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It’s not hard to understand the appeal of rewards credit cards that give cardholders cash back, travel miles, and other perks in return for charging everyday purchases. Credit card bonus offers can stretch those rewards even further for those who know how to take advantage of them.

When it comes to capitalizing on credit card promotions, it’s helpful to know how credit card bonus offers work and how to determine what limited-time credit card offers are available to you. From there, you can decide which promotional credit card offer makes the most sense for you to snag.

Recommended: Can You Buy Crypto With a Credit Card

How Do Credit Card Bonus Offers Work?

To understand how credit card bonus offers work, it’s helpful to first understand the basics of reward credit cards. Whether it’s a cash back card, travel credit card, or some other type of rewards card, these credit cards allow cardholders to earn back a small percentage of the value of their purchases. Account holders may get their rewards in the form of cash back, credit card points, or airline miles.

With credit card bonus offers, credit card issuers layer limited-time offers atop the regular benefits. Some common types of credit card promotions follow.

Welcome Bonuses

Designed to help make a specific credit card more appealing, welcome bonuses can fuel returns in the first weeks or months after signing up for a new card. How welcome bonuses work varies from card to card, but they generally provide increased reward earnings either up to a certain expenditure limit or for hitting a minimum spend.

The rewards may come in the form of flat-rate cash back or points, a better rewards rate, or another limited-time perk, depending on the type of credit card. For example, a card might provide a bonus for cardholders who charge at least $1,000 within the first three months of receiving their credit card. Another offer might double the rewards rate for a set time period, up to a maximum rewards dollar value. In some cases, cardholders might receive a welcome bonus simply for signing up.

Lower APR

The annual percentage rate, or APR, is the rate of interest that is applied to credit card balances and transactions like cash advances. Some credit card promotions offer a lower — or even 0% — APR for a limited time.

These promotional periods may last anywhere from six months to 21 months. After that point, your APR will return to your standard rate, which is determined based on factors like creditworthiness and the type of credit card.

Recommended: How to Avoid Interest On a Credit Card

Other Limited-Time Offers

While welcome bonuses are nice, credit card promotions don’t always dry up after the introductory period. Some credit cards may offer additional periodic promotions, such as increased credit card rewards earnings during a specific time period or offers for spending at a particular retailer or partner.

Look out for promotional emails or notifications on your statement or online account to stay aware of such offers.

What Offers are Available to Me?

If you’re not sure what new credit card bonus offers are currently available to you, it’s easy to check. Simply log onto your credit card account and click over to the rewards portal. That should give you a view of the credit card promotions currently on offer, though you’ll want to log on frequently to see the latest offerings.

You might also be able to opt in to communications from your credit card company about current promotional offers. Check your settings on your communication preferences to ensure you’re not missing out on these emails if you’d like to receive them.

Which Limited-Time Offer Should You Choose?

Any credit card promotion that keeps more money in the cardholder’s wallet is likely an attractive one. But some offers are better suited to certain financial situations.

If You Have a Big Purchase Coming Up

Whether it’s booking a big vacation, paying for a wedding or new appliances, or covering some other big-ticket outlay, timing a big purchase with a credit card promotion period can be beneficial.

It might be a stretch for some individuals to max out a welcome offer that requires $4,000 or more in spending within the first few months. But if a big planned expense is on the horizon, it could be a good time to take advantage of a welcome offer that requires a little more spending than usual. (Just make sure to pay off the balance to avoid interest charges and/or reward penalties.)

Recommended: What is a Charge Card

If You’re Carrying a Balance With a High APR

Although the best strategy to avoid paying interest on credit card charges is to pay off purchases in full by the statement date, that may not always be possible. For those who are trying to pay down a balance, taking advantage of a 0% APR offer (or switching to a balance transfer credit card) may reduce or eliminate interest costs and help with paying down credit card debt.

Recommended: Tips for Using a Credit Card Responsibly

If You Want To Optimize Everyday Purchases

The best type of credit card promotion for getting the most back from everyday purchases really depends on both the spender and the card. For instance, a credit card that provides a welcome bonus of 30,000 airline miles might be a great deal — but only for individuals who travel.

As such, finding the best credit card promotion for regular, everyday spending means taking the time to look at your usual spending habits. Then, compare limited-time credit card offers to find the best personal fit, whether that’s credit card miles or cash-back rewards, or another form of credit card bonus.

