roof needs major repair work. You may not be able to live in your home while this is underway. Since you have “lost the use” of your typical living space, the policy will help you pay for lodging and other expenses.

Read on to learn more about the loss of use coverage, including coverage limits and policy conditions. It’s an important consideration if a worst-case scenario ever happens to your home sweet home.

What Does Loss of Use Coverage Mean?

Loss of use coverage is the part of your homeowner’s insurance policy that covers the costs you’ll incur if you lose the usage of your home.

For example, if a fire destroys a significant portion of your house and it needs to be rebuilt, your typical home insurance policy will cover the cost of repairs. But (and this is a biggie) you may find yourself suddenly facing a whole lot of living expenses you otherwise wouldn’t. Hotel rooms and restaurant meals can add up quickly, and without your own kitchen and bedroom to cook in and retire to, you’d be pretty much forced to take advantage of these expensive options. Or perhaps you have to put your possessions in storage as your home is rebuilt, or even rent an apartment. These are the kinds of expenses that loss of use coverage will typically reimburse.

Recommended: Homeowners Insurance Coverage Options to Know

Coverage Limits

Like most other forms of insurance, loss of use coverage does come with certain limits — you don’t have carte blanche to go out and stay at a swanky hotel for months and eat exclusively Wagyu beef on the insurance company’s dime.

Generally, loss of use insurance is calculated and expressed as a percentage of your dwelling coverage limit — the amount of money up to which the insurer will pay out to repair or rebuild your home in the event of a qualified loss.

For example, if your dwelling insurance limit is $350,000, and your loss of use coverage is 20%, you’d have up to $70,000 to put toward living expenses during the time your home is being repaired. That may sound like a lot of money, but you’re likely to face a lot of expenses, especially since you’ll still be responsible, during that time, for paying your mortgage, insurance premiums, and other normal monthly bills.

Loss of use coverage is most commonly between 20% and 30% of the dwelling coverage limit, but it is possible to find plans with a higher loss of use limit — or a lower one.

In fact, although loss of use coverage is fairly standard, it is possible to purchase a homeowners or renters insurance policy that doesn’t include it, so always be sure to read your paperwork in full, including the fine print, to ensure you know what you’re getting.

Recommended: What Is Renters Insurance and Do I Need It?

Policy Conditions

Loss of use coverage is subject to additional conditions along with the coverage limit. For example, you’ll most likely be asked to prove your expenses to the insurance company in order to get the claim paid — so be sure to keep the receipts for all those hotel-room breakfasts!

Your policy may include other terms and conditions as well. Yet again, another good reason to get nice and cozy with that fine print.

Which Living Expenses Are Covered By Loss of Use Insurance?

Although the loss of use insurance covers many different kinds of living expenses while your home is being rebuilt or repaired, it doesn’t cover everything.

Once again, the only place to get verified information about what your specific policy covers is — you guessed it — your specific policy paperwork, but here are some of the most common covered costs.

•   Temporary housing, such as hotels, motels, or a temporary apartment

•   Moving costs

•   Public transportation

•   Grocery and restaurant bills beyond your typical expenditure

•   Storage costs

•   Costs to board a pet

•   Laundry costs

•   Parking fees

Once again, refer to your policy documentation in order to confirm which expenses are covered under your plan.

What Else Does Your Home Insurance Cover?

Loss of use coverage is only one small part of your overall homeowner’s insurance policy, which likely has several different coverages built in. A standard homeowners insurance policy offers coverage in the following categories:

•   Dwelling coverage, which covers the cost of repairing or rebuilding your house up to the given limit

•   Personal property coverage, which covers the costs of replacing your belongings in the event they are stolen, lost or damaged as part of a covered event

•   Personal liability coverage, which pays out to cover the medical or legal expenses you might incur if someone is accidentally hurt on your property (for example, if they’re bitten by your dog)

•   Additional coverages, such as coverage for additional structures on the property, specific damaging events (or “perils”) that aren’t listed in the standard policy, excess coverage for expensive belongings, etc.

