Deciding whether to pick a 15- or 30-year mortgage largely boils down to what kind of monthly payment you can afford and whether you need financial flexibility.
There’s a reason that the 30-year fixed-rate mortgage is most popular by far: Manageable payments that ideally allow room for other needs and wants.
But borrowers who can afford the higher monthly payments of 15-year mortgages, and who like the lower rate, may find them compelling.
How Does a 15-Year Mortgage Work?
Borrowers who opt for a 15-year mortgage when choosing a mortgage term will pay off their loan faster and save significantly more in interest over the life of the loan. (Here we are talking about fixed-rate home loans, not variable-rate ones; the latter can be useful in certain situations but are more complicated.) The main trade-off if you choose a 15-year loan is the fact that your monthly payment will be significantly higher than a comparable 30-year home loan.
Fifteen-year mortgages typically carry lower interest rates than 30-year mortgages. Consequently, the combination of a lower rate and compressed payoff time means a much lower interest cost overall.
A 15-year mortgage loan for $300,000 with a rate of 4.6% would result in $115,860 in interest paid. That same loan amount with a 30-year term at 5.8% would translate to about $333,700 in interest, a difference of $217,840.
The basic monthly payment, however, would be $2,310 vs. $1,760 in this example. Use an online mortgage calculator to compare home loans.
Lenders charge lower rates for 15-year mortgages because it costs them less to underwrite 15-year mortgages than 30-year loans. Generally speaking, the longer term a loan, the riskier it is to lenders, which they price into the loan through a higher interest rate.
Here are the main pros and cons of 15-year mortgages.
Pros
Cons
• Interest cost savings
• Faster loan payoff
• Lower interest rate
• Equity built at a faster rate
• Significantly higher monthly payments
• Less cash available for other opportunities
• Smaller range of homes in the budget, thanks to higher monhtly payments
When to Consider a 15-Year Fixed-Rate Mortgage
You might want to consider a 15-year fixed-rate mortgage if you’re trying to pay off the loan faster, you want to save on total interest paid, want a lower rate, and can afford the higher monthly payments.
If you’re buying a home close to retirement and you’re interested in building generational wealth, a 15-year mortgage also is an attractive option as it ensures a faster payoff.
The 15-year mortgage is more frequently used for refinancing than buying, thanks to the lower rate and because most borrowers who choose to refinance are usually several years into their loan.
Consequently, borrowers who have longer-term mortgages with higher interest rates may want to consider refinancing to a 15-year home loan to save on interest costs. However, if you qualify as a first-time homebuyer or are already on a fairly tight budget, a 15-year mortgage might be more than your family finances can handle.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
30-Year Mortgage vs. 15-Year Mortgage
Borrowers will find the payments on 30-year mortgages to be much more affordable than on 15-year mortgages. The longer the repayment term, the lower the monthly payment, potentially leaving more cash in your pocket every month.
Increased cash flow may allow borrowers to pursue other opportunities like preparing for retirement or shoring up emergency savings. Paying off higher-interest debt is also a good plan.
Homeowners may want to have enough cash to add or expand a home office, rev up the kitchen, and generally maintain the value of their home.
What about vacations and buying stuff? Yes and yes.
Like most things, 30-year home loans have upsides and downsides to consider.
Pros
Cons
• Lower monthly payments
• Extra monthly cash to dedicate to other opportunities
• Can make extra payments or refinance to shorten term
• More mortgage interest to deduct if you itemize on your federal taxes
• Higher interest expense than a 15-year loan
• Builds equity at a slower rate
• Longer time to pay off loan
When to Consider a 30-Year Fixed-Rate Mortgage
You may wish to consider a 30-year fixed-rate mortgage if you’re looking for the most affordable option when buying a home.
Fixed-rate 30-year home loans are the most straightforward and common type of mortgage loan on the market.
Given that home prices are relatively high and interest rates have not dropped substantially in recent years, 30-year home loans have started looking more attractive than other options. Despite the higher overall interest cost, the lower monthly payments on 30-year mortgages make it easier to afford a home.
Borrowers always have the option of paying off the mortgage early. Every extra principal payment reduces your overall loan balance and reduces the amount of interest that compounds over time as well.
