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It is very unlikely that you can directly pay your mortgage lender with a credit card. However, there are a few workarounds that can help you pay your home loan with plastic. But it’s important to understand other factors involved when paying your mortgage with this kind of card, such as possible fees and other financial consequences.

Read on to learn how to pay your mortgage with a credit card and what to consider before you do so.

How to Pay Your Mortgage With a Credit Card

If you’re wondering if you can pay your mortgage with a credit card – It’s highly unlikely that you can do so directly. That said, there are several ways you can use workarounds to pay your mortgage with a credit card, including using a money order, utilizing third-party services, and getting a cash advance.

Use a Third-Party Service

Some third-party services facilitate mortgage payments using your credit card and send a payment to your lender on your behalf. Companies like Plastiq allow you to use select credit cards to make mortgage payments through their platform.

For the privilege, you’ll most likely need to pay a convenience fee — Plastiq charges a processing fee of 2.90% — each time you make a mortgage payment using your credit card. And, depending on how that payment is delivered (say, check or bank transfer), you may also be charged an additional fixed fee that can range from 99 cents to $39. You may also have the option to make recurring payments or to make your payments manually.

Buy a Money Order

Depending on your location and the retailer, you may be able to purchase a money order with your credit card. Then you’ll simply take the money order and deposit it at your bank and transfer the amount to your mortgage lender.

Keep in mind that most retailers may not accept credit cards as a form of payment for money orders — several major companies, including 7-11 and Western Union, have ceased this service – so it’s best to check ahead of time if you plan to use plastic. Even if you can, money orders tend to have a limit of $1,000. That means if you want to go this route, it may take you a few transactions before your money orders total enough for your mortgage payment.

Additionally, you may incur a fee for each money order you buy. Also keep in mind that some credit card issuers treat money order purchases as cash advances, which can result in a fee and interest charges at a rate that’s usually higher than the standard purchase APR on a credit card.

Transfer a Balance to Your Bank Account

You could attempt to conduct a balance transfer, with the funds going into your bank account — some credit card issuers may allow this type of transaction. Most commonly, credit card issuers provide cardholders with balance transfer checks to facilitate these types of transactions. There may be balance transfer fees involved, and interest may accrue depending on your credit card terms.

Get a Cash Advance

As another method to pay your mortgage with a credit card, you can get a cash advance at the ATM with your credit card. You’d then deposit the cash into your bank account and use the funds to make your mortgage payments. You could also consider using the funds to purchase a cashier’s check and then mailing it to your lender.

Going this route most likely means you’ll have to pay a cash advance fee, and interest on cash advances will accrue on your credit card with no grace period and often at a significantly higher rate than on your everyday purchases. Credit limits may be lower for cash advances as well.

Recommended: Charge Card Advantages and Disadvantages

Use a Payment App or Digital Wallet

Increasingly many consumers now use payment apps called digital wallets – like Apple Pay, Google Pay, and Samsung Pay, among others – to store payment information so that they can make payments quickly and easily. These apps are common now for point-of-sale transactions of all kinds, so you may wonder if this is a way to pay your mortgage with a credit card. Some lenders might allow you to pay with a digital wallet, but they would still typically require that your payments come from a debit card or bank account, not a credit card.

Do All Mortgage Lenders Accept Credit Card Payments?

No, most mortgage lenders do not accept credit card payments directly from the borrower.

If you’re curious about why this is, know that paying debt with a credit card isn’t usually a financially responsible move. Mortgage companies likely don’t want the added risk when someone is paying for their home loan with credit vs. cash. Also, it can be expensive for lenders to accept credit cards, given that processing and other fees can take a bite out of every incoming amount of money.

Factors to Consider When Paying a Mortgage With a Credit Card

Before paying your mortgage with a credit card, consider the following.

Fees vs Rewards

Similar to those considering paying taxes with a credit card, many people may want to pay their mortgage with a credit card because they want to earn rewards. Since third-party services will charge you fees — or you’ll pay the fees charged directly by your credit card issuer for balance transfers or cash advances — you’ll want to make sure the value of the rewards outweighs what you’re paying in fees.

Remember, the fees may seem small, but they can quickly add up over time. Also, in many cases, rewards cards may only count certain transactions as eligible for rewards. Many issuers don’t consider balance transfers as qualifying transactions, for example.

