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When a couple decides to divorce, what happens to the house will depend on several factors, including state law. The partners might continue to jointly hold the property, sell the home, or one could buy the other out.

Getting divorced is usually not an easy situation. Setting aside the major impact on one’s emotional life and family, it can be challenging to tackle what happens to the home and the mortgage, which often represent the biggest asset a married couple owns.

Here, you’ll learn the answer to important questions about divorce and your home, including: when you get divorced, what happens to the house?; how does assumption of a mortgage after divorce impact taxes?; and how can your credit score be affected in a divorce with a mortgage?

Who Gets the House in a Divorce?

In an ideal divorce scenario, spouses will agree on how all property will be divided (and address other major concerns, such as child custody and debt responsibilities). If you and your spouse are able to agree to all terms of the separation without needing litigation, you can get an uncontested divorce much more affordably.

But what happens to the house when you get divorced and can’t agree on things? That often comes down to where you live. State law can play a key role in the outcome.

Divorce and State Laws

When you get married, it is your state, not the federal government, that awards marriage licenses. Just think about the classic marriage ceremony line, “By the power vested in me by the state of XYZ.” That means, state laws, rather than federal laws, will impact property division and debts in a divorce. In general, you’ll be in one of two types of states:

•   Common law property

•   Community property

The type of state you live in will dictate how the judge will approach the division of assets in a divorce proceeding.

Note that prenuptial and postnuptial agreements can impact the application of these laws and the assumption of a mortgage loan (and other property) in a divorce.

Common Law Property States

In a common law property state (also called separate property state), a married couple can own assets separately, like a car. Some spouses may choose not to open a joint bank account; some may keep their earnings and their debts separate.

Living in a common law property state means one spouse can even make a major purchase, such as a house, solely in their name, with only their name on the deed. However, that doesn’t mean that partner would necessarily automatically get the house in a divorce. Instead, common law property states use equitable distribution.

When engaging in equitable distribution, the judge will do their best to fairly distribute all assets. One spouse may get the house, but the other could get a mix of various assets roughly equivalent to the property.

Equitable distribution does not necessarily mean a 50/50 split. Instead, the judge will consider factors such as:

•   How long you’ve been married

•   How much each spouse earns, as well as future earning projections

•   Your age and health

•   Whether one spouse has another property to live in.

From these and other factors, the judge will attempt an equitable distribution of all assets that is fair, but not necessarily equal. The judge does not consider fault during these proceedings, even if one spouse is deemed responsible for the divorce, say, due to infidelity.

Most states are common law states, but you can check with a divorce attorney or your state’s website to understand the unique divorce laws where you live. Here is a list of common law states. (It’s worth noting that although Alaska by default is a common law state, it gives couples the ability to file a community property agreement before or during their marriage):

•   Alabama

•   Alaska

•   Arkansas

•   Colorado

•   Connecticut

•   Delaware

•   Florida

•   Georgia

•   Hawaii

•   Illinois

•   Indiana

•   Iowa

•   Kansas

•   Kentucky

•   Maine

•   Maryland

•   Massachusetts

•   Michigan

•   Minnesota

•   Mississippi

•   Missouri

•   Montana

•   Nebraska

•   New Hampshire

•   New Jersey

•   New York

•   North Carolina

•   North Dakota

•   Ohio

•   Oklahoma

•   Oregon

•   Pennsylvania

•   Rhode Island

•   South Carolina

•   South Dakota

•   Tennessee

•   Utah

•   Vermont

•   Virginia

•   West Virginia

•   Wyoming

Community Property States

Only a handful of states are considered community property states, which strive for an even split of all assets. When you get married in a community property (also called shared property) state, you own all assets acquired during the marriage together, no matter who purchased an item or took on a debt.

In such states, property must be divided 50/50. Because you can’t split a house down the middle, the court will work to find other ways to ensure equitable distribution of assets. (For instance, if one spouse gets a home with $30,000 of equity, the other spouse must receive $30,000 of equity in some other way.)

Here’s a list of community property states:

•   Arizona

•   California

•   Idaho

•   Louisiana

•   Nevada

•   New Mexico

•   Texas

•   Washington

•   Wisconsin.

Option 1: Sell the House and Split the Profits

The first and most obvious option for spouses to consider when getting a divorce is to sell the house and split the profits. If neither spouse wants to retain the house, this is ideal — both spouses can walk away with something to fund their next move, whether it’s an apartment, condo, or another house.