As you can see, homeowners insurance is about way more than insuring the four walls of your home, though it should cover that, too. Keep in mind that each of these coverages comes with its own limits and policy conditions. (We’d remind you to read the fine print again, but at this point, you’ve probably got it. Right?)

In addition, homeowners insurance generally involves — as do most forms of insurance — paying a deductible when it comes time to file a claim. That means you’ll be responsible for a certain out-of-pocket cost to cover even coverage-eligible sustained damages, although the insurance company will likely pay out significantly more. (For example, a homeowners insurance deductible might be $1,000, which isn’t nothing… but is a lot better than paying $30,000 out of pocket to replace your entire roof. In this instance, you’d pay $1,000 while the insurer would pay $29,000.)

Deductibles are charged in addition to the premiums you pay on a monthly, quarterly, or annual basis simply to keep the insurance policy active. (Typically, the higher the deductible, the lower the premium, and vice versa.) Again, it may feel like a pain to have to pay so much money simply to have insurance just in case something happens, at which point you’d have to pay out your deductible as well… but for most of us, our homes are the single largest purchase we ever make and the biggest asset to our names. It’s an investment worth protecting, especially when you consider the often astronomical cost of even basic home repairs.

The Takeaway

Loss of use insurance is a type of coverage baked into most homeowners and many renters’ insurance policies. This coverage pays out toward the extra living expenses you’ll incur if your home is rendered uninhabitable by a qualified loss, such as the cost of hotel rooms, additional food expenses, pet boarding, and public transportation.

While homeowners insurance is a valuable financial tool, it’s not the only one to keep in your tool belt. If you have family members and loved ones who rely on your income in order to maintain their lifestyle and comfort, life insurance can be a great way to ensure your death is primarily an emotional, rather than financial, loss.

SoFi has teamed up with Ladder to offer high-quality life insurance plans that are quick to set up and easy to understand, and our overall policy limits go up to $8 million. You can get a decision in minutes today, right from the comfort of your home — which, after all, already has its own insurance policy. (Right?)

Photo credit: iStock/Ridofranz

---

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

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.

SOPT1121008

Read more

Homeowners insurance may very well be the least sexy part of homeownership — but it is definitely a necessity, in part because your mortgage lender will likely require it.

Whether it’s a cozy micro-cabin or a rambling Colonial, your home is probably the single largest purchase you’ll ever make and your biggest physical asset. An investment like that is worth protecting.

That’s where homeowners insurance comes in; it gives you peace of mind that if you were to have major damage or get robbed (let’s hope not!), there would be funds to repair and restore your home.

So let’s say you’re convinced of the value of a homeowners insurance policy…but you think it’s time to make a change. Perhaps you’re not happy with your coverage or the premium, or maybe you’re moving to a new home and ready for a new policy. Maybe you’re just wondering what your rights are as far as switching goes.

Here’s what you need to know about switching your homeowners insurance policy, as well as a step-by-step guide to getting it done as quickly as possible and with a minimum of hassles.

Can I Switch Homeowners Insurance at Any Time?

Good news: yes! No matter what the reason may be, you’re allowed to change your homeowner’s insurance at any time, which is good, since shopping around for the right policy can save you a lot of money in some instances.

If you’re shopping for a new home as we speak, it can be a good idea to start looking at insurance before you sign the purchase agreement — so nice work on starting this research. And if you’re an existing homeowner looking to save money or simply find a new policy, you absolutely can do so whenever you like, but it’s important to follow the steps in order to ensure you don’t accidentally have a lapse in coverage.

Recommended: Homeowners Insurance Coverage Options to Know

When Should I Change My Homeowners Insurance?

There are certain events that should also trigger a review of your insurance, including paying off your mortgage (your rates may well go down) and adding a pool (your rates may go up). Also, you may find you are offered deals if you bundle your homeowners insurance with, say, your car insurance; that might be a savings you want to consider.