Tips for Taking Advantage of Bonus Offers

If you’re hoping to cash in on credit cards bonus offers, here are some key tips to keep in mind.

Do Your Homework

There can be many credit card promotions to choose from, with more limited-time offers popping up all the time. Before choosing a new credit card, it’s always a good idea to do some comparison shopping, considering factors such as annual fees, the APR, and the specifics of any rewards programs.

For those who track their spending, these records can be helpful for gauging actual expenditures across categories in order to estimate the potential benefits of various cards.

Keep Track of Expiration Dates

The important thing to remember about limited-time offers? They expire.

You may want to set up reminders for when offers will end. That way, you’ll remember to meet any minimum spending requirements or get in last-minute purchases before bonus rates end.

Avoid Carrying a Balance

Most credit card purchases don’t incur interest — if the cardholder pays off the full balance by the statement due date. Carrying a balance means interest charges, which are usually applied going back to the date of purchase. This can quickly add up and potentially outweigh the benefits of any credit card promotions.

Furthermore, before only paying the minimum, it’s a good idea to check the terms and conditions, which will tell you specifics of how a credit card works. That way, you can ensure the promotion still applies for those who carry a balance.

Think Before Canceling a Card After an Offer Expires

With so many attractive credit card offers on the market, it might seem like a good idea to open and close accounts in order to keep claiming new promotions. However, this may not be the best strategy for those concerned about their credit score.

For starters, each new credit card application results in a hard inquiry to check the applicant’s credit score. Each time a lender conducts such a check, it results in a slight reduction in credit score — which can last up to a year (and will remain on one’s credit report for up to two years). Applying for many cards to claim multiple offers can add up.

Furthermore, as much as 30% of your credit score is informed by your overall credit utilization rate, or how much you owe on all your revolving accounts, such as credit cards, compared with your total available credit. Canceling cards reduces the total amount of credit you have available — and if it’s a card with a big credit limit, cancellation can have a significant impact on your credit utilization ratio.

Recommended: What is the Average Credit Card Limit

Will I Get Approved Immediately?

Even if you find the perfect promotional credit card offer, remember that there’s no guarantee that you’re going to get approved for it. Particularly if reaping the bonus credit bonus offer requires applying for a new card, know that there’s never a guarantee of approval.

Rewards credit cards generally require at least a good credit score (meaning 670+) to qualify for. If your score is too low, or there are any credit report concerns, that could impact your approval odds.

Application-related issues could interfere with how fast you’re approved, too. For instance, if there’s an issue verifying your income or you’ve inadvertently turned in an incomplete application, it might take a bit longer for the credit card company to make a decision.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

The Takeaway

Whether it’s a welcome bonus, a low APR introductory rate, or a periodic promotion, credit card bonus offers can amplify rewards for those who know how to take advantage of them. To choose the right credit card promotion for your financial situation, it’s important to know the options and how they work. For instance, you might opt for a welcome bonus if you know a big purchase is coming up, whereas a 0% APR promo might be better if you’re working to pay down a credit card balance.

Always keep your eyes peeled for new credit card bonus offers to crop up, too. For instance, those who get a SoFi Credit Card temporarily have the chance to earn a higher rate of cash-back rewards.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

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¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.


¹See Rewards Details at SoFi.com/card/rewards.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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.

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 .

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Is it better to pay off a mortgage or invest? The answer will depend on your financial situation, but let’s look at pros and cons of each along with a strategy that can allow you to combine the best of both worlds.

Paying Off a Mortgage vs. Investing in the Market

How Does a Mortgage Loan Work?

In general, someone borrows money from a lender to buy a house at a certain interest rate and term length. As payments are regularly made (usually monthly), part of each payment goes toward the principal, lowering the balance. As the balance goes down, more of each payment typically goes toward the principal.

Further reading:

•  the different mortgage types

•  tips for shopping for a mortgage

•  the value of getting mortgage pre-approval

•  how to get answers to common mortgage questions

Components of a Mortgage Payment

You may hear the components of a mortgage payment summarized in an acronym: PITI. This stands for principal, interest, taxes, and insurance.

Principal

Initially, your principal is the amount of money you borrow. As you pay down your loan, the principal is the remaining (current) balance. When it comes to the mortgage loan payments themselves, the principal is the portion of the payment that goes toward the balance, reducing the amount. As the balance goes down, more of your payment goes toward the principal and less to interest.

