How to Save for Retirement at 30

How to Save for Retirement at 30

One of the most important things you can do in your 30s is to start prioritizing retirement savings if you haven’t done so already.

Building retirement savings at 30 is not always an easy task, even if you’re earning a higher salary. Financial responsibilities often increase at this time, but it’s important to keep retirement in mind even as you hit other milestones such as buying a house or starting a family.

To save for retirement in your 30s, you’ll need to balance your daily spending with your long-term goals. The sooner you can begin saving for retirement the better.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1


1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

How to Start Saving for Retirement at 30

You can set yourself on a path to healthy retirement savings by using the following strategies. First up, putting money into a designated retirement plan.

1. Contribute to a 401(k)

Saving in tax-advantaged retirement accounts available through work, such as a 401(k), is one of the best things you can do to start saving for retirement. Your 401(k) allows you to contribute up to $23,500 a year in 2025, up from $23,000 a year in 2024. Contributions come directly from your paycheck with pre-tax dollars, which lowers your taxable income in the year you make them.

Regular, automatic contributions, coupled with the benefits of compounding returns, can help your savings grow even faster. Starting a 401(k) at 30 gives you several decades for your funds to grow over time.

Also, 401(k)s allow employers to contribute to your retirement, and many will offer matching funds as part of your compensation package. Aim to save at least as much as is required to receive your employer’s match. Work toward maxing out your 401(k) contributions, especially as your salary grows over time.

You can access the funds penalty-free once you reach age 59 ½, but you will owe taxes on the money at that time.


💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

2. Open an IRA

An IRA is a retirement account, which anyone with earned income can open. If you don’t have a 401(k) at work, opening an IRA can give you access to a tax-advantaged account to save for retirement. Even if you already have a 401(k), opening an IRA can be a good way to save even more, though you won’t get to write off your contributions.

The contribution limit for an IRA in both 2024 and 2025 is $7,000 per year.

IRAs come in two different types: traditional and Roth IRAs. If you don’t have a 401(k), you can make contributions to traditional IRAs with pre-tax dollars. Like a 401(k), money in these accounts grows tax-deferred, and you’ll pay the taxes on it when you make withdrawals in retirement.

If you meet certain income restrictions, you may be able to contribute to a Roth IRA instead. In that case, you’ll make the contributions with after-tax dollars, but your money will grow tax-free inside the account and you do not have to pay taxes when you make withdrawals.

Recommended: Traditional vs. Roth IRA: How to Choose the Right Plan

3. Plan Your Asset Allocation

Diversification is the act of spreading your money across different asset classes. To minimize risk from a decline from one type of asset, it typically makes sense to create a diversified portfolio, including a mix of asset classes, such as stocks, bonds and other assets.

Your asset allocation refers to the proportion of each asset class that you hold. Your asset allocations will reflect your goals, risk tolerance, and time horizon. Given the relatively long period until your retirement, you might consider a relatively aggressive portfolio consisting mostly of stocks in your retirement account.

Stocks typically provide the most potential for growth, but they also fluctuate more than some other asset classes. Since you have three decades or more before you retire, you have time to ride out the natural ups and downs of the market.

Bonds, which tend to be less volatile than stocks but also offer lower returns, may balance out the riskier equity allocation. As you approach retirement, you may consider rebalancing your asset allocation to include more conservative investments to help protect the income you will need to draw upon soon.

Target-date funds are a type of mutual fund that automatically readjusts your portfolio as you near your target date, often the year in which you wish to retire.

4. Diversify within Asset Classes

Just as a portfolio with different types of assets offers some downside protection, so too, does diversification within those asset classes. If you invest the entire stock portion of your portfolio shares in just one company and share prices in that company drop, the value of your entire portfolio drops as well.

Now imagine that you own shares in 500 different companies. When one stock fares poorly, it will have a relatively small effect on the rest of your portfolio. Diversification helps limit the negative effects that any asset class, sector, or company could have on your portfolio.

You can further diversify your portfolio by including companies from different sectors and of all sizes from different parts of the globe. This same idea is true for other asset classes. For example, you could hold a mix of government and corporate bonds, and the corporate bonds could represent companies from various sectors and locations.