The Cost of Interest

If you don’t pay off your balance each month, interest will start to accrue on your credit card — and credit card interest rates are typically much higher than your mortgage interest rate, even if you have a good APR for a credit card.

Additionally, if you go the cash advance route, these transactions may have higher credit card interest rates, and there’s no interest-free grace period.

Effect on Your Credit Score

If your credit card balance starts to get too overwhelming and you miss making the credit card minimum payment, it could negatively impact your score.

Even if you make on-time payments, having a high balance could affect your credit utilization, which is the ratio between your balance and your available credit. The higher your credit utilization, the more it could negatively impact your score.

Challenges You May Face When Paying a Mortgage With a Credit Card

One challenge with using a credit card for mortgage payments is the time it takes to do so. Any of the above-mentioned methods will take you some time and effort to complete successfully. That’s because it’s unlikely your lender will accept a direct credit card payment and you will instead have to use a workaround.

There are also the fees to consider — determining whether paying the extra charges and potentially a higher interest rate is worth it takes some careful calculations.

Limited Payment Channels

Even with a workaround, your options for paying your mortgage with a credit card are quite limited. Major vendors have stopped accepting credit card payments for money orders, so the most viable methods are probably using a third=party service or getting a balance transfer or cash advance from your credit card, all of which cost money.

Potential for Increased Debt

Since credit card APRs are typically much higher than mortgage rates, putting your mortgage payment on your credit card (even indirectly) will mean that you’re risking hefty interest on top of your mortgage payment. And, since cash advances and balance transfers are among your most likely options and those typically come at even higher APRs, using them to pay for your mortgage opens you up to even more debt.

Should You Pay Your Mortgage With a Credit Card?

Making mortgage payments with a credit card might possibly be a good idea if you’re looking for a way to earn more rewards or get some financial breathing room. However, given the downsides, such as high fees and the impact it may have on your credit, you may be better off pursuing other options first. Also keep in mind that using a credit card to pay your mortgage may trigger a higher cash-advance interest rate than your typical interest rate since you can’t pay directly.

Alternatives to Using a Credit Card for Your Mortgage

Here are several options you can choose from instead of paying your mortgage with a credit card. Let’s start with what to do if the situation is urgent.

•   Consider mortgage forbearance: If you’re struggling with your payments and experiencing a significant hardship, you can contact your lender to see if mortgage forbearance is possible. This could allow you to temporarily stop paying or have your monthly payments reduced until you can get back on your feet.

•   Seek help from a housing counselor: You can find a reputable housing counselor that’s approved by the U.S. Department of Housing and Urban Development (HUD) by contacting the Homeowners HOPE Hotline or using the housing counselor tool on the Consumer Financial Protection Bureau’s website. They could suggest options to help you manage your mortgage payments. You may have to pay a small fee for the service, but it could be more affordable than using a credit card to pay your mortgage.

Refinancing or Loan Modification

If mortgage forbearance doesn’t seem necessary yet, there are other options worth considering: refinancing and loan modification.

Refinancing involves replacing your old mortgage with a new one – ideally with terms that will make it more manageable for you. The new mortgage might have a longer term or a better interest rate, resulting in lower monthly payments. The downside is that you’ll need to pay closing costs and, usually, to get more advantageous terms, you’ll need a good credit score and a regular income.

If refinancing doesn’t seem like a good option for you, you could go to your lender and request loan modification – changes in the terms of your mortgage that will make it easier for you to make your payments. This could involve a longer term or a better interest rate, for instance. Your lender is not under any obligation to offer this option, but it’s worth asking.

Personal Loan or HELOC

Another option to help with your mortgage payments could be a loan. Both personal loans and home equity lines of credit (HELOCs) are flexible loan types that might help you manage your mortgage in the short term. A personal loan is typically available at a fixed interest rate for up to $100,000 or even more. It’s usually paid back over a term of up to 10 years. A HELOC is a revolving line of credit, usually with adjustable interest rates. You can draw out funds, up to a set amount, during the initial draw period and during the subsequent repayment period, you pay back what you’ve borrowed, with interest. A HELOC is secured with your home equity, so the interest rate is typically lower than it is with a personal loan, but if you don’t make your payments, your house is at risk.