The final thing to consider is that a 30-year mortgage provides a greater tax benefit than a shorter-term mortgage if you take the mortgage interest deduction.
For many homebuyers, the choice of 15- vs. 30-year mortgage will not be voluntary: The monthly payments will force the decision.
If you are able to choose one or the other, you’ll want to consider whether you’re able to comfortably commit to a series of high monthly mortgage payments in exchange for the earlier loan payoff and interest savings, or whether any money left over monthly after making the relatively low mortgage payment on a 30-year loan could be put to other uses.
Your income level, career stability, and debt-to-income ratio may largely determine your course.
The decision on a 15- vs. 30-year mortgage depends on your personal budget and financial goals. If you can swing the shorter term, you’ll benefit from a lower interest rate, faster loan payoff, and substantial interest savings.
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.
FAQ
Is a 30-year mortgage better than a 15-year mortgage?
A 30-year mortgage has lower monthly payments, but a 15-year loan will have less interest over the life of the mortgage. Which is better is a matter of personal choice and affordability.
Is it better to pay off my mortgage for a long period?
If your monthly budget is fairly tight or you have other debts you need to pay off, yes. You’ll pay a lot more in total interest with a long-term home loan than you would with a shorter-term one, but payments will be more affordable.
Can I pay off my 30-year mortgage in 15 years?
Yes, you can pay off the balance ahead of schedule but read your mortgage documents first: Some loans have a prepayment penalty.
Are the interest rates for a 30-year mortgage higher than a 15-year mortgage?
Yes, the interest rates for 30-year mortgages are typically higher than 15-year mortgages because of the extra risk of longer-term loans.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility 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.
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• The payback period is the estimated amount of time it will take to recoup an investment or to break even. Generally, the longer the payback period, the higher the risk.
• To calculate the payback period you divide the Initial Investment by Annual Cash Flow.
• Equity firms may calculate the payback period for potential investment in startups and other companies to ensure capital recoupment and understand risk-reward ratios.
• Downsides of using the payback period include that it does take into account the time value of money or other ways an investment might bring value.
What Is the Payback Period?
The payback period is the amount of time it will take to recoup the initial cost of an investment, or to reach its break-even point. Considering the ups and down of various market factors — e.g. the crypto winter or the impact of higher-than-usual interest rates — being able to gauge the payback period is one of the most important calculations for investors when planning investments and returns.
The payback period can help investors decide between different investments that may have a lot of similarities, as they’ll often want to choose the one that will pay back in the shortest amount of time. The longer money remains locked up in an investment without earning a return, the more time an investor must wait until they can access that cash again, and the more risk there is of losing the initial investment capital.
How to Calculate the Payback Period
The payback period is calculated by dividing the cost of the investment by the annual cash flow until the cumulative cash flow is positive, which is the payback year. Payback period is generally expressed in years.
Prior to calculating the payback period of a particular investment, one might consider what their maximum payback period would be to move forward with the investment. This will help give them some parameters to work with when making investment decisions. If the calculated payback period is less than the desired period, this may be a safer investment.
There are two easy basis payback period formulas:
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Payback Period Formula (Averaging Method)
Payback Period = Initial Investment / Yearly Cash Flow
Using the averaging method, the initial amount of the investment is divided by annualized cash flows an investment is projected to generate. This works well if cash flows are predictable or expected to be consistent over time, but otherwise this method may not be very accurate.
Example of Payback Period
If a company makes an investment of $1,000,000 in new equipment which is expected to generate $250,000 in revenue per year, the calculation would be:
$1,000,000 / $250,000 = 4-year payback period
If they have another option to invest $1,000,000 into equipment which they expect to generate $280,000 in revenue per year, the calculation would be:
$1,000,000 / $280,000 = 3.57-year payback period
Since the second option has a shorter payback period, this may be a better choice for the company.
Payback Formula (Subtraction Method)
Payback Period = the last year with negative cash flow + (Amount of cash flow at the end of that year / Cash flow during the year after that year)
Using the subtraction method, one starts by subtracting individual annual cash flows from the initial investment amount, and then does the division. This method works better if cash flows vary from year to year.
