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If you’re trying to figure out how to pay off a 30-year mortgage in 15 years, there are several options, including making extra payments toward the principal, making biweekly payments, and more. And paying off a home loan early can save a substantial amount of interest.

But before you become a mortgage-paying overachiever, there are a few things you need to know about how to pay a 30-year mortgage in 15 years and what to consider before you do. Let’s take a look.

Should You Pay Off Your Mortgage Faster?

When you start paying on a 30-year mortgage, most of your payment goes toward interest rather than the principal (the amount you borrowed). This makes paying down your mortgage and building equity a slow process.

Over time, the percentage of your payment that goes toward interest vs. principal will change. Toward the end of your 30-year loan, you will pay more toward the principal than interest. This is what’s known as mortgage amortization.

Instead of following the amortization schedule, paying more on your mortgage loan — in one way or another — will reduce the principal more quickly, which means you’ll pay less interest overall.

Paying off your mortgage faster may give you a sense of accomplishment and save you a lot of money in interest charges, but if it takes you further away from your financial goals, it may not be worth it to you. Consider what you value most before deciding to put extra money toward paying off your mortgage.

Recommended: Is it Smart to Pay Off a Mortgage Early?

Pros and Cons of Paying Off Your Mortgage Early

Paying off a 30-year mortgage in 15 years has benefits, but in some cases, it may not make sense. Consider these pros and cons.

Factors to Consider Before Paying Off Your 30-Year Mortgage Faster

While paying off your mortgage early — a few zealous borrowers aim to pay off a mortgage in five years — can save you tens of thousands of dollars in interest, the lost opportunities from not having money readily available for other things could be more valuable. Think about:

•   Have I been contributing enough to my retirement plans as an employee or funding retirement as a self-employed person?

•   Do I have three to six months of expenses, or more, if my personal situation calls for it, in an emergency fund?

•   Am I able to secure a lower rate or shorter term for a refinance to pay off my mortgage faster? Would a cash-out refinance make sense?

•   Do I have higher-interest debt like credit card debt or student loans I should tackle first?

•   Have I set up a college fund (if kids are in the picture)?

•   Does my mortgage carry a prepayment penalty? (This is unlikely for loans originated after January 2014.)

•   Am I able to secure a lower rate or shorter term for a refinance to pay off my mortgage faster? Would a cash-out refinance make sense?

Impact on Savings and Investments

As the questions above suggest, if you’re thinking of paying your mortgage off early, it’s worth evaluating whether the money you’d spend doing that might be put to better use elsewhere. It’s important to have emergency savings, for instance, so that you have a financial cushion if you need one, and retirement savings are also crucial. You may also feel that it would make more sense to invest the money, though returns may not be what you expect. It can help to talk to a financial adviser about what you’d like to prioritize.

Prepayment Penalties

As mentioned above, prepayment penalties are also a significant factor to consider. Prepayment penalties are fees that some mortgages charge if you pay some or all of your mortgage off early. These penalties can vary significantly. They may only kick in if you pay your mortgage off within the first few years or if you pay off a very large chunk all at once – but since they can differ, it’s worth checking with your lender to find out if you have a prepayment penalty and what exactly that means for you.

Fortunately, these penalties have become rarer since 2014, due to the Dodd-Frank Act. Since then, only conventional loans can have these penalties and they’re most commonly attached to non-conforming loans, like jumbo loans, or non-qualified mortgages (issued to borrowers who don’t meet traditional criteria). If you got your mortgage before 2014, however, these rules don’t apply, so it’s even more important to check with your lender.

How to Pay Off a 30-Year Mortgage Faster

There are at least five methods for how to pay off a 30-year mortgage faster – in 15 years if that’s your goal.Just be sure that you specify to your lender that you want the extra money to go toward principal. (There will usually be a way to indicate this, no matter what payment method you use.)

Make Extra Principal Payments

Paying more toward principal is the primary way to pay off a 30-year mortgage early.

Here’s an example of how interest adds up: Assuming you buy a $450,000 house and put 10% down on a 30-year mortgage at 6.50%, this mortgage calculator shows that total interest will be $516,551. Even by the 120th payment, you will have paid only $61,657 of the $405,000 principal and will have paid $245,528 in interest.

Putting just $200 more per month toward principal, you’d save $112,234 in interest and pay off the mortgage five years and six months earlier.

To pay off this same mortgage in 15 years, however, you would need to put an extra $975 per month from the outset of the mortgage. That’s a substantial additional expense for many homeowners. You would, however, save more than $287,000 in interest over the life of the loan.

Switch to Biweekly Payments

Biweekly payments are half-payments made every two weeks instead of a full payment once a month. Making biweekly payments instead of monthly payments results in one additional payment each year.

Using the example above, making one full, extra mortgage payment each year will reduce the amount of time it takes to pay off your 30-year mortgage, but only by five years and nine months.

Look Into Refinancing

Refinancing your loan into one with a lower interest rate and/or a shorter term (such as a 15-year mortgage) can help you pay off your mortgage faster. A shorter term usually comes with a lower interest rate, so you’re saving on interest while also paying your mortgage off in less than 30 years.

Refinancing to a lower interest rate will reduce your monthly mortgage payment, so if you continue to make the higher payment, you’ll pay your mortgage off faster.