One way to add diversification to your portfolio is by investing in mutual funds, exchange-traded funds (ETFs), and index funds that invest in a diversified basket of stocks. For example, if you buy shares in an ETF that tracks the S&P 500 index, you’ll be investing in the 500 stocks included in that index.

5. Don’t Cash Out your 401(k) if You Get a New Job

If you’re only in your 30s, it’s likely that you’ll change jobs a couple of times or more, over the course of your career. When you change jobs, you’ll have a number of options for what to do with the 401(k) you hold with your previous employer.

One of these options is to cash out your 401(k). But this is typically not a great idea from a personal finance perspective. If you take a lump sum payment and you’re younger than 59 ½, you may not only owe income taxes on the withdrawal, but also a 10% early withdrawal penalty. What’s more, your money will no longer be working for you in a tax-advantaged account, potentially setting you back in your retirement savings goals.

A better option is to roll over your 401(k) into another tax-advantaged retirement account, such as your new employer’s plan, if they offer one, without paying income taxes. Or you can roll your 401(k) into an IRA without paying taxes. IRA accounts offer the added benefit of additional investment options, and they may have lower fees than your 401(k).

Recommended: How to Transfer Your 401(k) When Changing to a New Job

6. Protect Your Earnings with Disability Insurance

An injury or an illness that keeps you from going to work can hamper your retirement savings plan. However, disability insurance can help cover a portion of your lost income — usually between 50% and 70% — for a period of time.

Most employers offer some sort of short-term disability insurance, with a benefit period of three to six months. Some employers may offer long-term policies that cover periods of five, 10, or 20 years, or even through retirement age.

Check with your employer to see if you are covered by a disability policy and whether it provides enough coverage for your needs. If your employer’s plan falls short, or you don’t have access to one, you might consider purchasing a policy on your own.

The Takeaway

The earlier you can start saving for retirement the better. A long time horizon gives you the opportunity to take advantage of compounding growth for a longer period of time, which can help you increase the amount you’re able to save. Pay attention to the fees you’re paying on investments, which can eat away at returns over time.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.


Photo credit: iStock/AJ_Watt

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

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.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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What Is an Interest-Only Loan Mortgage?

An interest-only mortgage lets you pay just interest for a set period of time, typically between seven and 10 years, as opposed to paying interest plus principal from the beginning of the loan term.

While interest-only mortgages can mean lower payments for a while, they also mean you aren’t building up equity (ownership) in your home. Plus, you will likely have a big jump in payments when the interest-only period ends and you are repaying both interest and principal.

Read on to learn how interest-only mortgages work, their pros and cons, and who might consider getting one.

Note: SoFi does not offer interest only mortgages at this time. However, SoFi does offer conventional mortgage loan options.

How Do Interest-Only Mortgages Work?

With an interest-only mortgage, you solely make interest payments for the first several years of the loan. During this time, your payments won’t reduce the principal and you won’t build equity in your home.

When the interest-only period ends, you generally have a few options: You can continue to pay off the loan, making higher payments that include interest and principal; look to refinance the loan (which can provide for new terms and potentially lower interest payments with the principal); or choose to sell the home (or use saved up cash) to fully pay off the loan.

Usually, interest-only loans are structured as a type of adjustable-rate mortgage (ARM). The interest rate is fixed at first then, after a specified number of years, the interest rate increases or decreases periodically based on market rates. ARMs usually have lower starting interest rates than fixed-rate loans, but their rates can be higher during the adjustable period. Fixed-rate interest-only mortgages are uncommon.

An interest-only mortgage typically starts out with a lower initial payment than other types of mortgages, and you can stick with those payments as long as 10 years before making any payments toward the principal. However, you typically end up paying more in overall interest than you would with a traditional mortgage.

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

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Interest-Only Loan Pros and Cons

Before you choose to take out an interest-only mortgage, it’s a good idea to carefully weigh both the benefits and drawbacks.

Pros

•  Lower initial payments The initial monthly payments on interest-only loans tend to be significantly lower than payments on regular mortgages, since they don’t include any principal.

•  Lower interest rate Because interest-only mortgages are usually structured as ARMs, initial rates are often lower than those for 30-year fixed-rate mortgages.

•  Frees up cash flow With a lower monthly payment, you may be able to set aside some extra money for other goals and investments.

•  Delays higher payments An interest-only mortgage allows you to defer large payments into future years when your income may be higher.