Example of Payback Period Using the Subtraction Method
A company is considering making a $550,000 investment in new equipment. The expected cash flows are as follows:
Year 1 = $75,000
Year 2 = $140,000
Year 3 = $200,000
Year 4 = $110,000
Year 5 = $60,000
Calculation:
Year 0 : -$550,000
Year 1 : -$550,000 + $75,000 = -$475,000
Year 2 : -$475,000 + $140,000 = -$335,000
Year 3 : -$335,000 + $200,000 = -$135,000 Year 4 : -$135,000 + $110,000 = -$25,000
Year 5 : -$25,000 + $60,000 = $35,000
Year 4 is the last year with negative cash flow, so the payback period equation is:
4 + ($25,000 / $60,000) = 4.42
So the payback period is 4.42 years.
Other factors
Investors might also choose to add depreciation and taxes into the equation, to account for any lost value of an investment over time.
Benefits of Using the Payback Period
The payback period is simple to understand and calculate. It can provide individuals and companies with valuable insights into potential investments, and help them decide which option provides the best return on investment (ROI). It also helps with assessing the risk of different investments. Advantages include:
• Easily understandable
• Simple to calculate
• Tool for risk assessment
• Helps with comparing and choosing investment options
• Provides insights for financial planning
• Other calculations, such as net present value and internal rate of return, don’t
• look at the amount of time it takes to recoup an investment
Downsides of Using the Payback Period
Although the payback period can be a useful calculation for individuals and companies considering and comparing investments, it has some downsides. The calculation only looks at the time period up until the initial investment will be recouped. It doesn’t consider the earnings the investment will bring in after that, which may either be higher or lower, and could determine whether it makes sense as a long-term investment.
If earnings will continue to increase, a longer payback period might be acceptable. If earnings might decrease after a certain number of years, the investment may not be a good idea even if it breaks even quickly. On the other hand, an investment with a short lifespan could need replacement shortly after its payback period, making it a potentially poor investment.
The payback period doesn’t take into consideration other ways an investment might bring value, such as partnerships or brand awareness. This can result in investors overlooking the long-term benefits of the investment since they’re too focused on short-term ROI.
The payback period equation also doesn’t take into account the effects an investment might have on the rest of the company’s operations. For instance, new equipment might require a significant amount of expensive power, or might not be able to run as often as it would need to in order to reach the payback goal.
Another limitation of the payback period is that it doesn’t take the time value of money (TVM) into account. The time value of money is the idea that cash will be worth more in the future than it is worth today, due to the amount of interest that it can generate. Not only does this apply to the initial capital put into an investment, but it’s also important because as an investment generates returns, that cash can then be reinvested into something else that earns interest or income. This is another reason that a shorter payback period makes for a more attractive investment.
When Would You Use The Payback Period?
The payback period can apply to personal investments such as solar panels or property maintenance, or investments in equipment or other assets that a company might consider acquiring. Often an investment that requires a large amount of capital upfront generates steady or increasing returns over time, although there is also some risk that the returns won’t turn out as hoped or predicted.
Calculating payback periods is especially important for startup companies with limited capital that want to be sure they can recoup their money without going out of business. Companies also use the payback period to select between different investment opportunities or to help them understand the risk-reward ratio of a given investment.
Knowing the payback period is helpful if there’s a risk of a project ending in the future. For example, if a company might lose a lease or a contract, the sooner they can recoup any investments they’re making into their business the less risk they have of losing that capital.
Any particular project or investment can have a short or long payback period. A short period means the investment breaks even or gets paid back in a relatively short amount of time by the cash flow generated by the investment, whereas a long period means the investment takes longer to recoup. How investors understand that period will depend on their time horizon.
The Takeaway
You can use the payback period in your own life when making large purchase decisions and consider their opportunity cost. Understanding the way that companies calculate their payback period is also helpful to determine their financial viability and whether it makes sense for you to invest in them as part of your portfolio.
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For about 80% of homebuyers, purchasing a home means taking out a mortgage — and a conventional 30-year fixed-rate mortgage is the most popular kind of financing.
Conventional mortgages are those that are not insured or guaranteed by the government.