Round Up Your Payments

Another common way to prepay your mortgage is to round up your monthly mortgage payment, which is likely not an even number. If your monthly payment is $2,559, for instance, you might be able to round it up to $3,000 a month. That means you’re paying an extra $441 every month toward your mortgage, and it would let you pay off your mortgage more than nine years early.

Budget Strategically to Maximize Savings

If you’re trying to figure out how to pay off your mortgage faster, these strategies may seem expensive or unaffordable. But something that can help with all of them – and serve as an independent tactic in itself – is to focus consciously on saving money and eliminating non-essential spending. This can involve creating and/or reviewing a budget to understand exactly where you can save money by taking steps like eating out less, canceling subscriptions you don’t need, buying on-sale and bulk groceries, and avoiding “retail therapy.” Your budget can help you track how much you’re saving – and that money can go toward extra principal payments on your mortgage. Keep in mind, too, that windfalls, like gifts or work bonuses, can also feed into paying more toward your mortgage.

Recommended: Mortgage Questions for Your Lender

The Takeaway

There are multiple approaches when it comes to how to pay off a 30-year mortgage in 15 years. Paying off your mortgage early will result in substantial interest savings, but the tradeoff for many borrowers is not having extra money to put toward retirement and other purposes.

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 it cheaper to pay off a 30-year mortgage in 15 years?

The amount of interest you’ll save by paying off your mortgage in 15 years instead of 30 is substantial, but your monthly payments will be higher.

Why shouldn’t you pay off your mortgage early?

Homeowners who haven’t fully funded their retirement accounts, who don’t have an emergency fund, or who have other debt with high interest rates may not want to pay off a mortgage early. Also, those who think they can earn a better return on their money with investments may not want to pay off their mortgage early. (However, they need to keep in mind that past performance is not necessarily indicative of future returns.)

How do you pay off a 30-year mortgage in half the time?

If you’re trying to figure out how to pay off your mortgage faster, paying more toward the principal early in the mortgage can help you cut the amount of time you spend paying off your mortgage in half. The good news is you don’t have to make double payments to cut the amount of time you pay on your mortgage in half. Because each payment will reduce the principal, you will pay less overall.

Are biweekly mortgage payments a good idea?

Biweekly mortgage payments, or half-payments made every two weeks, will add a full mortgage payment every year. Using this method can take a few years off your mortgage.

What are the risks of paying off your mortgage early?

A primary risk of paying off your mortgage early is that you won’t be able to use that money for other important financial tasks, like paying off higher-interest debts, funding your retirement, and building up an emergency fund. You may also miss out on investment opportunities that have the potential for higher returns.

Photo credit: iStock/everydayplus

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

SOHL-Q325-030

It’s no secret that the price tags of single-family homes — the ideal dwelling in terms of space, independence, and resale value — have spiked, and many current homeowners have been reluctant to let go, but a buyer whose heart is set on a single-family home may be able to follow a playbook to find their prize.

Buying a single-family home isn’t dramatically different from purchasing another type of property, but the process has a few variations. Here are some guidelines.

What Does Single-Family Home Mean?

The definition would seem easy enough, but it does vary according to real estate experts and government sources. The U.S. Census Bureau says single-family homes include fully detached and semi-detached homes, row houses, duplexes, quadruplexes, and townhouses. Each unit has a separate heating system and meter for public utilities, and has no units above or below.

According to other definitions of a single-family home, the building has no shared walls; it stands alone on its own parcel of land. In some places, the number of kitchens the home has informs the definition.

Unlike a multi-family property, a single-family home is meant for one person or household. Among the types of houses out there, including condos, co-ops, townhouses, and manufactured homes, the single-family home remains the holy grail for many Americans.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Attached vs Detached Single-Family Homes

Single-family homes can be either attached or detached. An attached property has one or more walls in common with another property – think townhouses or row houses. You may find them in locations like cities where land is expensive.

What is a single-family detached home? This may be what you think of when you imagine a single-farmily home. Detached houses do not share any walls and typically stand alone on their own dedicated plot of land.

Benefits of Buying a Single-Family Home

While condos and townhouses may come with shared amenities and lower maintenance, traditional detached single-family homes come with different perks. When people buy a single-family home, they’re looking for benefits specific to this property type.

Spacious, Quiet, and Intimate

A single-family home is typically larger than a condo or townhome. Moreover, since the property is often on its own lot without shared walls, a single-family home offers more space and more privacy inside and outside the home.

Possibly No HOA

A co-op association or a condo or townhouse homeowners association sets and enforces rules and collects fees to pay for shared amenities. Anyone who buys into an HOA community must live by the CC&Rs: the covenants, conditions, and restrictions. These can be lengthy, and the ongoing fees can continually rise.

You may be able to buy a detached single-family home with no HOA and paint your mailbox, or house, pink or purple — unless you live in a city like Palm Coast, Florida, that allows only earth tones and light or pastel hues but no colors that are deemed “loud, clashing, or garish.” (As of July 2025, the town is considering loosening this restriction.)

Then again, HOAs are becoming more common for detached single-family homes in planned communities. In fact, about 65% of single-family homes built in 2022 were in an HOA.

Single-Family Home Appreciation

Generally, single-family homes are in higher demand than multi-family or other properties. Because of both the building and demand, when a person buys a single-family home, the value may increase faster.

Possibilities for Renovation and Expansion

When people buy single-family homes, they’re buying into the potential to expand or renovate extensively. If the lot is big enough, single-family homeowners could put an addition on the property.

Single-family homes can be an attractive buy simply because of the option to expand in the future, unlike properties with shared lots or walls.