•  Tax benefits Since you can deduct mortgage interest on your tax return, an interest-only mortgage could result in significant tax savings during the interest-only payment phase.

Cons

•  Cost more overall Though your initial payments will be smaller, the total amount of interest you will pay over the life of the loan will likely be higher than with a principal-and-interest mortgage.

•  Interest-only payments don’t build equity You won’t build equity in your home unless you make extra payments toward the principal during the interest-only period. That means you won’t be able to borrow against the equity in your home with a home equity loan or home equity line of credit.

•  Payments will increase down the road When payments start to include principal, they will get significantly higher. Depending on market rates, the interest rate may also go up after the initial fixed-rate period.

•  You can’t count on refinance If your home loses value, it could deplete the equity you had from your down payment, making refinancing a challenge.

•  Strict qualification requirements Lenders often have higher down payment requirements and stricter qualification criteria for interest-only mortgages.

Recommended: What Is Considered a Good Mortgage Rate?

Who Might Want an Interest-Only Loan?

You may want to consider an interest-only mortgage loan if:

•  You want short-term cash flow A very low payment during the interest-only period could help free up cash. If you can use that cash for another investment opportunity, it might more than cover the added expense of this type of mortgage.

•  You plan to own the home for a short time If you’re planning to sell before the interest-only period is up, an interest-only mortgage might make sense, especially if home values are appreciating in your area.

•  You’re buying a retirement home If you’re nearing retirement, you might use an interest-only loan to buy a vacation home that will become your primary home after you stop working. When you sell off your first home, you can use the money to pay off the interest-only loan.

•  You expect an income increase or windfall If you expect to have a significant bump up in income or access to a large lump sum by the time the interest period ends, you might be able to buy more house with an interest-only loan.

Recommended: Tips for Shopping for Mortgage Rates

Qualifying for an Interest-Only Loan

Interest-only loans aren’t qualified mortgages, which means they don’t meet the backing criteria for Fannie Mae, Freddie Mac, or the other government entities that insure mortgages. As a result, these loans pose more risk to a lender and, therefore, can be more difficult to qualify for.

In general, you may need the following to get approved for an interest-only loan:

•  A minimum credit score of 700 or higher

•  A debt-to-income (DTI) ratio of 43% or lower

•  A down payment of at least 20% to 30% percent

•  Sufficient income and assets to repay the loan

The Takeaway

An interest-only mortgage generally isn’t ideal for most home-buyers, including first-time home-buyers. However, this type of mortgage can be a useful tool for some borrowers with strong credit who fully understand the risks involved and are looking at short-term ownership or have a plan for how they will cover the step-up in payment amounts that will come down the road.

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.


SoFi Mortgages: simple, smart, and so affordable.


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.


*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.

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

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

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What Does At the Money Mean in Options Trading?

What Does At the Money Mean in Options Trading?


Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

An at-the-money (ATM) option is one where the strike price is at or very near the current price of the underlying stock itself. At-the-money options have no intrinsic value, but they may have value due to their potential to go in the money before they expire.

Options traders must understand the difference between the three types of options’ “moneyness:” at the money, in the money, and out of the money.

Key Points

•   An at-the-money (ATM) option has a strike price at or near the current price of the underlying stock, with no intrinsic value.

•   ATM options typically have a delta of around 0.50, meaning their price moves about 50 cents for every dollar movement in the stock.

•   ATM options can be less expensive than in-the-money (ITM) options but more costly than out-of-the-money (OTM) options.

•   The volatility smile indicates that implied volatility is generally lower for ATM options compared to ITM or OTM options.

•   Understanding ATM, ITM, and OTM options is crucial for effective options trading strategies.

What Is At the Money?

Conventionally, being at the money means that a given option’s strike price is identical to the price of the underlying stock itself. Both a call option and a put option can be at the money at the same time if their strike price is the same as the price of the stock.

In the age of decimal stock pricing, however, it is rare for an option’s strike price to exactly equal the price of the underlying stock. The at-the-money strike is usually considered the one closest to the stock’s price.

Understanding At the Money

Usually, an option that is at the money will have a delta of around 0.50 for an -call option and -0.50 for a put option. This means that for every $1 of movement of the underlying stock, the option will move about 50 cents.