But the fact that conventional mortgages are so popular doesn’t mean that a conventional home loan is right for everyone. Here, learn more about conventional mortgages and how they compare to other options, including:
Conventional mortgages are home loans that are not backed by a government agency. Provided by private lenders, they are the most common type of home loan. A few points to note:
• Conventional loans are offered by banks, credit unions, and mortgage companies, as well as by two government-sponsored enterprises, known as Fannie Mae and Freddie Mac. (Note: Government-sponsored and government-backed loans are two different things.)
• Conventional mortgages tend to have a higher bar to entry than government-guaranteed home loans. You might need a better credit score and pay more in interest, for example. Government-backed FHA loans, VA loans, and USDA loans, on the other hand, are designed for certain kinds of homebuyers or homes and are often easier to qualify for. You’ll learn more about them below.
• Among conventional loans, you’ll find substantial variety. You’ll have a choice of term length (how long you have to pay off the loan with installments), and you’ll probably have a choice between fixed-rate and adjustable-rate products. Keep reading for more detail on these options.
• Because the government isn’t offering any assurances to the lender that you will pay back that loan, you’ll need to prove you are a good risk. That’s why lenders look at things like your credit score and down payment amount when deciding whether to offer you a conventional mortgage and at what rate.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Conventional vs Conforming Loans
As you pursue a home loan, you’ll likely hear the phrases “conventional loan” and “conforming loan.” Are they the same thing? Not exactly. Let’s spell out the difference:
• A conforming loan is one in which the underlying terms and conditions adhere to the funding criteria of Freddie Mac and Fannie Mae. There’s a limit to how big the loan can be, and this figure is determined each year by the Federal Housing Finance Agency, or FHFA. For 2024, that ceiling was set at $766,550 for most of the United States. (It was a higher number for those purchasing in certain high-cost areas; you can see the limit for your specific location on the FHFA web site.)
So all conforming loans are conventional loans. But what is a conventional mortgage may not be conforming. If, for instance, you apply for a jumbo mortgage (meaning one that’s more than $766,550 in 2024), you’d be hoping to be approved for a conventional loan. It would not, however, be a conforming mortgage because the amount is over the limit that Freddie Mac or Fannie Mae would back.
Types of Conventional Loans
When answering, “What is a conventional loan?” you’ll learn that it’s not just one single product. There are many options, such as how long a term (you may look at 15- and 30-year, as well as other options). Perhaps one of the most important decisions is whether you want to opt for a fixed or adjustable rate.
Fixed Rate
A conventional loan with a fixed interest rate is one in which the rate won’t change over the life of the loan. If you have one of these “fully amortized conventional loans,” as they are sometimes called, your monthly principal and interest payment will stay the same each month.
Although fixed-rate loans can provide predictability when it comes to payments, they may initially have higher interest rates than adjustable-rate mortgages.
Fixed-rate conventional loans can be a great option for homebuyers during periods of low rates because they can lock in a rate and it won’t rise, even decades from now.
Adjustable Rate
Adjustable-rate mortgages (also sometimes called variable rate loans) have the same interest rate for a set period of time, and then the rate will adjust for the rest of the loan term.
The major upside to choosing an ARM is that the initial rate is usually set below prevailing interest rates and remains constant for a specific amount of time, from six months to 10 years.
There’s a bit of lingo to learn with these loans. A 7/6 ARM of 30 years will have a fixed rate for the first seven years, and then the rate will adjust once every six months over the remaining 23 years, keeping in sync with prevailing rates. A 5/1 ARM will have a fixed rate for five years, followed by a variable rate that adjusts every year.
An ARM may be a good option if you’re not planning on staying in the home that long. The downside, of course, is that if you do stay put, your interest rate could end up higher than you want it to be.
Most adjustable-rate conventional mortgages have limits on how much the interest rate can increase over time. These caps protect a borrower from facing an unexpectedly steep rate hike.
Also, read the fine print and see if your introductory rate will adjust downward if rates shift lower over the course of the loan. Don’t assume they will.
How Are Conventional Home Loans Different From Other Loans?
Wondering what a conventional home loan is vs. government-backed loans? Learn more here.