The Takeaway

While you probably can’t pay your mortgage directly with a credit card, there are workarounds that are possible, as long as you understand what you’re getting into and are strategic about what you’re doing. Before you move forward with paying your mortgage with your credit card, make sure you weigh the fees involved vs. the rewards you could earn as well as any interest you could accrue and potential impacts to your credit. Understanding the pros and cons of this scenario is an important step in using your credit card responsibly.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

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.

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FAQ

Can you use a credit card to pay a mortgage?

Can you pay your mortgage with a credit card? Probably not directly, but you may be able to do so through indirect methods. Some of these include going through a third-party service, making a balance transfer, purchasing a money order using your credit card, or getting a cash advance. Each of these methods will come with its own set of fees and/or higher interest rates.

Can paying a mortgage with a credit card impact credit score?

If you end up with a high balance on your credit card as a result of your mortgage payment, it could negatively impact your score if you have a high credit utilization. Or, if you end up missing or being late on a payment (perhaps you’re struggling to make the monthly payments), then your score could also be impacted.

Are there fees for paying a mortgage with a credit card?

There will probably be fees, depending on how you use your credit card to pay for your mortgage. For instance, you may incur balance transfer, cash advance, or third-party fees.

What are the risks of using a credit card to cover mortgage payments?

You would likely need to use a workaround to pay your mortgage with a credit card, which can require some advance planning and time. And typically, the workarounds will either involve third-party fees and/or repaying your credit card company at a higher-than-usual APR. Building up debt in this way can also have a negative impact on your credit score.

Is it ever a good idea to pay a mortgage with a credit card?

It’s rarely a good idea to pay your mortgage with a credit card. If it’s an emergency and paying with a credit card is your only option, it’s likely better than defaulting on your loan. If you have a new credit card with a signup bonus spending threshold you need to reach within a short time period, it might be worth it to consider paying through a third-party service so long as you are sure you’ll be able to pay off your credit card swiftly.

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*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.

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SOHL-Q325-025

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Have you heard the term “piggyback mortgage” and wondered what it is? At its most basic, a piggyback mortgage can be considered a second mortgage. It’s usually either a home equity loan or home equity line of credit (HELOC).

Piggyback mortgage loans can sometimes also be a wise option for homebuyers looking to finance a home without having a significant down payment available. In this situation, the piggyback mortgage is taken out at the same time as the main mortgage and put toward the down payment. The benefit is that it may help you pay less over the life of the loan because you don’t need to pay for private mortgage insurance (PMI).

Read on to learn more about what a piggyback loan is and how it works.

What Is a Piggyback Mortgage Loan?

Homebuyers can use a piggyback mortgage loan to help fund the purchase of a property. Essentially, they take out a primary loan and then a second loan, “the piggyback loan,” to fund the rest of the purchase.

Using the strategy helps homebuyers reduce their mortgage costs by enabling them to put down a 20% down payment. It also helps them avoid the need for private mortgage insurance, which is usually required for those who don’t have a 20% down payment.

Note: SoFi does not offer piggyback loans at this time.

Recommended: How to Qualify for a Mortgage

How Do Piggyback Loans Work?

When appropriate for a homebuyer’s unique situation, a piggyback mortgage might potentially save them money in monthly costs and reduce how much they need to come up with for the down payment.

Here’s an example of how piggyback mortgages work:

Jerry is buying a home for $400,000. He doesn’t want to put down more than $40,000 from his savings account for the down payment. This eliminates several mortgage types. He works with his lender through the prequalification and preapproval process to secure a first mortgage for $320,000, then with a piggyback mortgage lender to secure a piggyback mortgage of $40,000, and finishes the financing process with his total 20% down payment of $80,000, the sum of his saved money and the piggyback mortgage.

Piggyback home loans were a popular option for homebuyers and lenders during the housing boom of the early 2000s. But when the housing market crashed in the late 2000s, piggyback loans became less popular, as a lack of equity made homeowners more vulnerable to loan defaults.

Fast forward to today’s housing market. With the cost of living rising in certain areas, piggybacks are starting to become a viable option again.