Long-Term Investment Potential

Many homebuyers may have an eye toward selling their new property down the road. Historically, real estate has tended to appreciate in value, and single-family homes, which are currently in demand, are no exception. Detached homes may be more desirable to some, due to their land and the privacy it affords their owners, but attached homes, too, if well-maintained, have the potential to appreciate in value.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

How to Buy a Single-Family Home

Ready to buy a single-family home? Anyone from a first-time buyer to a seasoned investor may find appeal in a single-family home.

Recommended: First-Time Homebuyers Guide

1. Draw Up Your Financial Priorities

First, it’s important to look at finances. Your credit scores can have a significant impact on getting approved for a mortgage. To get a clear read on credit, but not scores, buyers can request free credit reports from the three major credit bureaus.

Additionally, it can be helpful for a qualified first-time homebuyer — who can be anyone who has not owned a principal residence in three years, some single parents, and others — to look into specialty mortgages and programs to see if they qualify for them.

A loan from the Federal Housing Administration (FHA) may allow a down payment as low as 3.5%. A USDA loan (from the United States Department of Agriculture) requires nothing down, and a VA loan (from the Department of Veterans Affairs) also usually requires nothing down. Some conventional lenders allow qualifying first-time buyers to put just 3% down.

It’s important to know, though, that all FHA loans require an upfront and annual mortgage insurance premium, regardless of the down payment size. VA loans require a one-time “funding fee.” And borrowers with conventional conforming loans who put down less than 20% will pay private mortgage insurance until their loan-to-value ratio drops to 80% and they request removal, or to 78%, when it falls off.

2. Decide on Your Preferred Type of Housing

No two houses are alike, just as no two homebuyers are. Everyone has different tastes and priorities about where they want to call home.

Before hitting every open house in town, consider deciding on must-haves for a single-family detached home, including privacy, proximity to businesses, size, and style. This could help determine if a single-family home is the right fit.

3. Arrive at Your Price Point

Armed with an understanding of the type of house, you can start thinking about the price point. In addition to considering the down payment, buyers will want to calculate a monthly mortgage payment and total loan costs.

Figuring out a price point before looking at homes can take the emotion out of the process. That way, buyers have a budget in mind and a “do not exceed” amount before they fall for a home.

4. Search for a Good Real Estate Agent

Buying a single-family home can be fun, stressful, and fast-paced. Working with a trusted real estate agent can make the process a little easier.

To find a real estate agent, you might consider:

•   Reaching out to friends for referrals

•   Checking out local real estate association websites

•   Using an agent selling homes in the area you want to buy in

You might want to interview more than one agent, asking about their experience, availability, and philosophy. The choice of agent will likely come down to a combination of personality match and experience.

5. Find Your Neighborhood

Once you have an agent and budget, it’s time to dive deeper into neighborhoods. Once again, the choice of where to search will come down to the buyer; there’s no one “right” place to buy a single-family home.

As buyers explore neighborhoods, they might prioritize the following:

•   School district

•   Walkability

•   Proximity to workplace

•   Community resources

•   Budget

An experienced agent can help buyers distill their priorities and even point them in the right direction. Typically, buyers will have to balance the above elements, as it might not be possible to check all the boxes in a single neighborhood.

6. Tour Homes With Your Agent

After buyers decide what neighborhoods they want to buy a single-family home in, it’s time to start touring properties.

When touring a single-family home with an agent, try to allot between half an hour to an hour. In the case of open houses, prospective buyers can walk in at any time, but private home tours require a buyer’s agent to gain access to the property.

When buying a single-family home, everyone will have their own checklist of what they want, which might include:

•   Listing price

•   Number of bedrooms and bathrooms

•   Storage space

•   Floorplan

•   Plot of land

•   Deck and porch

•   Garage and driveway

It could help to take photos or notes while touring a home to refer to them long after you’ve left the property.

7. Choose a House and Bid

Found a place and ready to make an offer? Time to get a home loan in order. Luckily, buyers will have a good idea of what they can offer on a property based on their finances if they’ve done the upfront legwork.

Your agent can help with negotiating a house price.

How to make an offer? It pays to understand comps and the temperature of the market, and then:

•   Figure out the offer price

•   Determine fees

•   Budget for an earnest money deposit

•   Craft contingencies

With an offer drawn up, it’s time to submit it to the seller and wait for the next steps.

8. Review the Process and Get Ready to Move

Buying a single-family home isn’t a done deal once an offer is submitted. Typically there will be a back-and-forth, perhaps over offer price or contingencies.

Once everything is agreed on, and the inspection is resolved, it’s time to tally moving expenses and pack up.

9. Head to Closing and Move Into Your New Property

The final part of buying a single-family home is closing day. During closing, the buyer and seller meet with their agents to go over paperwork and settle any outstanding costs, and formally turn over property ownership.

Next, it’s just moving everything in and settling in. Even after closing, homeownership may feel overwhelming, but there are plenty of resources to make it easier.

Financing Options for a Single-Family Home

Most homebuyers will use financing to pay for their home, so it can be helpful to be aware of the options. Here are some of the most common mortgage types.

Conventional Loans

Conventional mortgages are issued by private lenders, like banks. The lenders typically want to see credentials like a credit score of at least 620 and a DTI ratio of 36% or less (though they may accept up to 43%). They may also require a down payment of up to 20%, though for first-time homebuyers, they may accept as little as 3%.