You never know what options might be available out there to help you save some money, and since homeowners insurance can easily cost more than $1,000 per year, it can be well worth shopping around.

Recommended: Is Homeowners Insurance Required to Buy a Home?

How Often Should I Change My Homeowners Insurance?

You’re really the only person who can answer this one — but in general, it’s a good idea to at least review your coverage annually.

However, it does take time and effort, and sometimes, a cheaper policy means less coverage, so it’s not always a good deal. Be sure you’re able to thoroughly review all the fine print and make sure you know what you’re getting.

Ready to change your homeowners insurance? Follow these steps in order to ensure you don’t accidentally sustain a loss in coverage!

Step One: Check the Terms and Conditions of Your Existing Policy

The first step toward changing your homeowners insurance policy is ensuring that you actually want to change it in the first place!

Take a look at your existing policy and see what your coverage is like, and also be sure to look closely to see if there are any specific terms about early termination. While you always have the right to change your homeowners insurance policy, there could be a fee involved. In many instances, you may have to wait a bit to receive a prorated refund for unused coverage.

Step Two: Think about Your Coverage Needs

Once you have a handle on what your current insurance covers, you can start shopping for new insurance in an informed way. You probably don’t want to “save money” by accidentally purchasing a less comprehensive plan. But do think about how your coverage needs may have shifted since you last purchased homeowners insurance. For example, the value of your home may have changed (lucky you if your once “up and coming” neighborhood is not officially a hot market). Or perhaps you’ve added on additional structures or outbuildings and need to bump up your policy to cover those.

Step Three: Research Different Insurance Companies

Now comes the labor-intensive part: Getting out there and looking around at other available insurance policies to see what’s on offer. Be sure to keep in mind your current premiums and deductibles as you shop around, as saving money is likely one of the main objectives of this exercise. Though sometimes, higher costs are worth it for better coverage. Make sure you are carefully comparing coverage limits, deductibles, and premiums to get the best policy for your needs. Also consider whether the policy is providing actual cash value or replacement value. You may want to opt for a slightly pricier “replacement value” so you have funds to go out and buy new versions of any lost or damaged items, versus getting a lower, depreciated amount.

In addition to the theoretical coverage you encounter, it’s a good idea to stick with insurers with a good reputation. All the coverage in the world doesn’t matter if it’s only on paper; you need to be able to get through to customer service and file a claim when and if the time comes! Fortunately, many online reviews are available that make this vetting process a lot easier. A few reputable sources for ratings: The Better Business Bureau and J.D. Power’s Customer Satisfaction Survey and Property Claims Satisfaction Study. You can also do some of the footwork yourself by calling around to get quotes, though this is time-intensive and you might want to simply use an online comparison tool instead.

Step Four: Start Your New Policy, Then Cancel Your Old One

Found a new insurance plan that suits your needs better than your current one? Great news — but here’s the really important part: You want to get that new policy started BEFORE you cancel your old one.

That’s because even a short lapse in coverage could jeopardize your valuable investment, as well as drive up premiums in the future. Once you’ve made the new insurance purchase call and have your new declarations page in hand, you are ready to make the old insurance cancellation call. Go ahead, and be sure to verify the following with your old insurer:

•   The cancellation date is on or after the new insurance policy’s start date.

•   The old insurance policy won’t be automatically renewed and is fully cancelled.

•   If you’re entitled to a prorated refund, find out how it will be issued and how long it will take to arrive.

Presto-chango and congratulations: You’ve got new homeowners insurance!

Step Five: Let Your Lender Know

The last step, but still a very important one, is to notify your mortgage lender about your homeowners insurance change. Most mortgage lenders require homeowners insurance, and they need to be kept up-to-date on who’s got your back should calamity strike. Additionally, if you still owe more than 80% the home value to your lender, they may still be paying the insurer for you through an escrow account — so you definitely want to make sure those payments are going to the right company.