Recommended: First-Time Homebuyer Guide

Types of Piggyback Loans

Here are some types of piggyback loans to consider:

A 80/10/10 Piggyback Loan

There are different piggyback mortgage arrangements, but an 80/10/10 loan tends to be the most common. In this scenario, a first mortgage represents 80% of the home’s value, while a home equity loan or HELOC makes up another 10%. The borrower’s down payment covers the remaining 10%.

In addition to avoiding PMI, homebuyers may use this piggyback home loan to avoid the conforming mortgage limits standard in their area.

A 75/15/10 Piggyback Loan

A loan with a 75/15/10 split is another popular piggyback loan option. In this case, a first mortgage represents 75% of the home’s value, while a home equity loan accounts for another 15%. And like the 80/10/10 split, the remaining 10% is the part of the down payment the borrower already has.

For example, a $450,000 75/15/10 loan would break down like this:

Main loan (75%): $337,500
Second loan (15%): $67,500
Down payment (10%): $45,000

See how these options stack up in chart form:

	80/10/10 Piggyback Loan	75/15/10 Piggyback Loan
Structure:	80% primary loan 10% 10% HELOC or home equity loan 10% down payment	75% primary loan 15% HELOC or home equity loan 10% down payment
Typical use:	Commonly used to avoid PMI and stay under jumbo loan limits	Commonly used when purchasing a condo to avoid higher mortgage rates

Average Piggyback Mortgage Rate

A piggyback loan usually has a higher interest rate than the primary mortgage, and the rate can be variable, which means it can increase over time. Let’s say your primary mortgage rate is 6.75%. The rate on the second mortgage might be 7.50%. If you borrowed $35,000 over a 10-year term with this piggyback mortgage, your monthly payment for that loan would be about $415. Of course, the exact rates you are able to secure from a piggyback mortgage lender would be based on how much you borrow, your credit score, current interest rates, and other variables.

Benefits and Disadvantages of a Piggyback Mortgage

A piggyback mortgage may help homebuyers avoid monthly PMI payments and reduce their down payment. But that’s not to say an 80/10/10 loan doesn’t come with its own potentially negatives.

There are pros and cons of piggyback mortgages to be aware of before deciding on a mortgage type.

Piggyback Mortgage Benefits

Allows you to keep some cash on hand. Some lenders request a down payment of 20% of the home’s purchase price. With the median American home price at $446,766 as of mid-2025, this can be a difficult sum of money to save, and paying the full 20% might wipe out a buyer’s cash reserves. A piggyback mortgage may help homebuyers secure their dream home but still keep cash in reserve.

Possibly no PMI required. What may be the largest motivator for securing a piggyback mortgage is that homebuyers may not be required to pay PMI, or private mortgage insurance, when taking out two loans. PMI is required until 20% of a home’s value is paid, either with a down payment or by paying down the loan’s principal over the life of the loan.

PMI payments can add a substantial amount to a monthly payment and, just like interest, it’s money that won’t be recouped by the homeowner when it’s time to sell. With an 80/10/10 loan, both loans meet the requirements to forgo PMI.

Potential tax deductions. Purchasing a home provides homeowners with potential tax deductions. Not only is there potential for some or all of the interest on the main mortgage loan to be tax deductible, but the interest on a qualified second mortgage may also be deductible if it is used to buy, build, or substantially improve the home.

Potential Downsides of Piggyback Mortgages

Not everyone qualifies. Piggyback mortgage lenders take on extra risk. Without PMI, there is an increased risk of a financial loss. This is why they’re typically only granted to applicants with strong credit. Even if it’s the best option for you, there’s no guarantee that a lender will agree to a piggyback loan scenario. You’ll see whether the odds are in your favor by going through the process of getting preapproved for your home loan.

Additional closing costs and fees. One major downside of a piggyback loan is that there are always two loans involved. This means a homebuyer may have to pay closing costs and fees on two loans at closing, though some lenders may offer low- or no-cost closings for home equity loans.

Savings could end up being minimal or lost. Before deciding on a piggyback loan arrangement, a homebuyer may want to assess the potential savings. While this type of loan has the potential to save money in the beginning, homeowners could end up paying more as the years and payments go on, especially because second mortgages tend to have higher interest rates.