Interest

The interest is based on the interest rate charged on the loan’s principal, and these dollars go to the lender, serving as a key part of the cost of borrowing. As your loan balance goes down, less of your payment typically goes toward interest. Most mortgage loans have a fixed interest rate; others are variable, based on a certain financial index.

Move your cursor on the amortization chart of this mortgage calculator tool to see how principal and interest change over time.

Taxes and Insurance

A mortgage payment typically contains a month’s worth of property tax, which is based on the assessed value of the home and the tax rate where you live. A payment also may include a month’s worth of homeowners insurance and, if applicable, mortgage insurance that protects the lender in case of default.

Investment Gains vs Loan Interest Saved

At a high level, to determine which strategy can have the biggest positive financial impact, you can compare what investment gains you’ve had (or estimate future gains) and compare that to how much interest you would save when paying down your mortgage more quickly.

Pros and Cons of Paying Off Your Mortgage Early

Pros include the following:

•  You won’t have a mortgage payment anymore, which frees up money for other purposes: investing, paying for a child’s college expenses or wedding, and so forth.

•  You no longer have to worry about having the funds to make your payment. This can be especially helpful if unexpected expenses arise.

•  Typically, paying off your mortgage early will lower the amount of money that you pay in total interest — which means that you’ll pay back less on your mortgage overall.

•  Paying off your mortgage can give you a real sense of accomplishment, and if you pay it off early, those feelings can be magnified.

•  If you need to borrow against the home in the future, none of the proceeds will be needed to pay off a current mortgage.

Here’s more about paying off a mortgage early.

Cons include the following:

•  Depending on the current stock market return and the rate you’re paying on your mortgage, it could be more financially advantageous to keep making regular payments and then invest available funds.

•  Your credit score could drop a bit because you’ll no longer have a mortgage in your mix of open types of credit.

•  Focusing on rapidly paying off a mortgage may cause someone to drain their emergency savings fund, something that’s not typically recommended.

•  Although uncommon now, some lenders charge a prepayment penalty for early mortgage payoffs. When this clause exists, it’s for the first three years of a mortgage. Check your mortgage note for specifics, or ask your lender or loan servicer.

•  When you no longer have a mortgage, you no longer qualify for the mortgage interest tax deduction.

Pros and Cons of Investing

Pros include the following:

•  Many times, when you buy shares of stock, you can get a good return on your investment in the long term. To get a sense of current returns, you can check the 10-year annualized return for the S&P 500.

•  Nowadays, it is easier than ever to invest in the stock market. You can use a broker in person or invest online. If a share of a stock of interest is too expensive, you can often buy fractional shares of that stock.

•  If you’re in a workplace retirement plan, like a 401(k), your employer may match your contributions up to a certain amount.

•  Stocks are liquid assets, which means that you can buy and sell at any time with low transaction costs. So, if you need cash, you can sell stock shares for that purpose. Plus, some stocks will provide you with dividends that you can reinvest or spend.

•  Numerous strategies exist, including actively participating in trading or keeping stocks in your portfolio with the hopes of long-term growth.

Cons include the following:

•  Regarding the “hopes” of long-term growth, when investing in stocks, you could lose your entire investment in a stock, including the initial investment. If you’re a common stockholder, you get paid last if a company defaults.

•  If you’re managing your own portfolio, you’ll need to invest time into investigating stocks, deciding what to buy and sell, and otherwise monitoring the stock market.

•  If you sell stocks at a profit, you’ll usually need to pay capital gains tax (although this can be offset through losses).

•  While investing, you’ll still need to make your mortgage payment (until the home is paid off).

•  Depending on your personality type, watching stock values in your portfolio go down can be an emotional experience, and it may take time to figure out how often you should check that portfolio. Too often, and it can stress you out unnecessarily. Too little, and you may miss key trading information.

Evaluating Your Financial Situation

This involves calculating two key figures: your net worth and your debt-to-income ratio (DTI). To determine your net worth, add up all of your assets (what you own) and subtract your liabilities (what you owe). Assets include your home’s value, vehicles, bank accounts, investments, and cash. Do not include your income. Liabilities are your mortgage, car, personal and student loans, credit card balances, and so forth. This figure can be positive (you own more than you owe) or negative (you owe more than you own), with a financial goal often being to increase your net worth.