Bear in mind that borrowers with conventional loans who put down less than 20% will pay private mortgage insurance until their loan-to-value ratio drops to 80% and they request removal, or to 78%, when it falls off automatically.

FHA, VA, and USDA Loans

Government-backed mortgages are also popular among homebuyers who qualify for them. Because these loans are guaranteed by different government agencies (the Federal Housing Administration, the Department of Veterans Affairs, and the U.S. Department of Agriculture, respectively), there’s less risk for lenders, who can offer homebuyers easier terms. These may include lower interest rates, low or no down payments, and less stringent credit requirements.

An FHA loan may allow a down payment as low as 3.5%. A USDA loan has specific location and income requirements, but requires nothing down, and a VA loan also usually requires nothing down, though it’s only available to past or present service members and some military spouses.

It’s important to know, though, that all FHA loans require an upfront and annual mortgage insurance premium, regardless of the down payment size. VA loans require a one-time “funding fee,” and USDA loans come with fees as well.

Comparing Loan Terms and Rates

As you’re choosing how to finance your home, it’s important to compare different kinds of loans and options from different lenders to find the loan that will make the best financial sense for you. You may be living with your mortgage for the next 30 years, so it’s worth putting in the time now to make sure you get the best one possible.

Ready to Buy a Home Quiz

The Takeaway

Ready to buy a single-family home? The process before you may seem daunting, especially if it’s your first home purchase. But if you break it down into small steps and keep your budget and dream-house priorities top of mind, home sweet home may be closer than you think.

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

How much does it cost to buy a single-family home?

Zillow put the typical value of a single-family home at $371,110 in May 2025. New construction costs more. The median sales price of new houses sold in May 2025 was $426,600, according to the U.S. Census Bureau.

Can you buy a single-family home with no money down?

If a buyer qualifies for a mortgage backed by the Department of Veterans Affairs or Department of Agriculture, or one issued directly by those agencies, they may be able to purchase a home with no down payment.

What are the most important things to consider when buying a house?

Location (including property tax rate, quality of schools, walkability, crime rate, access to green space, and the general vibe), your ability to cover all the costs, duration of your stay, and square footage may be important.

How much should you have in savings to buy a single-family house?

You’ll need to have enough to cover a down payment, closing costs, and moving fees while ideally preserving an emergency fund.

What is the difference between a single-family home and a condo?

What does single-family home mean vs. condo? A single-family home is a dwelling owned by the homeowner. In a condo, the homeowner owns the interior of their unit, but the structure is part of a larger group of homes, which typically share various amenities, for which they may pay regular fees, and adhere to defined rules.

Photo credit: iStock/jhorrocks

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

SOHL-Q325-021

Buying homeowners insurance involves a few simple steps that ensure you’re purchasing a policy tailored to your needs. By investing a little time, you’ll be rewarded with coverage that protects your home and your belongings at the right price. This holds true whether you’re buying a house and insurance for the first time or shopping around for a better rate.

Insurance can be tricky, and many policies have a flurry of exceptions when it comes to what’s covered and what isn’t. Having an insurance policy with certain kinds of exceptions can wind up costing you hundreds of dollars for coverage that might fall short when it’s needed.

Fortunately, you can avoid that scenario. Here, we’ll walk you through how to buy homeowners insurance as well as offer some tips on how to find the best rate on your policy this year.

5 Steps to Shopping for Homeowners Insurance

When shopping for homeowners insurance, it’s a good idea to compare similar policies. You want to be sure you’re reviewing what different insurers charge for policies with almost identical coverage.

You’ll also want to shop around to get the best deal you can. Policies from the same company can vary widely by geography, property type, and even between two different zip codes.

It’s also a smart move to compare some intangibles, such as a company’s reputation for customer service and claims satisfaction. They can have a big impact when it comes time to file a claim.

Now, let’s walk through the steps of how to shop for homeowners insurance.

Step 1: Decide How Much Coverage You Need

When deciding how much homeowners insurance coverage you need, you’ll want to make sure that you have enough coverage to replace your most important belongings; rebuild your house in the event it’s destroyed; and cover any liability for injuries that might occur on your property. Your policy will be there in case a fire, storm, or crime causes a loss.

In industry terms, homeowners insurance coverage for the aforementioned events is typically broken into four categories:

•   Personal property coverage: Insures against losses to personal property — including furniture, clothing and electronics — in the event of a covered incident.

•   Dwelling coverage: Covers the repair or replacement of your property and any attached structures, like a garage, fence, or any sheds.

•   Liability coverage: Protects against any medical or legal expenses that you may be liable for as a result of injuries that occurred on your property.

•   Additional living expense coverage (ALE or Loss of use coverage): Pays for temporary housing and related costs in the event you’re displaced from your home due to a covered loss.

Each of the coverages listed above are subject to their own insurance limits. These are calculated based on both the insurers’ proprietary formulas and the amount coverage you choose to purchase. Here’s a closer look at each kind of coverage and how much you might want to buy.

Personal Property Coverage

Just as the name suggests, personal property coverage covers the cost of any personal property that you would need replaced in the event of a covered loss. This can include all the contents of your home, including furniture, electronics, kitchenware, and jewelry.

Generally, you’ll want enough personal property coverage to cover the cost of replacing all of your important belongings. To help you calculate how much this might cost, create a written inventory of all your major belongings and their cost. This allows you to better estimate how much personal property coverage you need and gives your insurer a reference point for how much insurance you might need. You might even consider doing a video inventory to keep track of your property.