The Takeaway

Homeowners insurance is an important but often expensive form of financial protection — it can help you cover the cost of repairing or rebuilding your home if you undergo a covered loss or damage. Since our homes are such valuable investments, they’re worth safeguarding… and most mortgage lenders require homeowners insurance in any case.

Sometimes, changing your policy can help you save money for comparable or better coverage. Reviewing and possibly rethinking your homeowners insurance is an important process, especially as your needs and lifestyle evolve. If you’ve added on to your home, put in a pool, bought a prized piece of art, or are enduring more punishing weather, all are signals that you should take a fresh look at your policy and make sure you’re well protected.

SoFi Can Help Protect You Too

While homeowners insurance protects your most important physical asset, it doesn’t protect the most important thing you have: your life. If you have family members or dependents who depend on your income for their comfort and stability, looking into life insurance may be a good idea.

Life insurance can help ensure the ongoing comfort and support of your loved ones in the event that something happens to you. SoFi has teamed up with Ladder to offer competitive term life insurance plans that range from $100,000 to $8 million, and we don’t require medical testing for eligible applicants seeking up to $3 million in coverage — just fill out an online application and you’ll have your decision in minutes.

Photo credit: iStock/MonthiraYodtiwong

---

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.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, Social Finance. Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under Ladder Life™ policies. SoFi is compensated by Ladder for each issued term life policy.
SoFi Agency and its affiliates do not guarantee the services of any insurance company.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

SOPT1121024

Read more

It’s easy to get confused about the difference between co-ops and condos. If you pulled up pictures of each during a home search, they might seem exactly the same.

But if you’re in the market for a home — especially in a large city where both housing types are popular — you’ll learn quickly that the terms are not interchangeable.

You might have wondered if you’d prefer a house or a condo. But if you’re moving in the direction of co-op vs. condo, it’s important to understand their many distinct features.

Both give a resident the right to use certain common areas, such as pools, gyms, meeting rooms, and courtyards. But there are big differences when it comes to what you actually own when you purchase a condo or co-op.

You’ve done the work of budgeting for a home. Now you need to get a handle on the difference between a condo and a co-op.

What Is a Condo?

With a condominium, you own your home, but you don’t solely own anything outside your unit — not even the exterior walls. Common areas of the complex are owned and shared by all the condo owners collectively.

Buying a condo is not all that different from securing any other type of real estate.

Typically, the complex will be managed by a homeowners association that is responsible for maintaining the property and enforcing any covenants, conditions, and restrictions that govern property usage. The HOA sets the regular fees needed to pay for repairs, landscaping, other services, and insurance for the shared parts of the property. Special assessments also might be levied to pay for unexpected repairs and needed improvements that aren’t in the normal operating budget.

What Is a Co-op?

In the co-op vs. condo debate, it’s key to know that with a housing cooperative, residents don’t own their units. Instead, they hold shares in a nonprofit corporation that has the title to the property and grants proprietary leases to residents. The lease grants you the right to live in your specific unit and use the common elements of the co-op according to its bylaws and regulations.

A co-op manager usually collects monthly maintenance fees; enforces covenants, conditions and restrictions; and makes sure the property is well kept.

As a shareholder, you become a voting manager of the building, and as such have a say in how the co-op is run and maintained. Residents generally vote on any decision that affects the building.

With a co-op, should you want to sell your shares, members of the board of directors will have to approve your new buyer. They will be much more involved than would be the case with a condo. That can make it a lengthy process.

Co-ops and condos are both common-interest communities, but their governing documents have different legal mechanisms that determine how they operate and can affect residents’ costs, control over their units, and even the feeling of community.

Some Pros & Cons of Co-Ops vs Condos

Financing

It’s important to drill down on the details of buying an apartment. Because you aren’t actually buying any real estate with a co-op, the price per square foot is usually lower than it would be for a condo. Eligibility for financing may depend on credit score, down payment, project analysis, minimum square footage of a unit, and more.