To make a quick assessment, check whether the monthly payment of the second mortgage is less than the applicable PMI would have been on a different type of loan.

Here are the pros and cons of piggyback loans in chart form to help you decide if this kind of mortgage arrangement is right for you.

How to Qualify for a Piggyback Mortgage

It’s essential to keep in mind that you’re applying for two mortgages simultaneously when you apply for a piggyback home loan. While every lender may have a different set of requirements to qualify, you usually need to meet the following criteria for approval:

•   Your debt-to-income (DTI) ratio should not exceed 36%. Lenders look at your DTI ratio — the total of your monthly debt payments divided by your gross monthly income — to ensure you can make your mortgage payments. Therefore, both loan payments and all of your other debt payments shouldn’t equal more than 36% of your income, although some lenders may go higher.

•   Your credit score should be very strong. Because you are taking out two separate loans, your risk of default increases. To account for this increase, lenders require a strong credit score, usually over 700 (though some lenders may accept 680), to qualify. A higher credit score indicates you’re more creditworthy and less likely to default on your payments.

Before you apply for a piggyback loan, make sure you understand all of the requirements to qualify.

Refinancing a Piggyback Mortgage Loan

Sometimes homeowners will seek to refinance their mortgage when they have built up enough equity in their home. Mortgage refinancing can help homeowners save money on their loans if they receive a lower interest rate or better terms.

If you have a piggyback mortgage, however, refinancing could pose a challenge. It’s often tricky to refinance a piggyback loan because both lenders have to approve. In addition, if your home has dropped in value, your lenders may even be less inclined to approve your refinance.

On the other hand, if you’re taking out a big enough loan to cover both mortgages, it may help your chances of approval.

Recommended: How Much Does It Cost to Refinance a Mortgage?

Is a Piggyback Mortgage a Good Option?

Not sure if a piggyback mortgage is the best option for you? It may be worth considering in the following scenarios:

If you have minimal down payment resources: Saving up for a down payment can take years, but a piggyback mortgage may mean you can sign a contract years sooner than any other type of mortgage.

If you need more space for less cash: Piggyback loans often allow homeowners to buy larger, recently updated, or more ideally located homes than they can with a conventional mortgage loan. This advantage can make for a smart financial move if the home is expected to build equity quickly.

If your credentials are a match: It’s traditionally more difficult to qualify for a piggyback loan than other types of mortgages. For many lenders, you will need to have a strong credit score, stable income and employment history, and an acceptable DTI ratio lined up.

Piggyback Mortgage Alternatives

A piggyback mortgage certainly isn’t the only type available to hopeful homebuyers. There are other types of mortgage loans you may also want to consider.

Conventional Fixed-Rate Mortgage

This type of loan typically still requires PMI if the down payment is less than 20% of the home’s purchase price, but it is the most common type of mortgage loan by far. They’re often preferred because of their consistent monthly principal and interest payments.

Conventional loans are available in various terms, though 15-year and 30-year options are among the most popular.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Adjustable-Rate Mortgage

Also known as an ARM, an adjustable-rate mortgage may start homebuyers out with an interest rate that’s lower than they’d get with a fixed-rate loan. However, the interest rate will only remain the same for a certain period of time, typically for one year up to just a few years.

After the initial term, rate adjustments will reflect changes in the index (a benchmark interest rate) the lender uses plus the margin (a number of percentage points) added by the lender.

Interest-Only Mortgage

For some homebuyers, an interest-only mortgage can provide a path to homeownership that other types of mortgages might not. During the first five years (some lenders allow up to 10 years), homeowners are only required to pay the interest portion of their monthly payments and can put off paying the principal portion until their finances more easily allow that.

FHA Loan

Guaranteed by the Federal Housing Administration, FHA loans automatically include built-in mortgage insurance, which makes these loans less of a risk to the lender. But while it’s not possible to save on monthly insurance payments, homebuyers may still want to consider this type of loan due to the low down payment requirements.