Some options traders employ more complicated strategies, such as an at-the-money-straddle. This involves buying or selling both an at-the-money call and an at-the-money put on the same underlying asset with the same strike price and expiration date. This strategy offers the potential to profit from large price swings in either direction. It also carries the risk of loss if the underlying price stays near the strike, as both options may expire worthless, costing the investor the net premium paid. Be aware that investors can only buy, and not sell, options on SoFi Active Invest at this time.


💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

At the Money vs In the Money vs Out of the Money

Usually there is one option strike price considered at the money, with any other strike prices being either in the money (ITM) or out of the money (OTM). The difference between ITM and OTM is that an in-the-money option is one that has intrinsic value, meaning it would be profitable to exercise it today.

A call option is in the money when the stock price is above the strike price, while a put options is in the money when the stock price is below the strike price.

Out-of-the money options have no intrinsic value and will generally expire worthless if they remain out of the money at expiration.

Consider the following call or put options for stock ABC with a current price of $55.

Option

Strike price

ATM / ITM / OTM

ABC Call option $55 At the money
ABC Put option $55 At the money
ABC Call option $70 Out of the money
ABC Put option $70 In the money
ABC Call option $40 In the money
ABC Put option $40 Out of the money

Recommended: Call vs. Put Options: The Differences

At the Money and Near the Money

An option is considered near the money usually if it is within 50 cents of the price of the underlying stock. However, it is common for investors to use the terms “near the money” and “at the money” interchangeably.

This is because stocks are priced to the nearest cent, while option strike prices are usually only to the nearest dollar or half-dollar, depending on the magnitude of the underlying stock price. It is rare for a stock to have an option that exactly matches any specific strike price.

Pricing At-the-Money Options

Because an at-the-money option has a strike price at or near the price of the underlying stock, it has no intrinsic value. Any value in an ATM option primarily consists of extrinsic value, meaning the portion of an option’s value determined by its potential to increase in value before it expires, measured by factors such as its time to expiration and implied volatility.

Options have the potential to provide greater returns, relative to the cost, than directly purchasing stock if the underlying asset moves favorably, but options investors also face the risk of losing their entire investment if the market moves unfavorably.

At the Money and Volatility Smile

A “volatility smile” is a graph that shows implied volatility across different strike prices, typically forming a curve that resembles a smile. This pattern generally shows that implied volatility is often lower for at-the-money options compared to those that are in-the-money or out-of-the-money. That said, it’s important to know that not all options fit into the volatility smile model.

Pros and Cons of Trading At-the-Money Options

Here are some pros and cons of trading at-the-money options:

thumb_up

Pros:

•   Generally less expensive than in-the-money options, which have intrinsic value.

•   Can offer a hedge against downside risk on stocks you already own.

•   May offer a range of trading strategies, given their position between in-the-money and out-of-the-money options, which can affect risk and potential reward.

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Cons:

•   Higher premiums compared to out-of-the money options.

•   ATM options have lower intrinsic value at purchase, and may expire worthless if the stock price doesn’t move.

•   If the stock moves against your expectations, you could potentially lose your entire investment.

The Takeaway

Understanding the difference between options that are at the money, in the money and out of the money is crucial if you want to trade options through your brokerage account. Prices with these three different types of options contracts react differently to movements in the price of the underlying stock, so make sure you buy the right one based on your overall strategy.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

FAQ

What does buying at the money mean?

When you buy an at-the-money option, you are buying an option whose strike price is at or near the price of the underlying stock. An option that is at the money generally has a delta value of around positive or negative 0.50, depending on if it is a call or a put. That means its price will move about 50 cents for every dollar that the price of the underlying stock moves.

How do at the money and in the money differ?

An at-the-money option is one whose strike price is at or near the price of the underlying stock. An in-the-money option is one with a strike price that would be exercised if the option closed today. An at-the-money call option is one whose strike price is at or lower than the stock price, while an at-the-money put option is one whose strike price is at or higher than the stock price.

Is it best to buy at the money?

There are several different strategies for trading options, and the strategy you trade will help decide whether it’s a good idea to buy at the money. It can certainly be profitable to buy or sell at-the-money options, but other strategies for making money with options exist as well.