For the second metric — your DTI — add up your gross (pre-tax) monthly income as well as your monthly debt obligations, such as your mortgage, car payment, and other loan payments. Divide your total monthly debt by your total gross monthly income, and the resulting ratio (say, 0.30 or 30%) is your DTI. When you have a lower DTI (say, under 30% or even 20%), this indicates more cash flow to either put toward your mortgage or to invest.

Factors You Should Put Into Consideration

The earlier you can begin to pay down your mortgage, the more you’ll likely benefit. That’s when more of your mortgage payment normally goes toward the interest.

That said, the earlier you can begin to invest, the longer you’ll have for your investments to build in value. Plus, because of compound interest, each dollar that you invest today will be worth more than a dollar that you would invest years from now.

Starting in 2018 and set to last through 2025, the federal government nearly doubled the amount of the standard deduction that taxpayers can claim. This means that far fewer people itemize their deductions, which in turn means that the mortgage interest deduction isn’t used by those taxpayers when they file their income taxes.

If real estate values are dropping in your area, paying down your mortgage can help you from going underwater (owing more on the home than what it’s currently worth). Being underwater can make it more difficult to sell or refinance the home. Struggling homeowners can look for mortgage relief programs.

Other Considerations

To this point, the post has largely focused on this question: Is it better to pay off a mortgage or invest? Let’s take a step back and look at issues to consider before doing either. First, do you have an emergency savings fund that could cover your monthly expenses for three to six months? If not, that’s a priority often recommended by experts.

Plus, if you have high-interest debt, such as credit card balances that you don’t pay off each month, it’s usually better to pay that off before paying extra on your mortgage or investing.

Another strategy: You could consider refinancing your mortgage to a lower rate to lower your mortgage payment. Then, when you put extra money toward the balance, even more would go to the principal than when the interest rate was higher.

Deciding What’s Best for You

Pay off house or invest? Perhaps the information provided has already allowed you to make a decision. However, there’s one more strategy to consider: doing both.

Best of Both Worlds: Funding Both at Once

Instead of simply considering two options, pay off mortgage or invest, another possibility meets in the middle: making additional contributions to your retirement investments while also paying extra on your mortgage principal. This is most effective early on, but adds value through the life of the mortgage.

If the stock market becomes especially volatile or is significantly heading downward, you could focus on the mortgage paydown during that time period.

The Takeaway

Pay off the mortgage or invest? It depends on your financial situation and priorities. Each choice has pros and cons, but a best-of-both-worlds strategy is to do both.

If you are seeking a new mortgage loan or want to refinance, more information is available at the SoFi help center for home loans.

SoFi Mortgages are designed to fit your needs: competitive rates, a variety of terms, and down payments as low as 3% for qualifying first-time homebuyers.

Look into SoFi’s home loan rates today.

FAQ

Is there any disadvantage to paying off your mortgage early?

If a mortgage note includes a prepayment penalty, this can cost you money. Other disadvantages are loss of the mortgage interest tax deduction and a potential drop in credit scores. Plus, it may be more advantageous to invest those dollars instead.

Should I pay off my mortgage or save money?

It depends! Look at the pros and cons of paying off a mortgage and the pros and cons of investing and make the best decision for your financial situation.

Is it better to pay off my mortgage or invest for retirement?

Ideally, you can do both. If that’s not financially possible right now, look at the pros and cons sections to review factors to consider in making your decision.

Should I invest when I have a mortgage and other debts?

Benefits definitely exist when you can invest and make extra payments on your mortgage. If doing both isn’t possible right now, explore pros and cons described in this post to create your strategy. If “other debts” include high-interest debt, such as credit cards that aren’t paid off in full each month, it typically makes sense to prioritize the payoff of that debt.

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Photo credit: iStock/burcu saritas

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.

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Most people in the market for a new dwelling will buy an existing home that more or less fits their needs.
Condo. Townhouse. Single-family home. Modular or manufactured home. Cabin or even houseboat. A house hunter has all of those types of homes to choose from.

But new homes don’t come with the problems that old homes might, from lead paint to a kitchen crying out for remodeling. And building a house may seem attractive because you can construct it to fit your specifications, from the number of bathrooms to building an outdoor kitchen.

If you’re ready to build your own house, here are the steps to take.

10 Steps to Building Your Own Home

1. Find a Location

The first thing you’ll need to do is find a site that’s zoned for a residential property. Look into local building regulations to see how much of the site you are allowed to build on and how far from property lines the building must be set back. Check ordinances that might limit size or height. Is there an HOA? Scour the rules.