Conventional Loans vs. FHA Loans
Not sure if a conventional or FHA loan is better for you? FHA loans are geared toward lower- and middle-income buyers; these mortgages can offer a more affordable way to join the ranks of homeowners. Unlike conventional loans, FHA loans are insured by the Federal Housing Administration, so lenders take on less risk. If a borrower defaults, the FHA will help the lender recoup some of the lost costs.
But are FHA loans right for you, the borrower? Here are some of the key differences between FHA loans and conventional ones:
• FHA loans are usually easier to qualify for. Conventional loans usually need a credit score of at least 620 and at least 3% down. With an FHA loan, you may get approved with a credit score as low as 500 with 10% down or 580 if you put down 3.5%.
• Unlike conventional loans, FHA loans are limited to a certain amount of money, depending on the geographic location of the house you’re buying. The lender administering the FHA loan can impose its own requirements as well.
• An FHA loan can be a good option for a buyer with a lower credit score, but it also will require a more rigorous home appraisal and possibly a longer approval process than a conventional loan.
• Conventional loans require private mortgage insurance (PMI) if the down payment is less than 20%, but PMI will terminate once you reach 20% equity. FHA loans, however, require mortgage insurance for the life of the loan if you put less than 10% down.
Not everyone has the choice between conventional and VA loans, which are backed by the U.S. Department of Veterans Affairs. Conventional loans are available to all who qualify, but VA loans are only accessible to those who are veterans, active-duty military, National Guard or Reserve members, or surviving spouses of those who served.
VA loans offer a number of perks that conventional loans don’t:
• No down payment is needed.
• No PMI is required, which is a good thing, because it’s typically anywhere from 0.58% to 1.86% of the original loan amount per year.
There are a couple of potential drawbacks to be aware of:
• Most VA loans demand that you pay what’s known as a funding fee. This is typically 1.25% to 3.3% of the loan amount.
• A VA loan must be used for a primary residence; no second homes are eligible.
Conventional Loans vs USDA Loans
Curious if you should apply for a USDA loan vs. a conventional loan? Consider this: No matter where in America your dream house is, you can likely apply for a conventional loan. Loans backed by the U.S. Department of Agriculture, however, are only available for use when buying a property in a qualifying rural area. The goal is to encourage people to move into certain areas and help them along with accessible loans.
Beyond this stipulation, consider these upsides of USDA loans vs. conventional loans:
• USDA loans can offer a very affordable interest rate versus other loans.
• USDA loans are available without a down payment.
• These loans don’t require PMI.
But, to provide full disclosure, there are some downsides, beyond limited geographic availability:
• USDA loans have income-based eligibility requirements. The loans are designed for lower- and middle-income potential home buyers, but the exact cap on income will depend on your geographic area and how many household members you have.
• This program requires that the loan holder pay a guarantee fee, which is typically 1% of the loan’s total amount.
Benefits and Drawbacks of Conventional Mortgages
Now that you’ve learned what is a conventional loan and how it compares to some other options, let’s do a quick recap of the pros and cons of conventional loans.
Benefits of Conventional Loans
The upsides are:
• Competitive rates. Rates may seem high, but they are still far from their high point of 16.63% in 1981. Plus, lenders want your business and you may be able to find attractive offers. You can use a mortgage calculator to see how even a small adjustment in interest rates can impact your monthly payments and interest payments over the life of the loan.
• The ability to buy with little money down. Some conventional mortgages can be had with just 3% down for first-time homebuyers.
• PMI isn’t forever. Once you have achieved 20% equity in your property, your PMI can be canceled.
• Flexibility. There are different conventional mortgages to suit your needs, such as fixed- and variable-rate home loans. Also, these mortgages can be used for primary residences (whether single- or multi-family), second homes, and other variations.
Drawbacks of Conventional Loans
Now, the downsides of conventional loans:
• PMI. If your mortgage involves a small down payment, you do have to pay that PMI until you reach a target number, such as 20% equity.
• Tougher qualifications vs. government programs. You’ll usually need a credit score of 620 and, with that number, your rate will likely be higher than it would be if you had a higher score.