However, it might be somewhat harder to get a mortgage for a co-op than a condo, even if the bottom-line price is less. It might not have all that much to do with you. Some lenders are reluctant to underwrite a mortgage for a property on which they can’t foreclose.

Most condo associations don’t restrict lending or financing in the building. If you can get a mortgage, the condo association will usually let you buy a place.

Fees

Because a co-op’s monthly fee can include payments for the building’s underlying mortgage and property taxes as well as amenities, maintenance, security, and utilities, it’s usually higher than the monthly fee for a condo. Either way, though, generally the more perks that come with your unit, the more there is to maintain and in turn, the more you’re likely to pay.

If you’re concerned about an increase in fees, you might want to ask the association or board about any improvements that may lead to an increase in the future — and what the rules are for those who do not pay their assessed dues.

All of these factors are important to weigh when you’re making a home-buying checklist, which includes figuring out how much money you’ll need and the best financing strategy.

Taxes

If you itemize on your income tax return, you may be able to deduct the portion of a co-op’s monthly fee that goes to property taxes and mortgage interest. However, none of a condo’s monthly maintenance fee is tax deductible.

You might want to consult a tax professional about these nuances before moving forward with a co-op or condo purchase.

Privacy vs Community

If you’ve ever lived in one of those neighborhoods where the only time you saw your fellow residents was just before they pulled their cars into their garages, it could take you a while to adjust to cooperative or association living. Because you share ownership with your neighbors, you may be more likely to see them at meetings and other events. And you can trust that they’ll know who you are.

Co-op boards often require prospective buyers — who are potential shareholders — to provide substantial personal information before a purchase is approved, including personal tax returns, personal and business references, and in-person interviews.

You may find that you like the sense of community and that everyone knows and looks out for each other. Or you may not. Again, you might want to ask some questions about socialization and privacy while checking out a particular co-op or an active condo community.

Restrictions

In a co-op, you might run into more rules regarding how you can renovate or even decorate your unit. And don’t forget: You’ll also have to deal with that rigorous application approval process if you ever decide to sell.

Both condos and co-ops frequently have restrictions on renting your unit, how many people can stay overnight or park in the parking lot, the type of pets you can have and their size, and more. Before you look at a unit, you may want to ask your agent about covenants, conditions, and restrictions that could be difficult to handle.

The Takeaway

Whether you end up saying home sweet co-op or condo, ownership offers many benefits you won’t find in a rental. When you’re ready to start a serious search, take the time to look for a lender that will work with you on whatever type of loan you might require. In the co-op vs. condo terrain, there are specialists for both sides.

SoFi offers competitive options for home loans, working with you to find the right fit for your financial needs. You can get prequalified online in just minutes, and you may be able to put as little as 3% down.

Check your rate on a SoFi mortgage today.

---

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

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

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.

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.

SOMG19004

Read more

Living in tiny houses is a growing trend across the country for people looking for affordable alternatives to traditional housing and ways to reduce their environmental impact. Financing for tiny homes may be different than securing a traditional mortgage, which may be limited to bigger spaces. As a result, other types of loans might need to be considered as financing for tiny homes. Here’s a guide to tiny houses and how to get them financed.

What Is A Tiny House?

A tiny house is often defined as a home that is between 100 and 400 square feet. In contrast, the median size of a single-family American home completed and sold in 2019 was around 2,300 square feet, according to the U.S. Census Bureau . That’s nearly six times bigger than the biggest tiny home.

Owners live in their tiny homes themselves, rent them out, use them as a small vacation home or even build them as an accessory dwelling unit (ADU) on the same lot as their primary residence. Tiny homes may be on wheels or they may sit on a fixed foundation.