Photo credit: iStock/DMEPhotography

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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2024 VA Loan Closing Costs Calculator Table With Examples

The U.S. Department of Veterans Affairs (VA) offers a mortgage financing program known as VA loans. This is designed to help veterans, active-duty service members, and surviving spouses get financing for a home loan.

When applying for any mortgage, there are additional costs on top of the purchase price of the property. These costs can be complex to figure out for first-time homebuyers, so there are calculators available to help.

A loan closing costs calculator is used to estimate the closing expenses associated with a mortgage loan such as a VA loan. These costs can include appraisal fees, loan origination fees, title and homeowner’s insurance, lawyer’s fees, and property taxes. The calculator takes into account the amount of the loan, the term of the loan, the interest rate, and the purchase price.

This guide will help you understand these costs and also calculate what these expenses might look like for your loan.

Key Points

•   VA loans offer mortgage financing for veterans, active-duty service members, and surviving spouses.

•   Closing costs for VA loans can include fees for appraisal, origination, and title insurance.

•   A VA loan closing costs calculator helps estimate these expenses, aiding in financial planning.

•   The VA funding fee varies and can be financed into the loan; some may be exempt from this fee.

•   VA loans do not require private mortgage insurance, potentially lowering overall borrowing costs.

Why Use a VA Loan Closing Costs Calculator Table?

A VA loan closing costs calculator is a useful tool for anyone looking into applying for a VA loan. Because, yes, you do pay closing costs with a VA loan.

Although calculators only provide an estimate and not the final closing costs, you can enter the property and loan details and immediately get an idea about the total closing expenses you will be paying if you go through with the loan.

This helps with budgeting, comparing the cost of living in different locations, looking at different properties and loan options, and negotiation. It also helps educate borrowers about the loan process.


💡 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.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


How to Calculate Your VA Loan Closing Costs

Whether you are a first-time homebuyer or have been through the process before, it can be a good idea to acquaint yourself in advance with the fees you’ll pay when you get a home mortgage. The following are some of the common costs associated with VA loans:

•   VA funding fee: This is a required fee calculated as a percentage of the loan amount. The amount of this fee depends on factors such as the down payment amount and the type of service member applying. Worth noting: This is the one fee that you may be able to roll into the loan vs. pay separately.

Also, some people may be exempt from paying a funding fee, such as those who receive compensation for a service-related disability, among other scenarios.

•   Loan origination fee: This is a fee for processing the loan application (it’s charged by the lender, not the VA) and is generally a percentage of the loan amount. With a VA loan, it typically has a maximum and will not exceed 1% of the loan value.

•   Discount points: These are upfront payments that can be made to reduce the loan’s interest rate. Each percent of the loan amount is equal to one point.

•   Credit report: This is a fee for obtaining a credit report, which is used to determine the borrower’s creditworthiness. Having good credit is just one important part of qualifying for a home loan.

•   Appraisal fee: There is a fee for hiring an appraiser, who determines the value of the property being purchased.

•   Homeowners insurance: This is to secure the property against damage and losses. Borrowers generally pay the first year upfront.

•   Real estate taxes: If there are any unpaid property taxes, some or all may need to be paid at closing.

•   State and local taxes: Some states or cities may impose taxes or property transfer fees.

•   Title insurance: Title insurance protects against issues with the property’s title and is generally required by lenders.

•   Recording fee: This fee covers the cost of recording the mortgage and any related documents with the government.

Worth noting: With VA loans, you can save big because private mortgage insurance (PMI) isn’t required for those putting down less than 20%, as it might be with other kinds of home loans.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

2024 VA Loan Funding Fee Calculator Table

Now that you understand the different fees that may be assessed when you take out a mortgage, take a closer look at what some of these fees look like for a typical VA loan. (Rates may differ for other types of VA loans, such as those for manufactured homes or that are part of the Native American Direct Loan program.)