It’s generally suggested that you not spend more than 20% of your total budget on the building site. When you purchase the land, you will acquire a property deed, which will also act as the house deed.

2. Obtain Permits

Before a shovelful of earth is turned, the local building department must OK the plans and provide permits for the whole shebang: grading, zoning, construction, electrical work, plumbing, and more. When the permits are in hand, construction can start.

On a related note, at various points during construction, the home will need to be inspected for code compliance. Your lender may also send an inspector to keep track of construction status before releasing payments from a construction loan.

3. Prep the Site and Your Finances

Site Prep

Before you start building, you’ll need to prepare the building site. You’ll want to be sure that soil conditions are stable. You may want to engage a civil engineer to give the site a look.

A site surveyor can stake the property boundaries. Then you’ll need to clear brush and debris at least to 25 feet around the planned perimeter of the house.

Size and Cost

The cost of building a house averaged $280,580 in mid-2022, according to HomeAdvisor, the directory of service pros, but the site gave a typical range of $112,500 to $449,000. Obviously location, materials, and level of detail affect the bottom line.

But size is the biggie. The larger the build, the more labor and material costs you should expect. The average new home in the country has about 2,200 square feet at $150 per square foot, HomeAdvisor noted.

After the peak of the pandemic, months long delays to receive materials, from appliances to garage doors, had raised construction costs. Oil prices had significantly increased transportation expense. Rising inflation and interest rates were making their mark. All of which is to say the numbers are a moving target.

Finance Options

When you build a home, you may need a loan that covers the purchase of land, buying materials, and hiring labor. In this case, you may want to look into a construction loan. Unlike mortgages, construction loans are not secured by an existing home, so approval might be tricky and take a bit longer.

The money is paid to your builder in installments. You’ll often only pay interest on the portion of the loan that has been withdrawn. After the typical 12 to 18 months of a construction-only loan, the usual route is to take out a mortgage and pay off the construction loan.

Other financing options are a home equity loan, if you already own a home.

A personal loan of up to $100,000 can pay for part of the construction (or maybe all, for a modest build).

If you’re buying the land, FHA one-time close loans cover the lot purchase, construction, and permanent mortgage. But the loans can be hard to find and are tougher to qualify for than traditional FHA loans.

Check out these additional resources for homeowners.

Choosing Materials

Only an experienced and highly organized person may want to act as their own general contractor for a new house build. Most people will put the job in a contractor’s hands, and add 20% to 30% for the cost of materials and labor.

General contractors already have priced and sourced many of the materials when making a bid. They usually have relationships with wholesale distributors, lumberyards, and retailers.

That said, you may have some skills that you could apply to cut costs. For example, you could look into how much it costs to paint a house and determine if painting the home’s interior could help you save.

Building a Work Team

If you choose to fly solo, you’ll be on the hook for finding subcontractors yourself.

A general contractor will hire all of the team members needed to complete the project and charge 20% to 30% of the overall cost of the home. However, they also typically have regular relationships with subcontractors, who may charge them less than they would a person who hires them on a one-off basis.

As a result, you may not end up saving much or any money by finding subcontractors yourself.

4. Pour the Foundation

Once the building site is cleared, construction can begin, starting with the foundation. Some houses are built on level slabs of concrete that are poured on the ground, leaving space in which to run utilities, like plumbing and electrical.

A home with a full basement requires that a hole is dug and that footings and foundation walls are formed and poured.
The concrete will need time to cure, and no construction will take place until it has set properly.

5. Set Up Plumbing

Once the concrete has set, crews install drains, water taps, the sewer system, and any plumbing going into the first-floor slab or basement floor, and then backfill dirt into the gap around the foundation wall.

6. Assemble the Frame, Walls, and Roof

With the foundation complete, framing carpenters will build out the shell of the house, including floors, walls, and the roof. Windows and exterior doors are installed, and the house is wrapped in a plastic sheathing that protects the interior from outside moisture while allowing water vapor from inside the home to escape.

7. Install Insulation, Complete Electric and Plumbing Installs

Now plumbers can install water supply lines and pipes to carry water through the floors and walls. Bathtubs and showers may be added at this time.

Electricians will wire the house for outlets, light fixtures, and major appliances. Ductwork and HVAC systems can be installed.

8. Hang Drywall and Install Interior Fixtures and Trim

With plumbing and electrical complete, the house can be insulated and drywall can be hung. A primary coat of paint goes on, and the house will start to look relatively finished.