Prefab homes can be delivered complete to the site, or there are kits that require some assembly. Those who would rather build their own house can hire an architect or draw up plans to their own specifications. Local zoning rules will determine whether or not a person can build or move into a tiny home. And building codes will determine things like ceiling height.

Tiny houses may not have good resale appeal since they are such a specific type of home and are often highly customized. Before buying a tiny house as an investment property, it might be wise to consult a real estate investment professional.

Recommended: Is Buying a House a Good Investment?

Tiny House Pricing

In 2019, the average sales price for a single-family home was about $380,000. Tiny homes cost quite a bit less, anywhere from about $30,000 to $100,000. That price can vary up and down depending on the size of the home, materials used, and amenities. The price of the building is not the only thing to consider.

Buyers of tiny homes must factor in the price of buying or leasing land on which to place the home if they don’t already own it, as well as the cost of hooking it up to utilities.

If the tiny home is on a foundation, there may be state and local property taxes to pay. If the tiny house is on wheels, though, there likely won’t be property tax assessed.

Financing the Land

If property needs to be purchased to have a place to put a tiny home, an option for financing is a land loan. There are three types of land loans: raw land loans, unimproved land loans, and improved loans.

•   Raw land loans are for land that’s completely undeveloped with no electricity, roads, or sewer access.
•   Unimproved land loans are for properties that have more access to amenities like utilities, but lack utility meters.
•   Improved land loans are for land with access to roads, water, and electricity.

The size of the down payment and the interest rate of the loan will depend on what type of loan is needed. For example, lenders may consider raw land to be a riskier option than improved land and require a bigger down payment and higher interest rates.

Mortgages for Tiny Homes

Qualifying for a home loan for a tiny home may be tricky. Some lenders may not be willing to offer first or second mortgages for tiny home financing. However, if a tiny home has a foundation and complies with local building codes, it may qualify for certain mortgages.

Tiny homes may also qualify for what is known as a “chattel mortgage,” a mortgage for moveable personal property. The tiny home acts as security for the loan, and the lender effectively becomes the owner of the tiny home until the loan is paid off and ownership is transferred back to the borrower.

This differs from traditional mortgages that are secured by a lien on the property. Because the size of the loans are typically small, chattel mortgages may have relatively short terms, though interest rates may be relatively high.

Personal Loans

A personal loan can allow individuals access to money that they can use for any personal, family, or household purpose, from paying off credit cards to an effective tiny house loan. Depending on the lender, loan amounts can range from $1,000 to $100,000. When the applicant is approved for a personal loan, they’ll receive the loan amount in a lump sum and pay it back in installments with interest.

Personal loans may be secured or unsecured. Unsecured loans are not backed with any collateral, and the interest rates can range from 5% to 36%, depending largely on the borrower’s credit score.

Secured loans are backed by collateral, such as personal savings, a car, or another home owned by the same borrower. They typically come with a lower interest rate than their unsecured counterparts, but if a personal loan is defaulted on, the borrower’s assets can be seized by the lender to repay the debt.

Home Equity Loans

The equity someone may have built up in a home they already own can be tapped to finance a tiny home for use as a vacation home, rental property, or ADU. A home equity loan is a fixed amount of money secured by a borrower’s home.

Usually, up to 85% of the equity accumulated in a home can be borrowed, though actual loan amounts will also depend on the applicant’s income and credit history. The home equity loan is repaid with monthly payments over a fixed term. And if the borrower fails to repay, the lender can foreclose on the house.

A home equity line of credit (HELOC) may be another option to finance a tiny home. HELOCs differ from home equity loans in that the borrower doesn’t receive a single lump-sum payment from the lender.

Rather, a HELOC gives the borrower access to a line of credit that can be drawn down, paid back, and drawn down again, if need be, within a certain time period. The HELOC is secured by the borrower’s home, so as with a home equity loan if the debt is not paid, the lender can use the home as collateral.