Other Options to Consider

Some other alternatives to a piggyback mortgage might include:

•   Speaking to a lender about PMI-free options

•   Quickly paying down a home loan balance until 20% of a home’s value is paid off and PMI is no longer required

•   Refinancing (if a home’s value has significantly increased) to allow the loan to fall below the percentage requirements for PMI

•   Saving for a larger down payment and reducing the need for PMI

The Takeaway

Before signing on for a piggyback mortgage, a homebuyer should fully understand all of their mortgage options. While a second mortgage might be the best option for one homebuyer, it could be the worst option for another. If you select a piggyback mortgage, understanding its benefits and potential setbacks may help you avoid financial surprises down the line.

FAQ

What is a piggyback fixed-rate second mortgage?

A piggyback fixed-rate second mortgage is a home equity loan or home equity line of credit (HELOC) with a fixed rate that is obtained at the same time as the primary mortgage on a home purchase. Because its rate is fixed, the interest rate does not change over the life of the loan.

Is it hard to get a piggyback loan?

Because piggyback borrowers typically don’t pay for private mortgage insurance, the requirements to obtain this type of loan can be more strict than they are for other home loans. You may need a credit score of 680-700 or more and a debt-to-income ratio of 36% or less.

What is the advantage of a piggyback loan?

A piggyback loan can help you avoid having to pay for private mortgage insurance (PMI) if you are making a low down payment on a home purchase. However, you’ll want to compare the costs of the second mortgage (including its closing costs) against the costs of PMI before making a decision.

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*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 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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOHL-Q325-047

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What is a purchase-money mortgage loan? With this nontraditional kind of mortgage, the seller finances part or all of the property for the buyer, who usually does not qualify for traditional financing.

Keep reading to learn more about what a purchase-money mortgage loan is and the benefits and drawbacks of using one.

Purchase-Money Mortgage Definition

A purchase-money mortgage is also known as owner financing. The seller extends credit to the buyer to purchase the property. This can be a portion of the sale price or the full price.

In other words, the buyer borrows from the seller instead of from a traditional lender. The seller ultimately determines the interest rate, down payment, and closing costs. Both parties sign a promissory note. They record a deed of trust or mortgage with the county. The seller usually retains title until the financed amount is paid off.

A purchase-money loan is a nontraditional financing method that may be needed when the buyer cannot obtain one of the other different mortgage types for purchasing the property.

The promise to pay is secured by the property, so if the buyer stops paying, the seller can foreclose and get the property back.

If you’re considering a purchase-money mortgage, it may be useful to use a mortgage calculator tool to help you determine what potential payments on a purchase-money mortgage might be.

Recommended: How to Buy a Foreclosed Home the Simple Way

How Does a Purchase-Money Mortgage Work?

Not all buyers are in financial situations that make it easy for them to get a conventional home loan. Even diligent shopping for a mortgage may not help them get the home loan they need.

If a buyer has a profitable business, for example, but doesn’t have two years of tax returns to prove steady cash flow, most mortgage lenders won’t take on the risk.

Enter a purchase-money mortgage. With the right property, seller, and situation, a buyer could finance the home with a purchase-money mortgage. The seller would offer terms to the buyer — usually a higher interest rate and a short repayment term, with a balloon mortgage payment at the end — and the buyer would enter into the agreement. The seller would hold title until the loan payoff.

Buyers and sellers who work with seller financing often intend for the purchase-money mortgage to be refinanced into a traditional mortgage with a lower mortgage payment at a later date.

Purchase-Money Mortgage Example

Let’s say a homebuyer wants to purchase a $450,000 house. They have a down payment of $100,000 and are making a good salary but underwent a bankruptcy two years ago and can’t qualify for a traditional mortgage. They might be able to arrange with the seller to get a purchase-money mortgage for the remaining $350,000 with a balloon payment at the end of five years. By then, they should be eligible for a traditional mortgage.

Types of Purchase-Money Mortgages

Purchase-money mortgages can come in several forms.

Land Contract

A land contract (also called a contract for deed) is simply a mortgage from the seller. The buyer takes possession of the property immediately and pays the seller in installments.

Land contracts are often for five years or less, ending with a balloon payment.

Lease-Purchase Agreement

In a lease-purchase agreement, the buyer agrees to rent the property for a specified amount of time and then enter into a contract to purchase the property at a price that’s the current market value or a bit higher.

For this and a lease-option agreement, the seller typically requires a substantial upfront fee, an above-market lease rate, or both. Part of the monthly rent payment goes toward the purchase price.