Light fixtures and outlets can be installed, as can bathroom and kitchen fixtures, like sinks and toilets.
Interior doors, baseboards, door casings, windowsills, cabinets, built-ins, and decorative trim go in. The final coat of paint is applied.

9. Install Exterior Fixtures

Crews begin exterior finishes like brick, stone, stucco or siding.
Some builders pour the driveway when the foundation is completed, but many opt to do so toward home completion, along with walkways and patios.

10. Install the Flooring

Wood, ceramic tile, or vinyl floors and/or carpet can be installed at this point.

Is It Cheaper to Buy or Build a New House?

There are so many variables that it’s hard to say.

The median sales price for new construction in May 2022 was $449,000, according to FRED, or Federal Reserve Economic Data.

Can you beat that price with a DIY build? Maybe, if you act as the general contractor and choose cheaper materials.

Keep in mind that HomeAdvisor’s average of $280,580 to build a house does not include the land.

Ultimately, the price of your dream home hinges on location, the cost of labor and materials, and your taste.

3 Home Loan Tips

1.   Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.

2.   Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees. If you get a personal loan from SoFi, there are no fees required.

3.   Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.

FAQ

How long can you expect to live in a self-built home?

If a home is well built and maintained properly, you can expect it to last a lifetime.

How long will it take to build a home?

The average time it takes to build a home from start to finish is 9.4 months for a contractor build and 12 for an owner build, according to data collected by the U.S. Census Bureau.

Is it dangerous to build a home yourself?

If the question means completely DIY — clearing a lot, pouring a foundation, framing, installing electrical, and so on — the answer is “it sure could be.”

Are there safe financing options for self-build projects?

DIY builders and remodelers may use a construction loan, personal loan, home equity loan, or FHA one-time close loan. If you do use a construction-only loan, shop for a mortgage that makes sense once you stand there admiring the finished product.

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Photo credit: iStock/Giselleflissak

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.

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When a domestic bank needs to handle foreign transactions, they can establish a nostro account with a foreign or correspondent bank, which holds the funds and makes transactions on behalf of the domestic bank. Nostro comes from the Latin, meaning “ours.”

Having a nostro account enables the bank to process transactions for their customers in other countries without having to set up a base of operations abroad. The correspondent bank in the other country handles deposits and other transactions, which are denominated in the local currency, minus any foreign transaction fees.

Since nostro accounts are bank-to-bank accounts, not personal ones, it’s unlikely you’ll encounter one of these. But it’s useful to know how financial matters work between countries, in case you’re thinking about what to do with leftover foreign currency, or other financial dealings while traveling or doing business.

What Is a Nostro Account?

A nostro account is set up by a bank in one country, let’s call it the domestic bank, and the funds are held and partly managed by a bank in another country (the foreign bank).

The foreign bank holds all the funds needed for the domestic bank’s transactions in that country, denominated in the local currency, within the nostro account.

When customers of the domestic bank have relocated, or are traveling or doing business abroad, they can use the foreign bank to make deposits and withdrawals, and so on. The foreign bank works with the domestic bank to ensure that the currency exchange for all transactions is accurate.

A nostro account is the bank’s bank account in another country. Individuals do not have nostro accounts. This system operates behind the scenes, and isn’t something you need to think about if you’re wondering how to invest in a foreign currency, although nostro and vostro accounts do help with foreign currency trading.

How Does a Nostro Account Work?

When opening a nostro account, you open an account with another bank in a foreign country. The foreign bank is also sometimes called the facilitator bank or correspondent bank.

Financial institutions and large corporations that are involved in international trade will typically set up nostro accounts. This gives the organization the ability to hold funds in a foreign currency (via the facilitator bank), without the need to convert its own currency into a foreign currency.

Interestingly, for accounting purposes, the foreign bank calls this account a vostro account, meaning “yours.” It is the same as the nostro account, but each bank uses a separate term for their accounting purposes.

Recommended: What Are Traveler’s Checks?

Example of a Payment Using a Nostro Account

What is a nostro account and how, exactly, does it work in real life?

Say that a small domestic bank located in Colombia has a number of customers who are traveling, living, and working in the U.S. temporarily. The Colombian bank might establish a nostro account with a bank in the U.S. to offer services to those customers.

The U.S. bank would be the facilitator bank in this arrangement. As such, the U.S. bank could accept deposits on behalf of the domestic Colombian bank into its nostro account. Those deposits would be denominated in U.S. dollars (which is also considered the world’s reserve currency).