Down Payment (%) Funding Fee (1st Time) Subsequent Funding Fee Other Closing Costs
0-5% 2.15% 3.30% $3,500 to $6,000
5-10% 1.50% 1.5% $2,500 to $5,000
>10% 1.25% 1.25% $2,000 to $4,000

Examples of VA Loan Closing Costs Calculations

Below are a few examples of closing costs for a VA loan in 2023:

Example 1: First-time homebuyer with no down payment

Loan Amount: $250,000
Down Payment: 0% (No down payment)
Funding Fee: 2.15% (First-time user)
Other Closing Costs: $5,000

Closing Costs Calculation:

Funding fee: $250,000 x 2.15% (0.0215) = $5,375
Other closing costs: $5,000
Total closing costs: $5,375 (funding fee) + $5,000 (other closing costs) = $10,375

Example 2: First-time homebuyer with a 5% down payment

Loan amount: $300,000
Down payment: 5% ($15,000)
Funding fee: 1.50% (first-time user)
Other closing costs: $6,500

Closing Costs Calculation:

Funding fee: ($300,000 – $15,000) x 1.50% (0.0165) = $4,275
Other closing costs: $6,500
Total closing costs: $4,275 (funding fee) + $6,500 (other closing costs) = $10,775

Example 3: Subsequent homebuyer with a 15% down payment

Loan amount: $400,000
Down payment: 15% ($60,000)
Funding fee: 1.25% (subsequent user)
Other closing costs: $7,000

Closing Costs Calculation:

Funding fee: ($400,000 – $60,000) x 1.25% = $4,250
Other closing costs: $7,000
Total closing costs: $4,250 (funding fee) + $7,000 (other closing costs) = $11,250

Recommended: The Cost of Living in California

Reasons to Calculate Your VA Loan Closing Costs First

Calculating VA loan closing costs is beneficial for a few reasons:

1.    Financial planning: Calculating closing costs for a VA loan upfront helps with planning finances and budgeting to make sure you have enough money to afford purchasing a home. It prevents unforeseen expenses and reduces stress throughout the buying process.

2.    Analyze affordability: Knowing closing costs can help you determine whether you can afford a property.

3.    Comparison shopping: Calculating closing expenses also helps with comparing various home mortgage loans so you can choose the terms that work best for you and potentially save money. While VA loans are one option, there are many types of mortgage loan choices that may be a good choice depending on your individual circumstances.

4.    Negotiation: Understanding closing costs provides a starting point for negotiation. Certain fees or terms may be negotiable, and having the knowledge of the starting points provides you, the borrower, with the information needed to get the best deal.

5.    Avoid surprises: Planning ahead can help prevent unforeseen costs that may arise during the closing process. It also allows you to compare the estimate to the final closing costs to make sure they are all accurate.

Recommended: How Long Does It Take to Close on a House?

Tips on How to Save on Your VA Loan Closing Costs

Here are some tips for how to save on VA loan closing costs:

•   Shop around for lenders: Compare closing cost estimates from various lenders by requesting quotations from them all. It’s important to shop around for a mortgage and look into different options to find the best rates and terms.

•   Negotiate with the lender: Don’t hesitate to ask for lower fees and discuss terms. Eligible borrowers with good credit may be able to negotiate loan conditions.

•   Consider seller concessions: In some cases it may be possible to persuade the seller of the home to cover some of the closing costs. Consult with the real estate agent during the negotiation process about this possibility to reduce costs.

•   Utilize VA loan programs and benefits: Take advantage of the benefits offered by the VA loan program. For instance, the VA funding fee can be rolled into the loan amount, and the VA has restrictions on fees which can help keep closing costs down.

•   Consider rate options: Evaluate different interest rate options and the impact they have on closing costs. For instance, a higher interest rate may offer lender credits that can be applied to closing costs. If one intends to live in the house for a long time, this may be a good option.

•   Read the Closing Disclosure (CD) carefully: The final closing costs are listed in the Closing Disclosure document. It’s important to carefully review this document to make sure there are no errors or unforeseen closing costs.

Dream Home Quiz

The Takeaway

VA loan closing costs include the financing fee, credit report fees, appraisal fees, title insurance, and other expenses associated with obtaining a VA loan. It’s important for borrowers to calculate their estimated closing costs in advance to compare loan options, negotiate fees, and prepare themselves financially for buying a home.

It’s also wise to consider a variety of loan options, from the VA or not, to make sure you are getting the right fit for your financial needs.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

Our Mortgage Loan Officers are ready to guide you through the process step by step.

FAQ

What is the VA funding fee for 2023?

The VA funding fees for 2023 are, for first use, dependent on your down payment amount: less than 5%, 2.15%; 5% to 10%, 1.5%; and over 10%, 1.25%. After first use, the rates shift to: less than 5%, 3.3%; 5% to 10%, 1.5 %; and move than 10%, 1.25%.