Lease-Option Agreement

A lease-option agreement is similar to a lease-purchase agreement in that the buyer agrees to first rent the property for a specified amount of time. But with this agreement, the buyer has the option to purchase the property instead of making a commitment to purchase it.

Assumable Mortgage

Sometimes the seller may have a mortgage that has more favorable terms than are common at the point they wish to sell the home. When that’s the case, the buyer may be able to simply take on that mortgage, with the same terms, and continue to make payments when the seller leaves off. This requires that the mortgage lender approves, of course, and is typically more common with government-backed loans. The buyer may need to pay the seller for their equity, as well.

Hard Money Loan

A hard money loan is generally a short-term high-interest loan made by private investors, often for buyers who want to purchase commercial property. It may make sense if the buyers anticipate that they will be able to refinance within a few years, for example, if their credit will improve significantly.

Pros and Cons of Purchase-Money Mortgages for Buyers

Like any kind of loan, a purchase-money mortgage may have benefits and drawbacks for potential buyers.

Pros and Cons of Purchase-Money Mortgages for Sellers

Sellers will also want to consider carefully the plusses and minusses of purchase-money mortgages.

Recommended: How to Navigate the Mortgage Preapproval Process

The Takeaway

If you’re able to secure financing from a seller, a purchase-money mortgage may be a good fit — assuming you have an exit plan for a few years down the road. It’s smart for both buyers and sellers to know the risks and rewards of a purchase-money mortgage.

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.

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FAQ

Who holds the title in a purchase-money mortgage?

The seller controls the legal title; the buyer gains equitable title by making payments.

Can a bank issue a purchase-money mortgage?

Yes, but it is not common. A buyer might pay for a house with a bank mortgage, cash, and a property seller mortgage. Both the mortgage issued by the third-party lender and the seller financing are considered purchase-money mortgages.

Does a purchase-money mortgage require an appraisal?

Not if the seller does not require one. With owner financing, the seller sets the terms, which may not include an appraisal.

Is a purchase-money mortgage the same as seller financing?

A purchase-money mortgage is essentially the same as seller financing, though there are several kinds of purchase-money mortgage, including land contracts and lease-purchase options, among others.

Should you buy with a purchase-money mortgage?

In general, if you can get a traditional mortgage, you may be better off with that, since typically you’ll get a lower interest rate and a longer term. However, if you can’t qualify for a traditional mortgage but can afford to make the necessary payments, a purchase=money mortgage can be a way to get a home sooner. Just be sure you understand the terms and have a plan to make sure you can refinance when the term is up.

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*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.

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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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Oil is valuable, and one of the most widely used and widely traded commodities in the world. Despite the growth of many forms of alternative energy, oil remains essential to the functioning of industry and transportation around the globe.

Given all the factors that go into oil prices, it’s no wonder that they can fluctuate dramatically, often on a daily basis. The price of oil has an impact on a wide range of industries, and ultimately on the prices that consumers pay at the pump, in the supermarket, and beyond. That also makes it attractive to some investors.

Ways to Invest in Oil

For those who are interested in incorporating crude oil investing in their portfolio, there are many ways to get started.

Oil Company Stocks

In addition to the massive global names, there are other companies that specialize in different aspects of energy production, oil exploration, drilling, equipment, delivery and more. There are also smaller oil companies with vertical operations, but only in specific parts of the world. Each of those types of companies will perform differently depending on the many geopolitical, economic, technological, and other factors that drive the price of oil up and down.

Recommended: Investing in the Energy Sector: What Any Investor Should Know

Oil Funds

Not every investor has the time or interest to research a host of oil companies. For those investors, another approach might be investing in a mutual fund or exchange-traded fund (ETF) that focuses on the oil sector, or more broadly on the energy sector.

Since thematic ETFs and mutual funds hold many securities, they offer investors a level of diversification within their portfolio.

Recommended: Key Differences between Mutual Funds and ETFs

Exchange-Traded Notes (ETNs)

Exchange-traded notes are a vehicle that invests directly in oil futures contracts. They may be attractive to some investors because they offer easy access to oil futures, without some of the other factors that can affect the performance of oil companies, such as currency fluctuations and swings in the equity markets. Because they buy oil futures directly, ETNs can offer investors a more direct investment in the price of oil.