Of course, that can be easier said than done. Selling a house can be a lot of work, so you’ll need to get on the same page about who’s doing what to get the house ready, work with a real estate agent, and maintain the mortgage and other costs until it’s sold.

This may be your only option if neither you nor your spouse can afford (or wants to keep) the house on your own. Getting used to living on a single income can be a tough transition and require smart budgeting after divorce.

Option 2: Maintain a Joint Mortgage

Spouses who are able to remain civil and trust each other may consider keeping a joint mortgage for one of two reasons:

•   Spouses can take turns living in the house and spending time with kids. This means kids don’t have to go back and forth from two places and can keep some routine in their lives in what’s an otherwise turbulent time for them.

•   Spouses with a nice house in a great market can earn and split profits by renting out the home or using it as a vacation rental.

Recommended: How to Prepare Financially for a Divorce

Option 3: One Partner Buys Out the Other

In an uncontested divorce, spouses may agree that one person can keep the house and the other will receive something else to be financially fair — money or other assets, usually.

But this can also be worked out in the courts during a divorce settlement. For instance, a spouse may choose to let their partner retain the house in exchange for not having to make alimony payments. Or the spouse not assuming the mortgage in the divorce may simply get the rest of the assets.

To ensure equitable compensation, the spouse not getting the house could even receive monthly payments from the spouse who retains the mortgage over a set amount of time. Divorce attorneys can get creative with these arrangements to find a solution both partners are happy with.

Tax Implications

Fortunately, there aren’t major tax implications if you get the house in a divorce. The IRS does not treat property transfers between spouses — even those divorcing — as a sort of financial gain or loss. Instead, you’ll treat the property as gift income for taxes, but the property value is not taxable.

As with most aspects of taxes, there are always exceptions. Reach out to a tax accountant, or review IRS guidelines if you have questions.

Credit Score Implications

Property distribution in a divorce won’t directly impact your credit score either. That said, if you are the spouse who does not retain the house, your name will no longer be on the mortgage loan. That affects your credit mix and length of credit history, which can impact your score in the long run.

Similarly, if you are the spouse who assumes the mortgage but you struggle to make on-time payments because of your new financial situation, you risk damaging your score by falling behind on payments.

And what if a spouse stops paying a mortgage during a divorce, when your name is still on the loan? That can indeed hurt your credit score, so it’s crucial that you and your spouse work together to make sure you’re making these and other shared payments every month.

Recommended: Am I Responsible for My Spouse’s Debt?

How Refinancing Can Help

If you are the spouse who keeps the home in a divorce, the court may require you to refinance to get your ex’s name off the mortgage. Doing this can be great not just for the convenience of getting their name off the loan. You may be able to work with a lender to obtain a more manageable monthly payment based on your single income. Depending on your credit and the current market conditions, you might even get a lower interest rate. In this case, home loan refinancing could be an advantageous move for you.

The Takeaway

Divorce can often be a tough and tumultuous time. One of the big financial decisions to make is what happens to the house when your union ends. The state you live in may impact how the court rules in the division of assets. You may both continue to hold the property jointly, sell it, or one partner might buy the other one out. And if you end up with the house, you may need to (or want to) refinance your mortgage to make payments more manageable. Working with a divorce lawyer may be your best bet for navigating all these difficult questions and decisions.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Does one spouse always get the house in the divorce?

One spouse doesn’t always walk away with the house in the divorce. The disposition of the house will depend on what state you live in, whether there are children living in the house, and whether or not one spouse wants to (and can afford to) take over any mortgage on the property, among other factors.

Is a house owned before marriage divided equally in a divorce?

A house that one partner owned before marriage might not be included in the division of property during a divorce if the property has been maintained separately from shared marital property. If the divorcing couple lived together in the house or shared in its upkeep and expenses, then it could be included in the marital property divided during the divorce. Whether property is considered shared will depend on your individual history and state laws.

Do I have to refinance if I keep the house in a divorce?

The partner who keeps the house in a divorce doesn’t always have to refinance to get their ex off the mortgage, but it is the most common solution. Not all home loans are assumable (meaning one partner could assume the burden of paying off the loan). This approach is feasible with some government-backed loans.

Photo credit: iStock/hikesterson

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-criteria for more information.