What percentage of closing costs can be included in a VA loan?

There is no specific limit on the percentage of closing costs that can be included in the loan amount, but the VA restricts the types of fees that can be charged. The VA has a “4% rule,” which states that the total allowable closing costs and certain fees paid by the borrower cannot exceed 4% of the loan amount.

What is an example of a VA funding fee?

The VA funding fee is a one-time fee paid by borrowers using a VA loan, and the amount is calculated based on factors such as the loan amount, down payment, and the borrower’s service category. For example, a first-time borrower with a $300,000 loan amount and no down payment may have a funding fee of 2.15%, resulting in a fee of $6,450.


Photo credit: iStock/Ole Schwander

Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.


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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How Much Does It Cost to Build a Floating Home?

How Much Does It Cost to Build a Floating Home? Expenses You Need to Know About

Some buyers may be, well, buoyed by the thought of living on the water full time. Living in a floating house is unique, and building one may be an even more ambitious undertaking than building a houseboat.

What’s the cost of building a floating house? Read on to learn about the expenses, benefits, and considerations associated with these aquatic abodes.

Key Points

•   Building a floating home starts at over six figures, with costs influenced by foundation, design, and materials.

•   Concrete floats, either foam-filled or empty, are commonly used for the foundation to ensure buoyancy.

•   Custom designs and high-end finishes can significantly increase the overall building cost.

•   Ongoing expenses include mooring fees, higher insurance premiums, and potentially increased utility and maintenance costs.

•   Floating homes offer community living, proximity to nature, and potential tax benefits, but financing is challenging.

Average Cost of Building a Floating Home

The cost to build a floating house will vary based on the size, features, labor, and materials, but a 1,200-square-foot model starts at over six figures. These are not houseboats, which are self-propelled and free to move about. Nor are they usually tiny house, though some are. They’re often twice as big as a houseboat.

An alternative to building a floating home is to buy an existing one. A quick look shows listings ranging from around $400,000 in the Pacific Northwest to well over $1 million throughout the West Coast, and a home floating in the Florida sun for a few hundred thousand. Buying or renting a slip will add to the cost.

In comparison, the cost to build a house of 1,200 square feet could be about $180,000, based on $150 per square foot, not including the land.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Factors That Affect the Cost of Building a Floating Home

There are at least two foundational considerations when building a floating home: constructing the platform the home will rest on, and finding a slip at a moorage for rent or purchase.

The cost of building a floating house could ebb and flow depending on who’s doing the building — is this a DIY project or do you need to find contractors? — and the following factors.

The Foundation

Traditionally, floating homes rested on giant logs, but over time logs begin to sag and sink, requiring pressure-filled barrels under them to shore up the whole shebang.

Nowadays, these homes stay afloat using concrete floats. One type of concrete float is filled with foam, which creates buoyancy. The other concrete float is empty, and like a bowl placed upside down in water, the space and pressure keep the home floating.

Size of the House

Generally, the bigger the home, the more expensive the build. And the larger the home, the more floats it will require, further adding to the cost.

Floating homes are limited by the size of the moorage, meaning buyers have to work within specific parameters. That means building up, but only as much as the floats allow.

Design and Materials

The more custom or high-end designs integrated into the home, the more the build could cost. From custom cabinets in the kitchen to nonstandard windows, these add-ons carry a higher price tag.

Alternatively, floating homes can be prefabricated, using a standard design to lower the cost. Similarly, some companies are now using decommissioned shipping containers as building materials, which could cut down on the total cost to build a floating house.

Another cost to keep in mind is the siding material. Float houses are on the water and subject to the elements, which means the exterior materials must be resilient.

Interior Finishes

As with a traditional home, the choice of interior finishes can drive the cost of a floating house up or down. Opting for a prefabricated floating house may lower the spend on the interior.

Other Expenses of a Floating Home

Mooring and Insurance

Floating-home owners pay a monthly moorage fee or a homeowners association fee. The cost will vary by moorage but could be $1,000 a month.

There could be a transfer fee to assume a rental slip. Insurance may be hard to find and expensive. Marinas may require liability coverage.

Utilities

Floating homes are permanently affixed to the moorage and hooked up to local utilities, including water, sewage, and electric or gas.