Loans From Tiny House Builders

A tiny house builder may be able to help secure financing through unsecured loans based on an applicant’s credit score, or secured loans backed by the value of the tiny home. These tiny-house loans may have longer terms and lower starting interest rates than personal loans, but they may require a downpayment.

RV Loans

If the tiny house has wheels and is certified as an RV by the Recreational Vehicle Industry Association, an RV loan may be another option for financing. Online lenders, banks, and credit unions may all offer RV loans. In many cases, the tiny house will serve as collateral for the loan, the same way a car would serve as collateral in an automobile loan.

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

The Takeaway

If you’re in the market for a tiny house, you may need to think beyond traditional mortgages. Personal loans, unlocking the equity in an existing home, and other forms of financing can set you on your way to owning the tiny house of your dreams.

To explore how personal loans can help you accomplish your real estate and other financial goals, learn more about SoFi personal loans, with competitive interest rates and no fees required.

---

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.

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.

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.

SOPL21004

Read more

If you’re like many Americans, your home is the single largest purchase you’ll ever make–and one you likely can’t afford to replace if disaster strikes.

That’s why homeowners insurance can be a wise investment. This type of insurance will compensate you if an event covered under your policy damages or destroys your home or personal items.

It will also cover you in certain instances if you injure someone else or cause property damage.

Although having homeowners insurance isn’t required by law, mortgage lenders often require you to insure your home until you’ve paid the loan in full.

Choosing the right coverage for your home–and understanding exactly what is (and what isn’t) covered–can be confusing though.

Some policies cover more than others, and how much coverage you need will depend on your circumstances, as well as your risk tolerance.

Here’s what you need to know about the options available for protecting your home.

Recommended: What’s the Difference Between Homeowners Insurance and Title Insurance?

What Does Homeowners Insurance Typically Cover?

Most standard homeowners insurance policies include six different kinds of important coverage.

•  Dwelling: This covers the physical structure of the home itself, including its foundation, walls, and roof, as well as structures attached to the home such as a front porch.
•  Other structures on your property: This covers things that aren’t attached to the main home structure, like garages and fences.
•  Personal property: This includes personal items including clothing, furniture, and everything else that you put inside your home.
•  Additional living expenses: This provides funds to pay for temporary living expenses, such as hotel costs and restaurant meals, while your home is being repaired or rebuilt.
•  Liability coverage: This protects you against lawsuits and damages you or your family cause to other people or their property.
•  Medical coverage: This is offered to foot the bills incurred by somebody who is injured on your property, whether it’s your fault or theirs.

What Type of Events Does Homeowners Insurance Cover?

The most common type of homeowners insurance policy on the market is called HO-3 insurance.

This insurance includes coverage of 16 specifically named perils, but it may also offer “open peril” coverage, which means that anything that damages your dwelling that is not specifically excluded in the paperwork will be covered by the policy. (This coverage generally does not extend to your personal property, however.)

The 16 named perils typically include:

•  Fire or lightning
•  Windstorms or hail
•  Explosions
•  Riots
•  Damage caused by aircraft
•  Damage caused by vehicles
•  Smoke
•  Vandalism
•  Theft
•  Volcanic eruptions
•  Falling objects
•  Damage due to the weight of ice, snow or sleet
•  Water or steam overflow from plumbing, HVAC systems, internal sprinklers and other appliances
•  Damage due the “sudden and accidental tearing apart,cracking, burning, or bulging” of an HVAC, water-heating, or fire-protective system
•  Freezing of pipes and other household appliances
•  Damage due to a power surge

What Isn’t Covered by Homeowners Insurance?

Homeowners insurance typically covers most scenarios where a loss could occur. However, some events are generally excluded from policies. These often include:

•  Earthquakes, landslides and sinkholes
•  Infestations by birds, vermin, fungus or mold
•  Wear and tear or neglect
•  Nuclear hazard
•  Government action (including war)
•  Power failure

What if you live in a flood or hurricane area? Or an area with a history of earthquakes? You may want to consider a rider (which is supplementary coverage to an existing policy) for these or an extra policy for earthquake insurance or flood insurance.