SOHL-Q425-191

Whether a layoff, inflation, or other bugaboo is causing you to struggle with your mortgage payments, life rafts are available. Options for people who need mortgage relief include forbearance, loan modification, and refinancing. Here’s a closer look at each option.

What Are Mortgage Relief Programs?

Relief programs don’t magically make monthly mortgage payments disappear, but they can pause or lower those payments.

Through a perennial form of mortgage relief, mortgage forbearance, borrowers facing financial troubles may be able to defer or trim payments short term.

It’s important to know that if you even anticipate a problem making a payment, it would be smart to contact your mortgage servicer (the company you send your mortgage payments to) immediately to talk about your options.

Tardy payments damage credit scores, and late payments stay on a credit report for seven years.

Catching a Break Through Mortgage Relief

The remedies for mortgage payment anguish come in several forms.

Forbearance at Any Time

While pandemic-related laws that required lenders to provide mortgage forbearance relief to struggling homeowners expired in April 2023, many lenders offer forbearance programs to borrowers on a case-by-case basis. If you’re dealing with a short-term crisis, you can reach out to your lender and ask for mortgage forbearance, to temporarily pause or lower your mortgage payments.

Many lenders will ask for documentation to prove the hardship. They also will want to know whether the hardship is expected to last for six months or less or 12 months.

During forbearance, interest accrues and is added to the loan balance. All suspended or reduced payments will need to be paid back.

Refinancing

Homeowners coming out of forbearance may find that it’s a good time for a mortgage refinance, aiming for a lower rate and possibly different repayment term.

When choosing a mortgage term, know that the longer the term, the lower the payments, in general.

It’s generally thought that you should have at least 20% equity in your home to refinance. Your debt-to-income ratio and credit will be assessed if you apply.

There are two refi options for low- to moderate-income homeowners whose current mortgage is owned by Fannie Mae or Freddie Mac. Fannie Mae’s RefiNow and Freddie Mac’s Refi Possible are designed to help those homeowners get better mortgage rates and reduce upfront costs.

Someone with a VA loan can look into an interest rate reduction refinance loan, and an FHA loan borrower may look into an FHA Streamline Refinance or standard conventional refi.

💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

Loan Modification

Homeowners who expect a permanent change in finances, or who are exiting forbearance but don’t qualify for refinancing, can ask for a loan modification.

Loan modification may result in a lower interest rate, a lower principal balance, an extension of the repayment term, or a combination.

You might have to prove the hardship to be approved.

Recommended: Loan Modification vs. Refinancing

Applying for Mortgage Relief

Again, when homeowners realize that they might have trouble making their monthly mortgage payment, they would be doing themselves a favor by contacting their loan servicer.

This applies to primary homes, multifamily properties, and vacation homes.

Suffering in silence does no good. Working with your mortgage servicer could lead to one of the mortgage relief options described above or an agreement to try a short sale to avoid foreclosure.

A deed in lieu (an arrangement where you give your mortgage lender the deed to your home) is also sometimes used to avoid foreclosure.

Recommended: 6 Ways to Lower Your Mortgage Payment

What to Do During Forbearance

A homeowner in mortgage forbearance might want to keep track of the following:

•   Automatic payments. Any automatic payments or transfers to mortgage accounts should be paused by the borrower during the forbearance period. It’s unlikely the payments will be paused automatically, so it might be best to double-check.

•   Credit scores. On any loan, deferring payments shouldn’t affect credit scores, but homeowners might want to keep an eye on their scores in the event of an error.

•   Savings account. Now might be a good time to set aside any extra income to pay for the mortgage once forbearance ends.

•   Any changes to income. If a borrower’s income is restored during forbearance, they might need to contact their lender.

•   Property taxes and insurance payments. If homeowners insurance and taxes are paid through an escrow account, it should go into forbearance along with the mortgage. Homeowners who do not have an escrow account may be on the hook for those payments.

Homeowners interested in an extension of a forbearance period need to ask their mortgage servicer.

💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

How to Repay Forbearance

Homeowners who received Covid hardship forbearance are not required to repay their paused payments in a lump sum when the forbearance period ends.

For those with Fannie Mae and Freddie Mac loans, options include a repayment plan with higher mortgage payments, putting the missed payments at the end of the loan, and a loan modification.

Borrowers with FHA loans can put the money owed into a no-interest lien that comes payable if they sell the home or refinance the mortgage. Or they can negotiate to lower their mortgage payments with a loan modification.