Bear in mind that not all items are covered under your home insurance policy. For example, any vehicles damaged while housed in your garage should be covered under your auto insurance. Additionally, rare and high-value items, like art, fine jewelry, and antiques, may be subject to value caps under your policy and may require separate/supplemental insurance policies for full coverage.

Recommended: Should I Sell My House Now or Wait?

Dwelling Coverage

Dwelling coverage covers the cost to repair or rebuild the building on your property, in addition to any attached structures, like garages, balconies, or fences. When you think about the dollar amount here, you probably want to be prepared for the worst-case scenario of totally rebuilding your home. Though rare, this kind of catastrophic incident can happen.

Liability Coverage

Liability coverage helps shield you from lawsuits in the event you’re found liable for any accidents that occur on your property. These can range from slips and falls to any damage caused by falling trees from your property.

Generally, the more assets you have, the more liability insurance you’ll want to purchase. However, liability coverage will only pay out to a set dollar limit as listed on your policy, with you responsible for any balance. If you’re looking for added liability coverage, you may want to look into a personal umbrella policy.

Additional Living Expense Coverage

Additional living expense coverage, or loss of use coverage, pays for reasonable housing and living costs if you’re displaced for an extended period due to a covered event. Imagine that a storm sent a tree branch crashing through your roof and your bedrooms became uninhabitable. That’s the kind of situation that would lead you to move out and tap what’s sometimes called ALE coverage.

Typically, your loss of use coverage will encompass a fixed percentage of your dwelling coverage. Larger families may wish to opt for more coverage if your weekly living expenses are particularly burdensome.

Learn the Difference Between ACV, RCV, and GRC Coverage

Once you have some ballpark numbers in mind for the amount of coverage you need, you also need to decide what kind of coverage you want in terms of potential payout. There are three terms to know — ACV, RCV, and GRC — and these will impact how claim amounts are determined as well as your premiums.

•   Actual Cash Value (ACV): Typically the cheapest option, ACV calculates your home and property’s value based on its current market value minus depreciation. Depreciation occurs naturally over time. Let’s say you had a 10-year-old refrigerator that had cost $1,000 when you bought it. After 10 years, its “cash value” might be, say, $100, so that is what ACV would reimburse you if it were destroyed during a covered event. This would not enable you to go out and buy a similar unit.

•   Replacement Cost Value (RCV): This policy is more expensive. In the event of loss, it insures your home for the cost it takes to rebuild it like new and replace the items in it at their full cost. Unlike actual cash value, RCV does not factor in depreciation.

•   Guaranteed Replacement Cost (GRC): The most expensive policy of the bunch, this policy insures your home and property for its replacement cost value plus a certain percentage over that amount, which can help protect against inflation.

Step 2: Verify Details About Your Home

Before an insurer can give you a quote, you’ll need to provide them with details about you and your home so they can accurately price your home insurance policy.

Keep in mind that insurance agents will take steps to verify the accuracy of this information, so be sure to answer to the best of your ability. Here are some of the most commonly requested details:

•   Property size and foundation

•   Roof type, material, and age

•   Age of structure and building materials

•   Age and type of electrical, plumbing, and heating system

•   Presence of any adjacent structures, pools, fences, etc.

•   Presence and number of pets

•   Intended use of property (rental, secondary, or primary home)

You can ask your real estate agent to forward you this information or obtain it from publicly available sources. Often, many of these details can be found in your home inspection and appraisal reports. Remember to disclose any improvements or renovations that have been made over time.

Step 3: Consider Whether You Need Added Coverage

A typical homeowners policy goes a long way towards protecting you from damage to or loss of your home and property. But it doesn’t cover everything. Acquaint yourself with these details and decide if you want additional coverage.

According to FEMA, a common myth among many Americans is that homeowners insurance covers flooding. However, in most cases, it does not.

In fact, here’s a list of common events that are often not covered under most home insurance:

•   Floods

•   Earthquakes

•   Sinkholes

•   Water and sewer backup

It’s important to review your insurance policy for any exceptions or issues not mentioned that you may want covered. You may be able to purchase additional insurance coverage for the above-mentioned issues as part of a separate policy, or what’s known as an endorsement, on your existing home insurance policy.

Also remember that personal property coverage often has a reimbursement cap on valuable items, which may limit the recoverable amount on certain rare or valuable goods. If you inherited valuable artwork or saved like crazy to afford a luxury watch, you may want to purchase additional endorsements for these.

Recommended: What Does Homeowners Insurance Cover?

Step 4: Take Advantage of Any Discounts Your Insurer Offers

Before finalizing your policy, check with the insurer about any discounts they offer and how many you might qualify for.

These can take them form of bundling discounts, which reward you for purchasing other policies (e.g. auto and life) through the same insurer; retention discounts which reward you for staying with a single insurer for an extended period of time; and even safety discounts, which reduce your premiums based on various improvements that you make to your home (e.g. adding a security system).

Each insurer has its own batch of discounts that you may be eligible for. Make sure to check with each potential policy provider to confirm that you’re getting the best deal possible.

Recommended: How Much Is Homeowners Insurance?

Step 5: Finalize Your Policy and Figure Out Your Payments

Now that you’ve selected the coverage you want, at the price you want, it’s time to put the finishing touches on your homeowners insurance policy.