• Stricter debt-to-income (DTI) ratio requirements. It’s likely that lenders will want to see a 45% DTI ratio. (DTI is your total monthly recurring payments divided by your monthly gross income.) Government programs have less rigorous qualifications.
How Do You Qualify for a Conventional Loan?
Conventional mortgage requirements vary by lender, but almost all private lenders will require you to have a cash down payment, a good credit score, and sufficient income to make the monthly payments. Here are more specifics:
• Down Payment: Many lenders that offer conventional loans require that you have enough cash to make a decent down payment. Even if you can manage it, is 20% down always best? It might be more beneficial to put down less than 20% on your dream house.
• Credit score and history: You’ll also need to demonstrate a good credit history to buy a house, which means at least 620, as mentioned above. You’ll want to show that you make loan payments on time every month.
Each conventional loan lender sets its own requirements when it comes to credit scores, but generally, the higher your credit score, the easier it will be to secure a conventional mortgage at a competitive interest rate.
• Income: Most lenders will require you to show that you have a sufficient monthly income to meet the mortgage payments. They will also require information about your employment and bank accounts.
The Takeaway
A conventional home loan — meaning a loan not guaranteed by the government — is a very popular option for homebuyers. These mortgages have their pros and cons, as well as variations. It’s also important to know how they differ from government-backed loans, so you can choose the right product to suit your needs. Buying a home is a major step and a big investment, so you want to get the mortgage that suits you best.
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.
FAQ
What is the minimum down payment for a conventional loan?
In most cases, 3% of the purchase price is the lowest amount possible and that minimum is usually reserved for first-time homebuyers — a group that can include people who have not purchased a primary residence in the last three years.
How many conventional loans can you have?
A lot! The Federal National Mortgage Association (FNMA, aka Fannie Mae) allows a person to have up to 10 properties with conventional financing. Just remember, you’ll have to convince a lender that you are a good risk for each and every loan.
Do all conventional loans require PMI?
Most lenders require PMI (private mortgage insurance) if you are putting less than 20% down when purchasing a property. However, you may find some PMI-free loans available. They typically have a higher interest rate, though, so make sure they are worthwhile given your particular situation.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*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.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†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.
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.
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.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
You probably like your home to be clean, but when it comes down to breaking out the mop and bucket, the vacuum cleaner, the wood polish, sponges, and bleach, do you really have the time or inclination to dive in?
If you feel like groaning just reading about tidying up, it could be worthwhile to hire a cleaning person or service.
There are many factors to consider when thinking about hiring out this task, and that’s where this guide will come in handy. Read on to learn:
• What’s the difference between a cleaning person and a cleaning service?
• How much does hiring a cleaning person or service cost?
• What are the pros and cons of hiring a cleaning person vs. a cleaning service?
• What are the alternatives to hiring a cleaning person or cleaning service for your home?
What Does a Cleaning Person or Service Do?
A cleaning person or service takes care of basic tasks such as dusting, vacuuming, sweeping, mopping, disinfecting the toilets, cleaning the sinks and bathtub/shower, and taking out the garbage.
There are typically add-on services available: laundry, changing the sheets, and doing the dishes for starters. Some of these could be included in the cost depending on the cleaning person or service.
“But, I can (or should) do all that myself!” you may be thinking. In which case, you are likely wondering: Is hiring a cleaning person worth it?
If a spic-and-span home is high on your checklist for maintaining a house, a little research can help determine if a cleaning person or service is right for you. Read on for more detail which can assist you as you make your decision.
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How Much Does a House Cleaner Cost?
The cost for hiring a cleaning person (or independent contractor) will depend on where you live, the size of your home, and how often they will come, but individual cleaners typically charge between $50 and $100 an hour.
Going with an individual generally costs less than hiring a cleaning service. However, they may not offer as many guarantees as a large company.
How Much Do Cleaning Services Cost?
Full-service cleaning companies can charge between $175 and $300 per visit. You can typically get a customized quote based on the size of your home and services you want before you hire a cleaning service. Some companies may have a minimum fee per visit. Generally the more frequently a service comes, the lower the cost per cleaning.
You can also hire a service for specialized, one-time cleaning services, such as after an event or before moving out or moving into a home.