Options for USDA and VA loan repayment include adding the missed payments to the end of the loan, and loan modification.

In general, a homeowner can expect one of the following scenarios:

•   Repaying the forbearance amount in a lump sum.

•   An amount is added to the borrower’s monthly payment until the forbearance amount is repaid in full.

•   The forbearance amount is added to the end of the loan.

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

The Takeaway

Federal mortgage relief programs help homeowners who are experiencing hardship. General mortgage forbearance is possible during most any household setback. Refinancing could be an answer for some borrowers who are coming out of forbearance.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

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-criteria for more information.

SOHL-Q425-182

College credit hours are the academic units that measure your progress toward a degree. They determine your enrollment status, impact federal financial aid eligibility, and define the requirements for degrees like a bachelor’s or master’s. If you’re applying to college or you’re already enrolled, it’s important to understand how credit hours work. What follows is an essential guide to credit hours, from how they work to what they mean for your tuition bill, GPA, and graduation timeline.

What Is a Credit Hour?

A college credit hour is a unit that represents the amount of work for a course, typically based on time spent in class and doing homework. It is a key metric used to determine a student’s progress toward a degree, define full-time vs part-time status, and calculate tuition costs and financial aid eligibility.

💡 Quick Tip: Pay down your student loans faster with SoFi reward points you earn along the way.

One Credit Hour Is Equal to How Many Hours?

According to federal guidelines, one credit hour is roughly equal to one hour of classroom or direct faculty instruction and at least two hours of out-of-class student work per week. That means you can expect to spend about three hours in the classroom and roughly six hours working independently each week for the average three-credit course.

Impact of Credit Hours on Tuition and Financial Aid

The number of credits you take not only impacts your total workload but also influences the cost of your tuition. For example, full-time students (defined as taking 12 or more credit hours) typically pay a flat tuition fee per semester, whereas part-time students (taking fewer than 12 credit hours) often pay on a per-credit basis.

Credit hours also significantly impact financial aid, as your enrollment status (i.e., full-time vs part-time) determines eligibility and the amount of aid you receive. Dropping below 12 credit hours, for example, can reduce a student’s Pell Grant award amount. And students who want to take out a federal student loan need to be enrolled in college at least half-time (six credit hours or more).

How Many Hours of Study Time per Credit Hour Online?

Online college courses typically require the same amount of time as in-person classes. For each credit you take, you can expect to spend around one hour of online class time, plus at least two hours studying and doing homework. So for a three-credit online class, you’ll want to make sure you have at least nine hours per week you can devote to taking the course. That includes three hours of online instruction and six hours of independent work.

Recommended: Do College Credits Expire?

How Many Credit Hours Does a Course Have?

College courses can range between one and five credits, but are typically three or four. Most common courses, like history or literature, are three credit hours, meeting for approximately three hours per week. Language classes, which may rely on an immersion technique and therefore meet more often, can be worth four or five credits. A science lab, often taken in conjunction with a science lecture, may only meet once a week, making it worth one credit.

Credit Hour Calculator

To estimate the total amount of time you’ll spend on classes in a semester, add up the credits you’re taking, multiply that number by three hours (or more, depending on your university’s guidelines), then multiply that total by the number of weeks in a semester.

Below is an example credit hour calculator chart to determine total hours spent on one or more credits.

How Many Credit Hours Do You Need to Graduate?

The exact number of credit hours you need to graduate varies by institution, degree type, and specific program. Below are some general guidelines.

Bachelor’s Degree Credit Hours

Bachelor’s degrees are generally 120 credits minimum and take four years to complete. Schools that operate on a quarterly basis (four terms a year), usually require 180 credits to graduate.

Students enrolled in a bachelor’s program are generally required to complete core curriculum and various credit hour types: general education, major/minor, and elective credits.

General education courses are required courses for undergraduate students that provide knowledge and skills outside of their major. They often cover foundational subjects such math, literature, and sciences. However, the core curriculum might vary by major. For instance, a student majoring in marketing might take intro economics courses, whereas an architect student may take intro art history courses.

Major or minor credit hours are classes related to a student’s field of study. They are often categorized into lower- and upper-division credits. Students must typically complete lower-division courses in order to enroll in upper level courses. Internships may also be mandatory and are converted into credits (generally up to six).

Finally, bachelor’s programs require elective credits — courses unrelated to a student’s major and general requirements. Students sign up for courses out of interest or to complement their major.