First, you’ll want to set your insurance policy deductible, which is the amount you agree to be personally responsible for before the insurance company pays out on any claims. This is similar to a copay on a health insurance plan and is charged on a per-claim basis.

Generally, higher deductibles lead to lower insurance premiums, because they transfer some of the financial burden of paying for claims from the insurer to you.

While you will end up paying more out of pocket when you need to file a claim, this can be a smart financial decision for newer homes and low-risk areas. Of course, this option will only make sense for you though if you are confident you can cover that deductible in an emergency.

Second, you’ll need to decide how you wish to pay your insurance premiums. Policies are typically written on an annual basis and can be paid on a monthly or quarterly basis, or even in one lump sum. Some insurers offer added discounts if you decide to pay the entire amount upfront.

Finally, you’ll need to set the date on which your policy takes effect. Generally, this should be the same day you take possession of the property if you’re buying a new home. If you’re switching insurance providers, it should coincide with the end date of the previous policy, without any lapse in coverage.

The Takeaway

Buying the right homeowners insurance ensures that your home is protected if disaster ever strikes. That said, shopping for a policy can feel overwhelming at first since there are a lot of new terms to be learned, figures to calculate, and decisions to be made.

As you gather the information and quotes you need to make your choice, you’ll be rewarded with a policy that suits your needs, is priced just right, and can give you peace of mind.

Recommended: Homeowners Insurance Resources: A Comprehensive Guide to Homeowners Insurance

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Photo credit: iStock/JLco – Julia Amaral

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
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SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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

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

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If you’re buying a home and have a down payment of less than 20% of the purchase price, you may need to pay for private mortgage insurance (PMI) or a mortgage insurance premium (MIP). This insurance protects your lender in the event that you default on your loan. It also presents an additional cost for you — a charge you’ll have to keep paying for part or all of the life of the loan. But it can be worthwhile since, for many aspiring homeowners, it can unlock a chance at homeownership.

Private mortgage insurance may be required for conventional home loans — those not backed by a government program. A mortgage insurance premium is a little different and is always a part of an FHA-insured loan, at least for a number of years. Both are intended to protect lenders against losses if borrowers default on their home loans. Here’s a guide to how they work, how they differ, how much they cost, and when you can possibly escape their hold on you.

What Is Private Mortgage Insurance?

PMI is a type of coverage typically required by lenders on conventional conforming loans. A lender might stipulate PMI when you make a down payment that is less than 20% of an accepted offer or asking price.

Most conventional mortgages are “conforming,” which means they meet the requirements to be sold to Fannie Mae or Freddie Mac. It’s best to consult the lender when you apply for a loan about whether you will have to pay for PMI.

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

How Much Does PMI Cost?

The price of PMI varies, but often is 0.5% to 1% of the total loan amount annually. The cost depends on the type of mortgage you get, your credit score, the loan-to-value (LTV) ratio, and more. It also depends on the amount of PMI that your loan program or lender requires. PMI could run as high as 6% of the amount you borrow.

Usually, homeowners required to pay PMI do so monthly, rather than annually, and it’s included in their mortgage payments. A few may opt for lender-paid mortgage insurance (LMPI), an option where the lender for the home loan pays the cost of mortgage insurance. For that convenience, however, a homebuyer will usually pay a slightly higher interest rate, and more over the life of the loan.

Despite the cost, PMI may be more economical than an FHA loan if you’re a borrower with a FICO® score of around 740 or above who can put 3.5% down.

When Can You Stop Paying PMI?

Buying a home may require you to pay PMI, but there are ways to get to the point where you can stop paying it.

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

Second, you can have your home reappraised, which will likely result in a new value, and ask your servicer to cancel PMI if you have built equity of 20% or more of the current value. Owners of homes that have appreciated, either over time or thanks to home improvements, may benefit from this. You may need to be proactive with your lender and meet specific eligibility requirements to help make that happen.

Third, you may be able to refinance your mortgage. If you have at least 20% equity, you can possibly qualify for a conventional loan that won’t require PMI.
Finally, the Consumer Financial Protection Bureau notes that if you have stayed current on your payments and reached the halfway point of the loan’s schedule, PMI can be canceled, even if your mortgage balance hasn’t yet reached 78% of the home’s original value.

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

What Is a Mortgage Insurance Premium?

If they’re securing a home loan backed by the Federal Housing Administration, borrowers pay for a different type of coverage, known as a Mortgage Insurance Premium or MIP. When it comes to FHA loans, MIP applies no matter what your loan term or down payment amount.

A key reason people choose FHA loans is the ability to buy a home even with a low down payment — these loans allow you to put down as little as 3.5%. But keep in mind that even with that affordable down payment, this type of loan bears costs and, as a borrower, you’ll want to understand them.

MIP runs for 11 years or the loan’s full term, depending on the borrower’s down payment, the balance owed, and LTV. As the homebuyer, you also pay a one-time upfront MIP premium of 1.75% of the base loan amount, which can be rolled into the loan. On top of that, you’ll have an annual premium that is divided by 12 to determine your payment, which is added to your monthly mortgage payment.

Recommended: Different Types of Mortgage Loans, Explained

How Much MIP Will You Pay on an FHA Loan?

Like a mortgage interest rate, MIP fluctuates. The ongoing annual MIP is calculated with a rate that’s currently around 0.15% to 0.75%. It is divided by 12 and added to your monthly mortgage payment. What you’ll pay in the end depends on your loan-to-value (LTV) ratio — also known as the price minus your down payment — and the length of the loan.