If a floating house is designed with efficiency in mind, the monthly cost of utilities will likely be similar to traditional homes in the area. But a lack of shade could mean higher bills for cooling.

Some floating homes rely on a plumbing pump to carry sewage out of the home. It could create a higher electric bill.

Furniture

The average cost to furnish a home is $16,000, but since a floating home resides dockside, it’s harder to transport large items to the property. That could mean hiring extra labor or larger delivery fees.

Additionally, floating homeowners may be constrained by the dimensions of a smaller space, meaning custom or specialty furniture that fits in with and into the home.

Financing Your Floating Home

In some states, a floating home is considered personal property, so it cannot be built or purchased with a traditional home mortgage loan. A local bank or credit union may offer a floating home loan with at least 20% down and at a higher rate than a usual home loan. An inspection, at your expense, will likely be required to see if the home is in adequate shape to qualify.

Another option is a personal loan, which provides fast cash but usually has a higher rate than a secured loan.

Options for homeowners who have built sufficient home equity and are dreaming of a floating home include a home equity line of credit (HELOC), home equity loan, and cash-out refinance.

Recommended: HELOC Monthly Payment Calculator

How Long Do Floating Homes Last?

With regular upkeep and maintenance, owners of floating homes can expect their property to last 50 to 60 years before requiring rebuilding or refurbishment.

Pros and Cons of Living on a Floating Home

If you hear the siren call of the floating-house lifestyle, it’s a good idea to weigh the good vs. the not-so-great before taking the plunge.

Pros

Some of the benefits floating-home owners can expect include:

•   Tight-knit community. Dock living means living close to neighbors. A floating community could be a great fit if that’s your thing.

•   Good choice if downsizing: Minimalists, retirees, and others with an affinity for the water may find a floating home a chance to downsize.

•   Doesn’t require an engine. Floating homes are permanently docked, so buyers or builders don’t need to factor in the costs of a motor. And there are opportunities to go greener still if you build a floating home: One DIY floating-home builder crafted a home on a lake in British Columbia that has a pellet stove, solar power, a composting toilet, and an evaporation gray water system.

•   Water views all the time. If you prioritize proximity to nature, you can’t beat living on the water. A cup of coffee or glass of wine is always accompanied by a pretty vista.

•   May be less expensive housing. You may be able to build a floating home for less than a single-family home, especially in some of the hot spots for floating homes.

•   Potential for tax breaks. In some states, floating homes are considered personal property, not “real property.” Those owners will not pay annual property taxes but will pay personal property tax. Also, interest paid on a loan or HELOC for a floating home as a first or second home could be included in the mortgage interest deduction if you itemize. (It’s smart to consult a tax advisor about this matter.)

Cons

Now the potential downers:

•   Costs go beyond the build: Moorage or HOA fees can range from a few hundred dollars to $1,000 a month. Insurance can be pricey.

•   Limited locations. Floating-home communities are uncommon, meaning vacancies are even less frequent. It could be hard to find a dock community to take a floating home to, or it could mean waiting for a spot.

•   Weather damage. Constant exposure to saltwater or freshwater can take a toll on a floating home. That can translate into more frequent repairs and replacements, adding to the cost of upkeep.

•   Financing challenges. It can be hard to secure financing to construct or buy a floating home.

Recommended: Tips for Buying a New Construction Home

The Takeaway

Build your own floating home? A few do take on that challenge, which can pay off in terms of cost and satisfaction. Others will look into buying a floating house that’s already berthed, as finding moorage can be a challenge. Although a floating house usually can’t be financed with a typical home loan, there are other ways to pay, including a floating home loan or a home equity line of credit that is based on your equity in a home you already own.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Can you live permanently in a floating home?

Yes, floating homes can be permanent residences.

Do you have to pay property tax on a floating home?

Floating-home owners don’t have to pay property taxes in some states or cities. It varies by location.

Where can you get a loan to build a floating home?

Floating homes don’t qualify for traditional mortgages. Options include a floating-home loan from a small pool of lenders, a personal loan, a home equity line of credit, a home equity loan, and a cash-out refinance.


Photo credit: iStock/Roman_Makedonsky

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.


*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.

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

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

²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


This content is provided for informational and educational purposes only and should not be construed as financial advice.

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