Home insurance policies also typically set special limits on the amount of reimbursement you can receive in categories such as artwork, jewelry, appliances, tools, electronics, clothing, cash, and firearms.

If you own something particularly valuable, such as fine art painting or piece of expensive jewelry, you might want to purchase a rider that you will be reimbursed in full for it.

What Should I look for in a Homeowners Insurance Policy?

Homeowners insurance companies typically offer three different reimbursement models or levels of coverage.

Which one you choose can be an important decision. That’s because it will impact how you will be reimbursed in the event your home is damaged or burglarized, and also the cost of your premiums.

These are the most common homeowners policy options, listed from least to most costly.

Actual Cash Value

Actual cash value typically covers the cost of the house plus the value of your belongings after deducting depreciation (i.e., how much the items are currently worth, not how much you paid for them). If your five-year-old TV was stolen, for instance, you would not likely get reimbursed for the cost of a brand-new one.

Replacement Cost Value

Replacement value policies generally cover the actual cash value of your home and possessions without the deduction for depreciation, so you would likely be able to repair or rebuild your home and re-buy your possessions up to the original value.

Extended Replacement Cost Value

This coverage will typically pay out more than the original value of your home and belongings, up to a specified limit, if it actually costs more to fix your home and/or replace your possessions.

The limit can be a dollar amount or a percentage, such as 25% above your dwelling coverage amount. This gives you a cushion if rebuilding is more expensive than you expected.

Guaranteed Replacement Cost Value

Guaranteed Replacement Cost is the most comprehensive coverage. This inflation-buffer policy pays for whatever it costs to repair or rebuild your home and replace your possessions—even if it’s more than your policy limit.

This type of coverage can be ideal since you typically don’t need just enough insurance to cover the value of your home, you will likely need enough insurance to rebuild your home, preferably at current prices.

Understanding Homeowners Insurance Deductibles

Homeowners policies typically include an insurance deductible — the amount you’re required to cover before your insurer starts paying.

The deductible can be a flat dollar amount, such as $500 or $1,000. Or, it might be a percentage, such as 1 or 2 percent of the home’s insured value.

When you receive a claim check, an insurer typically subtracts your deductible amount from the total claim.

For instance, if you have a $1,000 deductible and your insurer approves a claim for $8,000 in repairs, the insurer would likely pay $7,000 and you would be responsible for the remaining $1,000.

Choosing a higher deductible will usually reduce your premium. However, you would likely have to shoulder more of the financial burden should you need to file a claim.

A lower deductible, on the other hand, means you might have a higher premium but your insurer would likely pick up a greater portion of the tab after an incident.

The Takeaway

Of the many types of insurance coverage out there on the market, homeowners insurance is one of the most important–it literally protects the roof over your head, which very well might also be your most valuable asset.

Homeowners insurance covers damage to your home and its contents. It also typically reimburses you for losses due to theft and pays out if visitors to your property are injured.

Your policy may also pay for living expenses, such as a hotel stay, if your home becomes uninhabitable.

In some cases, you can get additional policies or riders for events not covered by your regular home insurance, such as flooding, as well as extra coverage for any highly valuable possessions.

Because choosing the right homeowners insurance company and right amount of coverage can be overwhelming, SoFi has partnered with Lemonade to help bring customizable and affordable homeowners insurance to our members.

Prices start as low as $25 per month, and Lemonade gives back leftover money to charities of your choice.

Check out homeowners insurance options offered through SoFi Protect.

---

SoFi offers customers the opportunity to reach the following Insurance Agents:
Home & Renters: Lemonade Insurance Agency (LIA) is acting as the agent of Lemonade Insurance Company in selling this insurance policy, in which it receives compensation based on the premiums for the insurance policies it sells.

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.

SOCO21022

Read more