Derivatives

More sophisticated investors may also consider investing in the derivatives markets, buying futures, and options. Crude oil options trade on the New York Mercantile Exchange (NYMEX) and on the ICE exchange.

Alternative Investments

Investors interested in alternative investments might get exposure to oil by purchasing mineral rights or buying into Limited Partnerships (LPs) that invest throughout the sector.


💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

Trends in Oil Investing

Oil prices plummeted in 2020, as pandemic-associated lockdowns drove U.S. oil prices into negative territory for the first time in history. In April 2020, investors bid the price for West Texas Intermediate (WTI) from $18 per barrel, down to roughly negative $37 a barrel.

Later that year, oil prices began to normalize. Demand returned in 2021, and oil prices shot back up in 2022, when they reached levels not seen in decades. Then, in 2023, prices did fall a bit again, and remain around $66 per barrel as of mid-2025 — but the point is that prices are always on the move. Given the unpredictability of the global economy, too, it’s very difficult to determine how oil prices will perform going forward.

Forces That Drive Oil Prices

There are many factors that determine oil prices. That, in turn, can affect prices for gasoline and more. Here are some of the forces at play.

The Organization of Petroleum Exporting Countries (OPEC)

Another important contributor to oil prices is the Organization of Petroleum Exporting Countries (OPEC), a group of 12 oil-producing countries, including Algeria, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela.

Together, they’re responsible for nearly 80% of the planet’s oil reserves. As an organization, OPEC meets regularly to set production levels. And its decisions can directly change the price of oil and gas. And while it has a massive influence on the price of oil, it doesn’t control the price.

Market Fundamentals

The global oil market is a force in its own right, as supply and demand tend to fluctuate sharply and unpredictably. There can be too much supply. Within OPEC, members don’t always follow through on the limits they agreed upon limits. There are also major oil suppliers, such as the United States, who are not OPEC members who may produce more oil than expected. That can cause high levels of supply relative to demand, which can drive down prices.

Production Costs

Oil in Canada’s oil sands or American shale reserves is far more labor-intensive and expensive to extract and refine than the oil in the Middle East. Those extraction costs contribute to the price of the oil, which can drive the oil prices higher or lower, depending on where the bulk of supply is coming from at any given time.

Natural Disasters

Oil prices are also susceptible to change as a result of natural disasters. Hurricanes, for example, regularly shut down oil production in the Gulf of Mexico, which can reduce the supply of oil and drive prices up.

International Relations

The headlines, especially international ones, can also drive oil prices. A significant amount of the world’s oil comes from the Middle East. Political instability in that region creates investor uncertainty, which can lead to price fluctuation. The same goes for countries like Russia, which produces a lot of oil, but is often involved in geopolitical conflicts.

Economic Factors

While not always the case, recessions and economic turmoil can push oil prices lower.

The relative strength of the U.S. dollar also plays a role in the price of oil. The thinking is that a strong dollar allows American oil companies to buy more oil, and cut the cost to U.S. consumers, who buy a good percentage of the oil on the market.

However, while oil does not typically perform well during a recession, it does typically become more attractive to investors later in the business cycle.

The Takeaway

Oil is always in demand, and fluctuates a lot in price, which may make it attractive to many investors. But it’s a volatile investment, which can make investing in oil a risky endeavor. Given that many people are focused on renewable energy sources, too, investing in oil may not be as attractive as it once was.

The volatility of oil and its importance to the global economy makes it an important asset class for many investors. But again, it’s risky — so, whether you decide to invest in oil or oil-adjacent sectors and companies should be given considerable thought.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

How can investors invest in oil?

There are several ways to potentially invest in oil either directly or indirectly, including oil company stocks, mutual funds, ETFs, and exchange-traded notes that track oil prices directly.

What sorts of factors determine oil prices?

There’s a long list of variables that may affect oil prices, including the goals of cartels like OPEC, production costs, natural disasters, and international relations or military conflicts.

What is OPEC?

OPEC is the Organization of Petroleum Exporting Countries (OPEC), a group of 12 oil-producing countries, including Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC makes up nearly 80% of the planet’s oil reserves.

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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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