Funds, such as deposits to the U.S. bank, could then be forwarded to the domestic bank in Colombia through the SWIFT system. SWIFT is the Society for Worldwide Interbank Financial Telecommunications, a cooperative that offers safe and secure financial communications to facilitate cross-border transactions.

The Colombian bank could then convert the deposits to its local currency, and credit customers’ accounts with the corresponding amount of money, minus any fees charged.

Recommended: What Is Forex Trading?

Nostro Account vs. Vostro Account

The terns nostro and vostro both describe the same bank account, but from each bank’s perspective. That’s because the domestic bank looks at the funds in the other bank as “ours” — nostro.

Meanwhile, the bank in the other country that holds the account considers it a “vostro” account (vostro means “yours). The money in the account is held in a foreign currency (i.e., the currency of the correspondent bank), then converted to local currency once the funds are transferred to the domestic bank.

Essentially, the terms vostro and nostro simply help to distinguish between the two sets of records that must be kept and reconciled by the two banks.

Advantages of a Nostro Account

•   There are several advantages to having a nostro account.

•   Ease of transactions in conducting international currency exchanges.

•   Nostro accounts allow you to pay money in your currency without having to incur foreign exchange risk.

•   Nostro accounts allow holders to keep funds in a foreign currency.

Disadvantages of a Nostro Account

•   There are also some disadvantages that come along with maintaining a nostro account.

•   There may be some added expenses associated with money transfers using nostro accounts.

•   Since you are working with financial institutions outside of the U.S., there are rules and regulations you have to comply with.

The Takeaway

Nostro accounts are an important behind-the-scenes system that banks and large corporations rely on to make international and foreign exchange transactions seamless. This specialized system helps settle international trades and payments without one bank having to physically set up operations in a new country.

Nostro is Latin for “ours,” which is the term used by the domestic or originating bank. Vostro means “yours” and is the term used by the correspondent or facilitating bank that holds the funds on behalf of the other institution. The two terms refer to the exact same account, just from different perspectives for accounting reasons.

Despite the convenience, nostro accounts come with certain fees and expenses, along with regulations that must be adhered to when executing these transactions.

Fortunately, most individuals don’t have to consider vostro or nostro systems when opening up their personal bank accounts. For example, if you open an all-in-one bank account with SoFi, you’ll just enjoy the convenience of banking easily and securely from your phone or computer, no matter what is happening across borders. If you set up direct deposit, you can earn a competitive interest rate. Also, SoFi members pay no account or overdraft fees, and can access complimentary financial advice from professionals as needed.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What is a nostro account and why is it used?

A nostro account is a bank account a bank holds at a foreign bank denominated in a foreign currency where the account is held, and facilitates foreign exchange transactions with ease.

How do I open a nostro account?

Individuals don’t open nostro accounts. If you are part of a large bank or corporation, you would establish a nostro account with a bank overseas.

Does a nostro account earn interest?

A nostro account may earn interest, so it’s likely that deposits made with the foreign bank would offer competitive rates to customers relative to that location.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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If you’re shopping for a new home and traditional single-family houses are out of your price range or the mere idea of lawn mowing and tree trimming makes you sweat, a townhouse could be the answer.

Many but not all buyers will find that townhouses rise to the occasion.

What Is a Townhouse?

Among the different home types, from condos to modular homes, are townhouses.

But what is a townhouse specifically? It’s a multifloor home with its own entrance that shares at least one wall (not floors or ceilings) with an adjacent townhouse. Townhomes may be part of a community of units with a uniform appearance, but that isn’t always the case.

Why Buy a Townhouse?

There are pros and cons of buying a townhouse, with benefits including the following:

•   Ownership

•   Affordability

•   Low maintenance

Here’s more about each benefit.

Ownership

It’s a bit tricky because some townhouses are sold as condos. If you buy a townhome as a condo, you will own just the inside of your unit. If you buy it as a townhouse, you’ll own the interior and exterior of the structure and the land under and sometimes around your property.

This means fewer restrictions on how you’d use your yard compared with a condo owner. Townhouse owners could, as just one example, have the right to grill in their private outdoor space.

Ownership of the structure and land also means that financing a townhouse is much less complicated than financing a condo. It’s basically the same as getting a mortgage for a detached single-family house.