If you take out an FHA loan for the common term of 30 years, or any length of time greater than 15 years, your monthly MIP costs will be determined by calculating the loan’s annual average outstanding balance, based on what banks refer to as its amortization schedule. This figure is then multiplied by the annual MIP rate and divided by 12 to determine a monthly payment.

That is the amount that will be added to your principal payment on your home loan, along with charges like escrow amounts for property taxes and the monthly cost of your homeowner’s insurance.

Here’s an example: Let’s say you borrow less than or equal to $726,200 to buy your home, and make a down payment of 5% or less. You’ll pay an annual MIP of 0.50% on your loan. On a home loan of $300,000, you’ll pay MIP of about $1,500 per year, or $125 per month.

The following chart details approximate monthly payments based on different loan and down payment amounts. Remember, LTV is the total home price, or 100%, minus the percentage you take care of in your down payment.

Some homeowners can pay off their loans more quickly. By choosing a shorter term, such as 15 years, you could take advantage of a lower MIP.

Take the 15-year option, which gives you a better deal with a lower rate. If you were to borrow less than or equal to $726,200 and put down 10% or less as a down payment, you’d pay an annual MIP of just 0.15%. On a $300,000 home loan, that’s more like $450 a year, or $37.50 a month.

This all may seem complicated, but many people find that the flexibility of an FHA loan, if you can secure one, makes it worth paying the MIP.

Thinking about buying a fixer-upper and making it beautiful and functional again? FHA offers the FHA 203(k) home loan for that — something that few lenders do, especially if the home isn’t in good enough shape to be lived in, but it may be worth investigating.

Recommended: FHA Mortgage Loan Calculator

Can You Get Rid of MIP?

Possibly. If you took out an FHA loan before June of 2013, you may be able to cancel your MIP. You would need to now have 22% equity in your home — meaning your loan balance has reached 78% of the purchase price noted on your mortgage paperwork — and have made all payments on time. (FHA lenders do not automatically cancel your MIP once you reach that threshold. You’ll need to ask for it to be stopped.)

If your FHA loan originated more recently than June 2013, however, different rules govern it. If your down payment totals less than 10%, you must pay the MIP for the life of the loan. Made a down payment of 10% or more? MIP expires in 11 years.
Other ways to unburden yourself of MIP include paying off the FHA loan or refinancing it into a conventional loan with a private lender, which will give MIP the heave-ho.

What About Refinancing?

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

Some borrowers may find that at a certain point they can qualify for a conventional home loan without mortgage insurance.

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

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

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

The Takeaway

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

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

FAQ

Is it a better option to put down 20% or to pay PMI?

It’s great to make a down payment of 20% and avoid private mortgage insurance (PMI), but not everyone can afford to do it. It can be particularly hard for first-time homebuyers, who often don’t have income from the sale of another residence to fund their next home purchase. Use a home affordability calculator to look carefully at monthly mortgage payment amounts for various home prices and interest rates. Put down what you can afford and try not to compromise your ability to cover other bills, including the mortgage payment itself.

How long will I pay PMI?

If you’re paying private mortgage insurance, you’ll need to continue until you’ve built up 20% equity in your home (based on the original sale price). At this point, you can request in writing that your loan servicer cancel PMI as long as you’re current on your payments.

How are FHA MIP rates determined?

The FHA reevaluates and updates MIP rates periodically. Changes are based on the condition of its Mutual Mortgage Insurance Fund, and current housing and economic conditions.

Can I cancel my FHA MIP once I’ve reached a certain equity level?

No. Unlike the private mortgage insurance on a conventional loan, which goes away after a homeowner reaches 20% equity, FHA MIPs cannot be canceled.

Are MIP payments tax-deductible?

Unfortunately, no. The Further Consolidated Appropriations Act of 2020 allowed qualified taxpayers to take a tax deduction for MIP and PMI costs for the tax years 2018 through 2021, but the deduction has expired and is no longer available.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

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

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

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When you’re a renter, it can feel like all the transformative DIY projects are reserved for homeowners. But just because you rent doesn’t mean you can’t spruce up your space.

That’s right: Rental-friendly upgrades exist. And the best part? Many improvements can have a major impact on your space without blowing your budget.

1. Create an Accent Wall

Spicing up your walls doesn’t have to cost a fortune, nor must it require gallons of paint. For just a few bucks a roll, you can buy washi tape and create a custom accent wall that won’t ruin the paint job. Or, if you’re able to spend a few extra dollars, you could also invest in removable wallpaper.

2. Update Light Fixtures

Light fixtures in rentals are notoriously drab and tend to provide uneven lighting. Fortunately, there is no shortage of lighting options to help you brighten up your space. A recessed lighting conversion kit, for instance, is fairly inexpensive, easy to install, and allows you to hang a pendant or other light fixture. Not sure your landlord would approve? You can always buy some decorative lamps or even string lights to help amp up the brightness and style of any room.

3. Install Radiator Shelving

In older units, rusty radiators can be a renter’s nightmare. But luckily, there are some rental upgrades — like installing radiator shelving — that can disguise even the most unattractive units. You can DIY a custom shelving unit to work around your radiator, upgrade some shelving from a local thrift store, or even order one online.

4. Buy Matching Bookshelves

Bookshelves are a simple way to upgrade the decor and add much-needed storage space. Placing tall, matching shelves on either side of a TV, couch, or even a bed could bring some serious style (and space) to a small room, plus allow you to display photos or art without putting holes in the wall.