Recommended: What Is the Difference Between B.A. and B.S. Degrees?

Master’s Degree Credit Hours

A master’s degree can range from 30 to 60 credits. Students typically need to complete a thesis or project at the end of the program. If you’re enrolled full-time in a 30-credit master’s program, you might only need one year to complete your degree. However, a 60-credit program typically takes two years of full-time attendance to complete.

How Do Semester Credit Hours Influence GPA?

Semester credit hours influence your grade point average (GPA) by acting as a weight; a higher number of credit hours means a course has a greater impact on your overall GPA. This is because each course’s contribution is calculated by multiplying its grade points by its credit hours.

Grade points work as follows: A = 4, B = 3, C = 2, and D = 1. The grade point is multiplied by the number of credit hours to give you your quality points. Your final GPA is the total number of quality points earned divided by the total credit hours taken.

For example, if you score an A in your three-credit chemistry class, it has more impact on your GPA than the A in your one-credit photography class. Below is an example of how grades and credit hours impact GPA.

The chart above illustrates that if you score all As in your three-credit courses, but all Bs in your one-credit courses, you still walk away with a 3.75 GPA.

By contrast, if all of your one-credit courses are As and all of your three-credit courses are Bs, you end up with a lower GPA, as illustrated in the chart below.

What Is the Cost per Credit Hour?

At public universities, the average college credit costs $406 for in-state students, or about $1,218 per three-credit class, according to the Education Data Initiative. The average private four-year university charges $1,469 per credit hour, or $4,406 per three-credit course. These averages don’t represent the full cost of attendance (COA), however, since they don’t include room and board, books, and daily living expenses.

💡 Quick Tip: Even if you don’t think you qualify for financial aid, you should fill out the FAFSA form. Many schools require it for merit-based scholarships, too.

The Takeaway

Earning a degree means accumulating a certain number of college credit hours, which represent the amount of instructional and study time required for each course. Understanding how credit hours work can help you plan your academic workload, estimate tuition costs, and track your progress toward graduation.

Whether you’re pursuing an associate, bachelor’s, or master’s degree, being aware of credit hour requirements and their impact on your academic standing and financial aid is crucial for a successful college journey.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

How many hours is one credit hour?

According to federal guidelines, one credit hour is roughly equal to one hour of classroom or direct faculty instruction and at least two hours of out-of-class student work per week. That means you can expect to spend about three hours in the classroom and roughly six hours working independently each week for the average three-credit course.

What does three credit hours mean?

Three credit hours typically mean that a course requires approximately three hours of in-class instruction or direct faculty interaction per week, along with at least six hours of out-of-class work (studying, homework, projects) each week. This is a common structure for many standard college courses.

How many credit hours do you need?

The number of credit hours you need depends on the type of degree you’re pursuing. For a bachelor’s degree, you typically need a minimum of 120 credits. Master’s degrees usually range from 30 to 60 credits.

Photo credit: iStock/asbe

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Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

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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.

SOISL-Q425-026

When life insurance policy types are listed and described, the focus is usually on two of them: term life and whole life policies. There are more types than those two, though, and they’re typically more complex. They include universal life insurance — and, as a subset, indexed universal life insurance, or IUL. This is an advanced type of policy, where interest on the cash value component is linked to a market index.

Here’s a look at what IUL is, how it works, its pros and cons, and more.

Definition of Indexed Universal Life Insurance (IUL)

First, let’s define universal life insurance. Universal life insurance is a permanent policy, which means that it doesn’t have a set term (say, for 10 or 20 years), and it comes with a cash value. A universal life insurance policy allows policyholders to flexibly adjust premiums and death benefits, though this can have an adverse effect on the policy.

Now, what is IUL? Indexed universal life insurance adds another twist to the equation. This is a type of universal life insurance that doesn’t come with a fixed interest rate. Instead, its growth is tied to a market index. (More about the index soon.)

How Does IUL Work?

After someone buys an IUL policy, they pay premiums, which is similar to other types of life insurance policy structures. Part of that premium covers the insurance costs that, like with other types of life insurance, are based on the insured’s demographics. Remaining fees paid go towards the cash value of policy. Interest paid is calculated in ways that are based on an index (or indexes).

This may sound similar to investing in the stock market, but there’s a key difference. The part of the premium that goes towards the cash value of the policy doesn’t get directly invested in stocks. Instead, the market index(es) is how the interest rate and amount is determined, with a minimum fixed interest rate usually guaranteed.