Affordability

Townhouses are typically less expensive than detached single-family homes, which can be especially important in expensive cities and for first-time homebuyers. Townhouses can serve as space-efficient choices, too, in places where land is scarce.

Note that townhouses may be more expensive than a condo in the same community.

Low Maintenance

Yards are likely smaller and, if the townhouse is part of a homeowners association (HOA), you may benefit from its security protocols and maintenance of shared areas. In some cases, you can enjoy amenities like pools because of HOA membership.

Some home downsizers may appreciate the lack of interior and exterior sprawl to maintain.

Recommended: First-Time Home Buying Guide

Disadvantages of Buying a Townhouse

Buying a townhome can also come with disadvantages, including:

•   HOA fees and restrictions

•   Lack of privacy

•   Stairs

Here’s more about each potential disadvantage.

HOA

If the townhouse is part of an HOA, there will be fees to cover shared services and spaces. Plus, HOA rules may limit how you can decorate your townhouse. Who is responsible for roof repair costs can cause confusion.

So be sure to find out the specifics of a townhome you’re interested in buying.

Lack of Privacy

Shared walls automatically mean less privacy than with a detached home, which can be especially problematic for families with young children. This can also be a consideration for young couples who may want to start a family or for other people for whom privacy is a plus.

Stairs

Because townhouses are multistory dwellings, residents will need to climb stairs, which can be challenging for those with temporary or permanent mobility issues. Plus, if someone is used to a larger yard, having a small lot with neighbors nearby can feel constraining.

How to Buy a Townhouse

When buying a townhome, there are several steps to take.

Find a Real Estate Agent

Very few buyers go it alone, so finding a real estate agent who is experienced in your geographical location can help you to make savvy choices. This agent can guide you through the process of finding the right townhouse and help negotiate the best deal for you.

Know the Market

An experienced real estate agent can look into comps, or recently sold townhomes in the area that are similar in size, condition, and features, and you can also use a real estate website to find asking prices of similar townhouses and other real estate in the area.

If more than one buyer is interested in the same townhouse, you’ll need to be clear in your mind about how much you’re willing to pay for the property and strategically make an offer without busting your budget.

Investigate the HOA Fees

If the townhouse is part of an HOA, you’ll want to know what the monthly fees will be and what they’ll cover.

You might ask when the HOA last raised the fee, by how much, and when any new increase might happen. Looking at the HOA’s budget and reserve study could also be a good idea. If the reserves are low, the community is at risk of needing a special assessment.

Shop for a Mortgage and Get Pre-approved

If you’re shopping for a mortgage, you’ll benefit from looking at more than advertised interest rates. You can apply with more than one lender and then compare loan estimates.

You may want to compare the APRs on Page 3: The annual percentage rate reflects the interest rate, lender fees, discount points, and the loan term. If comparing, realize that escrow fees and mortgage insurance can skew the APR.

The loan estimate will also give a monthly payment. To get a sense of what a payment might be with different down payments, you can also use an online mortgage calculator.

By getting mortgage pre-approval, you’ll know exactly how much of a townhouse you can afford to buy, which can give you the ability to bid on a property with confidence and compete with other buyers for a property of choice.

Order a Home Inspection

It’s a good idea to get the townhouse inspected inside and out. Also pay attention to how well neighbors are maintaining their properties.

The Takeaway

Buying a townhouse could be a good choice for first-time homebuyers, lawn-mower phobics, downsizers, and people priced out of the larger market. If you decide that buying a townhome is the right choice for you, you’ll probably need to apply for a mortgage.

SoFi is here to answer all of your mortgage questions. And SoFi offers competitive mortgage rates and flexible terms.

Qualifying first-time homebuyers can put as little as 3% down.

It takes just minutes to view your rate.

FAQ

Is it worth buying a townhouse?

Townhouses, in general, don’t appreciate in value as quickly as detached single-family homes. But the purchase price is often lower.

Is a townhome a good first home?

A townhouse can be a good first home because of the low maintenance, and amenities may be included. Plus, the price is right for many first-time homebuyers.

Why shouldn’t you buy a townhouse?

Disadvantages can include a lack of privacy and usually a small yard. If an HOA is in place, ongoing fees and rules are involved. Plus, the stairs that come with townhomes may be challenging for some people to navigate.

How do I choose a good townhouse?

When buying a townhome, make sure that it has the features you want and need in a neighborhood where you’d like to live at a price within your budget. If it’s part of an HOA, ensure that the fees are palatable and cover what you expect them to.

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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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