5. Apply Contact Paper

Do you have older appliances you’d like to freshen up? For just a couple bucks, you can invest in some stainless steel contact paper to make them at least look shiny and new again! Contact paper also comes in a wide variety of colors and styles that you can use to liven up your cabinets and refresh your countertops.

6. Replace Pulls & Knobs

This is another budget-savvy, rental-friendly upgrade that can add some flair to your home. Replace your door handles, kitchen cabinet knobs, and any other pulls with something more your style. Affordable, stylish knobs can be found on sites (like Etsy and Amazon) and in stores like Lowe’s and Home Depot. Be sure to hang on to the original knobs so you can swap them back in before you move out.

7. Install a Bike Mount

If you own a bike but are short on storage, install a bike mount or other bike storage solution. Just make sure your landlord is okay with the installation since it may require some drilling.

8. Try Large Floor Mirrors

Sometimes more is more. Exhibit A: an oversized leaning mirror (don’t worry; it’s mounted securely though it looks casually propped against a wall). It can serve double-duty as a luxe decoration that brightens a room and a functional mirror.

9. Invest in Houseplants

Want to add some life to your rental — literally? Look no further than a houseplant. If you don’t have a green thumb, explore hardy varieties, like air plants, or even artificial plants.

10. Upgrade Your Showerhead

Installing a new showerhead is a quick, effective way to upgrade your bathroom. You could start reaping the rewards the very first time you turn on the faucet. Make sure to hang on to that original showerhead so you can reinstall it when you move out.

Recommended: How Much Does a Shower Remodel Cost?

11. Set Up Room Dividers

Need to carve out space for a home office? Or maybe even make room for a closet? Buying or creating stylish room dividers can provide an instant rental update. And when you need a larger space, simply close the dividers.

12. Use a Pantry Organization System

Help bring order to the busiest spot in your home: the kitchen. Pantry organization systems come in a variety of shapes, sizes, and varieties, so you should be able to find one that suits your home and the budget you’re working with.

13. Update Your Blinds

It can be easy to forget about window coverings. But freshening up your blinds or curtains can add a new visual element to the room, frame a window, or help brighten the space.

14. Install Sticker Flooring

When you’re considering places to upgrade, don’t forget to look down. Changing up the flooring — even temporarily — can make a room feel brand-new. One option to consider if you have a tile floor: removable tile stickers, which come in a variety of styles, sizes, and price points.

15. Create a Kitchen Backsplash

You can also use removable stickers to freshen up a kitchen backsplash, which is a much easier and cheaper option than replacing the tiles. New to this type of project? There are online video tutorials you can watch that will show you how to get the job done.

Recommended: Renovation vs. Remodel: What’s the Difference?

16. Replace Light Switch Covers

Don’t sleep on the small details — sometimes, they can have a major impact. One example of this is swapping out basic light switch covers with ones that match the decor of your rental. Plus, new covers are generally affordable and easy to install.

17. Buy a New Kitchen Faucet

There’s something to be said for upgrading the items in your rental that you use every day, such as the kitchen faucet. Installing a new faucet is a fairly simple DIY project, provided you know how to shut off the water to your sink and use a wrench. If you’re unsure how to do either, though, you can enlist the help of a plumber. Just be sure to put the old faucet in storage so you can swap it back before moving.

18. Find a Stylish Toilet Seat

Let’s be honest: Most rentals come with a basic toilet seat. When yours just won’t do anymore, it may be time to upgrade to something more modern and comfy. You can find a wide variety of options online or in stores.

19. Paint the Molding and Trim

Before selecting color swatches, you may want to double-check with your landlord that painting is allowed. Many landlords welcome you painting your molding and trim, since it’s an easy, affordable way to update a rental.

20. Invest in Good Rugs

Quality rugs can run well into the thousands of dollars. But there are less expensive options that are also durable and stylish. Besides protecting your flooring, a good rug can also visually anchor a room and help absorb sound.

No matter the price of your rug, you may want to consider purchasing renters insurance to protect it and your other valuables against losses.

Financing Your Home Updates

Some of these home updates may be easily paid for out of your checking or savings account. But others can add up. If you need a quick infusion of cash, you might consider taking out a small home improvement loan.

This is basically an unsecured personal loan, which is typically available at a lower interest rate than a credit card. It gives you a lump sum of cash (perhaps just $1,000 or so, depending on your needs) that is then paid back with interest over a term of one to seven years.

Recommended: How to Apply for a Personal Loan

The Takeaway

When you’re a renter, you may not be able to rip out walls or change out kitchen cabinets. But there are still simple, effective ways to transform your space without breaking the terms of your lease. While these sorts of jobs tend to be affordable, you can easily rack up quite the bill if you plan on tackling several home improvement projects at once. In that case, a personal loan could be a wise move.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is a good way to update a rental?

Small, temporary changes can work well. You might choose to create an accent wall with removable wallpaper, or add a floor mirror, which you can take with you when you move.

How can I update a rental home?

Some small moves that will have a big impact include adding new window treatments, lighting, showheads, and toilet seats. Painting or adding peel-and-stick wallpaper are other ways to freshen up a rental home.

What can make rental cabinets look better?

If you want to make cabinets in a rental residence look better, consider putting up vinyl or contact paper to give them a new look. This can be removed when you move out.

Photo credit: iStock/CreativaStudio

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.

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