Things to Consider When Hiring a Cleaning Person or Service
When deciding if hiring a house cleaner or cleaning service is worth it, you’ll benefit from addressing a few questions about your monetary situation, schedule, and level of desired cleanliness.
Your Budget
The first step in determining if you can afford a cleaning person or service is to set up a basic budget if you don’t already have one up and running.
If you’re wondering how to make a budget, consider using the 50/30/20 rule. This means putting 50% of the household income toward necessities or musts (which typically includes housing, utilities, food, and debt); 30% towards wants (like dining out and entertainment); and 20% on saving (including retirement) and debt payments beyond the minimum.
Once you see how much cash you have coming in and going out, you’ll be better able to assess if you can afford to pay for cleaning from that 30% that covers “wants.”
A good way to decide whether hiring a house cleaner is worth it is to remember this saying: Time is money. If paying a professional $50 an hour frees you up to make $65 an hour while working, the cost might be worth it, since you’ll come out ahead financially.
Schedules (How Often Are You Home?)
If you work long hours at an office or other workplace, outsourcing your house cleaning will allow you to enjoy your time at home without having to clean. And if the cleaning person or team comes while you’re at work, you won’t have to worry about staying out of their way.
However, if you are someone who works from home, or you or your spouse are a stay-at-home parent, a cleaning person or service can potentially be disruptive.
How Often You Need Your House Cleaned
Frequency of cleaning will matter. While a service may charge less per cleaning if they come weekly vs biweekly or monthly, you’ll still likely save money by having your home cleaned less frequently.
Worth noting: Do you sometimes list your house for renters? If you rent out on Airbnb, you’ll be asked to adhere to Airbnb’s cleaning protocol standards. A cleaning crew is helpful for a quick turnaround between renters.
Cleaning Requirements
The price of a house cleaner or cleaning service can go up depending on what is required of them:
• Level of mess. Do you entertain frequently or have small children? It may take longer to clean up the aftermath. Or maybe you haven’t done a deep-clean in ages. That too may make cleaning take longer.
• Area of mess. Does the whole house always have to be cleaned? You can save money by only having the common areas and bathrooms tidied up.
• Pets. Vacuuming dog and cat hair can add many minutes to a cleaner’s timesheet.
• Are you a neat freak? A deep-clean or super detailed job will cost more than basic dusting, vacuuming, and mopping.
How Good You Are At Cleaning
If you are a disciplined and effective cleaner who loves getting your place spotless, there may be no need to hire someone. That said, there might be times you get too busy to clean or want some help tidying up before the holidays or a houseguest’s arrival.
If you’re the kind of person who ignores dust bunnies or the sight of a broom stresses you out, perhaps you should outsource household tasks and enjoy some time elsewhere.
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Cleaning Services vs Individual Cleaners: What’s the Difference?
An individual cleaning person typically costs less than a cleaning service. A cleaning person often works alone, while a cleaning service can be a crew of two, three, or more who clean simultaneously.
An independent cleaner generally keeps 100% of the earnings, while a portion of the money for a cleaning crew goes to the service provider.
There are other key differences between individual cleaners and cleaning services:
Pros of Hiring a House Cleaning Person
Here are some of the perks that can make a cleaning person worth it:
• Lower costs. An independent contractor can be less expensive than a cleaning service. Fewer workers can mean cheaper rates.
• Price flexibility. You may be able to negotiate cleaning add-ons more easily (and affordably) with an individual.
• Familiarity. The same person comes to your home every time. This can provide a sense of comfort and trust for you and your family.
• Personal recommendations. You can get referrals from someone you trust — a friend or a neighbor.
If you’re considering getting help tidying up around the house, a cleaning service can be worth it. They come with several benefits:
• Vetted employees. Full-service cleaning companies typically check their employees’ backgrounds, so you don’t have to.
• Set standards. Many companies train their employees to uphold a certain level of cleaning criteria.
• Faster service. Since cleaning services are composed of crews, a team of workers can get the job done faster than an individual house cleaner.
• Customer service. If a job isn’t up to snuff, professional companies will deal with any complaints you may have.