IULs typically offer policyholders a choice of indexes and allow them to divide the cash value portions of their premiums between fixed and indexed account options.

Explaining the “Index” Feature

A market index represents a broad portfolio of investments that use a weighted average to come up with an index figure. This figure is used to calculate the returns of an indexed product. The three most commonly used market indexes in the United States are the Dow Jones, the S&P 500, and the Nasdaq Composite.

Note that funds invested for the cash portion of the insurance policy do not need to be invested in the index used to calculate the interest. Many times, insurers invest these dollars in bonds rather than stocks.

Benefits and Drawbacks of IUL Insurance

Like other types of life insurance policies, indexed universal life insurance comes with pros and cons. Here is an overview of the benefits and drawbacks of IUL.

Benefits of IUL Insurance

Benefits include:

•  There’s a death benefit for beneficiaries, as well as the cash value of the policy.

•  Withdrawals can be tax-free up to the amount of premiums paid.

•  Premiums are flexible. You can pay different amounts each month as long as it’s enough to cover fees and doesn’t go beyond an IRS limit.

•  Gains are locked in each year, which means you can’t lose the previous years’ gains. However, if the market is down the following year, it can decrease, unless the policy has a built-in floor.

•  Because of the annual reset feature, you never need to make up any losses from prior years.

•  No mandatory distributions exist.

•  You can explore your tax benefits with your accountant or other financial advisor, and they may be significant for your situation.

•  You can borrow against this policy and, if you do, you typically won’t face negative tax consequences.

Recommended: Life Insurance Definitions

Cons of IUL Insurance

Challenges include:

•  An IUL is complicated. To get the most benefits from this policy, you’ll need to understand how to maximize its value.

•  Although you can pay a minimal premium amount when you want, this can have a negative overall effect on the policy’s cash value.

•  Because the cost for the insurance portion depends on your rating, how much is insured, and your age, the cost will likely go up over the years as you get older.

•  Although the rate is based on an index, policies come with a cap. So, during high index years, you likely won’t realize the full benefit because of this cap. On the flipside, many policies also have built-in floors to help protect you from losses when the market is down.

•  Fees can take a big chunk out of the policy, causing you to lose much of its value.

•  If you don’t keep the policy in force, you may lose the death benefit (which is true of other types of policies), along with the extra money paid into the premiums.

Alternatives to IUL Insurance

Whether you’re not sold on IUL insurance or simply want to know what your other life insurance options are, here are some of the alternatives to indexed universal life insurance:

•  Adjustable life insurance: This combines aspects of term life insurance with whole life and provides policyholders with the flexibility to adjust the policy’s amount, term premiums, and more. Adjustable life policies also come with a cash value component. A key benefit of adjustable life insurance is that you can make adjustments to your policy without the need to cancel the current policy or buy a new one.

Recommended: Life Insurance Calculator

•  Variable universal life insurance: Variable universal life is similar to IUL, as it is a permanent life insurance policy that has a cash value and flexible premiums. The investment portion comes with subaccounts and can resemble investing in mutual funds. When the market is doing well, this can benefit the policyholder, but when it’s not, significant losses can occur.

•  Standard universal life insurance: Then, of course, there are universal life insurance policies. These come with a fixed interest rate rather than one tied to an index.

•  Whole life insurance: Additionally, there’s the more basic whole life insurance policy with standard premiums. There is also a guaranteed death benefit and a cash value component.

•  Term life insurance: Term life insurance is life insurance at its simplest. These policies are generally the most affordable option, offering a straightforward death benefit to beneficiaries for a specific term (perhaps 10 to 20 years) without any cash value component.

•  Current assumption whole life insurance: Another type of cash value insurance is called current assumption whole life (CAWL), and it has similarities to universal life insurance policies. Premiums are fixed for a certain period of time and, on predetermined dates, premiums are recalculated (and perhaps the death benefit is as well). Interest is handled in a way that’s similar to universal life.

Recommended: How to Buy Life Insurance

Is IUL Insurance Right for Me?

By comparing this overview of indexed universal life insurance with, say, term or whole life insurance, you can see that IUL insurance is quite complex. If, though, you’re earning a high income or want to explore long-term investment opportunities, it can make sense to consider whether the tax benefits associated with an IUL would be worthwhile.

For those who do consider moving forward with exploring indexed universal life insurance, it’s important to compare its pros or cons against those of other types of life insurance. Also take the time to research and compare different life insurance policies.

Recommended: A Comprehensive Guide to Life Insurance

The Takeaway

Although the question of “What is IUL?” is quite short, the answer isn’t. If this type of policy interests you, consider exploring it in more depth to ensure that you’re clear about its complexities.

SoFi has partnered with Ladder to offer competitive term life insurance policies that are quick to set up and easy to understand. Apply in just minutes and get an instant decision. As your circumstances change, you can update or cancel your policy with no fees and no hassles.

Explore your life insurance options with SoFi Protect.

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Coverage and pricing is subject to eligibility and underwriting criteria.
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Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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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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On a salary of $50,000 per year, you can afford a house priced at around $150,000 — that is, as long as you have relatively little debt. However, not everyone earning $50,000 will see this number in response to a loan application. The figure could change significantly depending on where you want to live, interest rates, and how much debt you’re carrying.

Understanding how these factors play into home affordability can get you closer to finding a home you can afford on your $50,000 salary.

What Kind of House Can I Afford With $50K a Year?

A $50,000 per year salary is solid, but there’s no denying today’s real estate market is tough. When buying a home, one rule of thumb is to not spend more than three times your annual salary. If you earn $50K a year, that means you can afford to spend around $150,000 on a house.

You’ll need to know the full picture of home affordability to get you into the house you want, starting with your debt-to-income (DTI) ratio.

Understanding Debt-to-Income Ratio

Your debt-to-income (DTI) ratio may be one of your biggest challenges to home affordability. Each debt you have a monthly payment for takes away from what you could be paying on a mortgage, lowering the mortgage amount you can qualify for.

To calculate your DTI ratio, combine your monthly debt payments — such as credit card debts, student loan payments, and car payments — and then divide the total by your monthly income. This will give you a percentage (or ratio) of how much you’re spending on debt each month. Lenders look for 36% or less for most home mortgage loans.

For example, on a $50,000 annual salary and a $4,166 monthly income, your maximum DTI ratio of 36% would be $1,500. This is the maximum amount of debt lenders want to see on a $50,000 salary.

💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

How to Factor in Your Down Payment

A down payment increases how much home you can afford. The more you’re able to put down, the more home you’ll be able to afford. Borrowers who put down more than 20% also avoid having to buy mortgage insurance. When you don’t have to pay mortgage insurance every month, you can qualify for a higher mortgage — but you do need to consider if putting down 20% is worth it to you.

A mortgage calculator can help you see how much your down payment affects the mortgage you can qualify for.

Factors That Affect Home Affordability

In addition to the debt-to-income ratio and down payment, there are a handful of other variables that affect home affordability. These are:

•   Interest rates: When your interest rate is lower, you’ll either have a lower monthly mortgage payment or qualify for a higher mortgage. With higher interest rates, you’ll have a higher monthly mortgage payment and/or qualify for a lower home purchase amount.

•   Credit history and score: Your credit score affects what interest rate you’ll be able to get, which is a huge factor in determining your monthly mortgage payment and home affordability.

•   Taxes and insurance: Higher taxes, insurance, or homeowners association dues can bite into your house budget. Each of these factors has to be accounted for by your lender.

•   Loan type: Different loan types have varying interest rates, down payments, credit requirements, and mortgage insurance requirements which can affect how much house you can afford.

•   Lender: You may be able to find a lender that allows for a DTI ratio that is higher than the standard 36%. (Some lenders allow a DTI as high as 50%.)

•   Location: Where you buy affects the type of house you can afford. This is one area that you can’t control, unless you move. If you are considering this option, take a look at the best affordable places to live in the U.S.

Recommended: The Cost of Living by State

How to Afford More House With Down Payment Assistance

If you want to be able to afford a more costly house, you may want to look into a down payment assistance program. These programs can help you with funding for a down payment on a mortgage. You can look for programs with your state or local housing authority.

Preference may be given to first-time homebuyers or lower-income families, but there are programs available for a wide variety of situations and incomes.

How to Calculate How Much House You Can Afford

If you want to know how much mortgage you’ll likely be able to qualify for, you’ll want to take a look at these guidelines.

The 28/36 Rule: Lenders look for home payments to be at or below 28% of your gross monthly income. Total debt payments should be less than 36% of your income. These are the front-end and back-end ratios you may hear your mortgage lender talking about.

•   Front-end ratio (28%): At 28% or your income, a monthly housing payment from a monthly income of $4,166 should be no more than $1,166.

•   Back-end ratio (36%): To calculate the back-end, or debt-to-income ratio, add your debt together and divide it by your income. This includes the new mortgage payment. With monthly income at $4,166, your debts should be no more than $1,500 ($4,166*.36).

The 35/45 Rule: The 35/45 rule is a higher debt level your lender can elect to follow. It’s riskier for them and may come at a higher interest rate for you. This rule allows you housing payment to be 35% of your monthly income and 45% of your total debt-to-income ratio. With a monthly income of $4,166, the housing allowance (35% of your income) increases to $1,458 and the total monthly debt (45% of your income) increases to $1,875.

An easier way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

Making $50,000 a year gives you around $4,166 to work with each month. Using the 36% debt-to-income ratio, you can have maximum debt payments of $1,500 ($4,166 * .36). In the examples below, taxes ($2,500), insurance ($1,000), and interest rate (6%) remain the same for a 30-year loan term.

Example #1: High-debt borrower

Monthly credit card debt: $200

Monthly car payment: $400

Student loan payment: $200

Total debt = $800

Down payment = $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500

Maximum mortgage payment = $700 ($1,500 – $800)

Home budget = $88,107

Example #2: The super saver

Monthly credit card debt: $0

Monthly car payment: $200

Student loan payment: $0

Total debt = $200

Down payment: $20,000

Maximum DTI ratio = $4,166 * .36 = $1,500

Maximum mortgage payment = $1,300 ($1,500 – $200)

Home budget = $171,925

How Your Monthly Payment Affects Your Price Range

Your monthly payment directly affects the mortgage you’re able to qualify for. The more monthly debts you have, the lower the mortgage you’ll be able to qualify for. That’s why it’s so important to take care of debts as soon as you can.

It’s also important to get the best interest rate you can. Shopping around for lenders and building your credit score can both save you money and improve home affordability. A home loan help center is a good place to start the process of looking for a mortgage.

Recommended: 10 Strategies for Building Credit Over Time

Types of Home Loans Available to $50K Households

How much home you can afford also comes down to the different types of mortgage loans. Here are some common options:

•   FHA loans: If your credit isn’t ideal, you may be able to secure a Federal Housing Administration mortgage. Though FHA loans are more costly, you can still be considered with a credit score as low as 500. FHA mortgage insurance, however, makes them more expensive than their alternatives.

•   USDA loans: If you’re in a rural area that is covered by United States Department of Agriculture loans, you’ll want to consider whether the low interest, no-down-loan will make sense for you.

•   Conventional loans: Conventional financing offers the most competitive interest rates and terms for mortgage applicants who qualify.

•   VA loans: If you have the option of financing with a U.S. Department of Veterans Affairs loan, with few exceptions, you’ll generally want to take it. It offers some of the most competitive rates, even for zero-down-payment loans. It also comes with no minimum credit score requirement, though the final say on whether or not you can get a loan with a low credit score is up to the individual lender.

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.

The Takeaway

Your $50,000 salary is the first step in qualifying for the home mortgage loan you need to buy a house. To position yourself for the best possible borrowing scenario, consider paying down debt, working on your credit score, applying for down payment assistance, adding a co-borrower, or some combination of the above. With these moves, home affordability improves a great deal.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is $50K a good salary for a single person?

A $50,000 salary is good in terms of covering the cost of living in many parts of the U.S. With proper budgeting, it can even put you on the path to affording to purchase your own home.

What is a comfortable income for a single person?

Generally, an income of $40,000 to $60,000 per year is considered comfortable in many U.S. cities. This range allows for a decent standard of living, covering basic needs, some savings, and occasional luxuries. Adjustments may be needed based on cost of living and personal financial goals.

What is a livable wage in 2025?

A livable wage varies widely depending on where you live. According to the Living Wage Institute at the Massachusetts Institute of Technology, for a family with two adults and two kids, a livable wage in 2025 might range from around $85,000 annually in Alabama or Kentucky to more than $146,000 in Massachusetts.

What salary is considered rich for a single person?

A salary of $400,000 per year would put you in the top 2% of earners in 2025. However, the definition of “rich” varies by person. One person may feel rich earning $100,000 per year, whereas for another, it may take $750,000 per year.

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