Cons of Hiring a House Cleaning Person
• You’ll do the vetting. The responsibility of getting references and background checks on the cleaning candidate will fall to you.
• Longer cleaning time. Since a house cleaner usually works solo, they might not be as fast as a cleaning service with multiple workers.
• Unpleasant boss duties. If your cleaning person is not meeting your expectations, it will be up to you to address the problem and, possibly, terminate the arrangement.
• Inflexible schedule. If the contractor has a lot of clients, there could be fewer timeslot options available.
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Cons of Hiring a Cleaning Service
• Higher prices. A cleaning service generally costs more than an independent maid.
• Lack of familiarity. The company could send different people every time.
• Add-ons can be costly. Since the company sets the prices, you could spend a lot for a deep-clean of the fridge. A cleaning person, on the other hand, might not charge extra if they can get the job done within their hourly time frame.
Alternatives to House Cleaners or Cleaning Services
House cleaners and cleaning services are generally the route people take when hiring help, but there are a few other options:
• Gig-based workers. Apps and online services such as Taskrabbit and Fiverr feature a variety of folks willing to do odd jobs, including house cleaning. Whether they pursue this full-time or as a side hustle, you may well find affordable options.
• College students. If you live near a campus, check the online or physical job boards. Students are generally eager to make extra dough.
• Your kids. Shelling out for an allowance can be a lot cheaper than a cleaning service.
Tips for Saving Money on Cleaning Services
There are a few things you can do to potentially reduce the cost of a cleaning person or service:
• Shop around. It’s a good idea to interview more than one house cleaner or get estimates from multiple cleaning services.
• Make the terms clear. You’ll want to clarify exactly what tasks need to be done, so you won’t get charged for any unexpected add-ons.
• Consider a trial run. It can be a good idea to try out a house cleaner or cleaning service for a month or so before committing to a long-term agreement.
• Inquire about fees. It’s a good idea to ask about any potential extra fees so you don’t hit with any surprises. Some cleaning services may tack on a processing fee if you pay with a credit card vs. direct deposit.
• Look for promotional deals. Cleaning services will occasionally run specials. They may also offer package deals and referral bonuses.
• Tidy up before they come. Keeping your house orderly in between appointments allows the hired cleaner to perform more efficiently.
If your messy home is stressing you out, a cleaning person or service can take some of the weight off your shoulders. As long as you can justify the extra expense, hiring a professional can make your home look great and improve your mood, plus leave you with more free time to enjoy your favorite pursuits.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.
FAQ
Are individual house cleaners better than cleaning services?
Both are good options if you need help cleaning your house. Typically, a cleaning person can be cheaper and is someone you see regularly and can build a relationship with. A cleaning service, on the other hand, may be able to get the job done faster and may have more professional training and customer service.
Is it safe to hire a cleaning person or service?
To feel secure, it’s a good idea to get recommendations and references (and check them) for an individual cleaning person. Cleaning service companies generally vet their employees for you.
Should you hire a house cleaner if your house is not very dirty?
Whether to hire a cleaning person or not depends on how clean you want to keep your home, and how much time you are willing to personally spend on it. Even if you’re a regular duster, a house cleaner can help with larger tasks like cleaning the fridge and oven, heavy-duty vacuuming, and/or window washing.
SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.
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.
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.
Minimalism is a lifestyle choice that centers on embracing simplicity and eliminating physical, mental, or emotional clutter. Financial minimalism is an extension of that idea. It advocates for spending less on material items and investing your time, money, and energy into experiences that enrich your life in some way.
Becoming a financial minimalist can help you to improve your money situation if you’re able to pay down debt, grow savings, and invest to build wealth while still enjoying life. Adopting a minimalist finance approach can take some getting used to, but can have a significant payoff, including less financial stress.
Read on to learn:
• What financial minimalism means.
• What the benefits of financial minimalism are.
• How to practice financial minimalism.
What Is Financial Minimalism?
There’s no set definition of financial minimalism or what it means to be a financial minimalist. Broadly speaking, financial minimalism is about taking a “less is more” point of view when it comes to spending on unnecessary things and focusing more of your attention, money, and energy on experiences and purchases that add value to your life.
Minimalist finance emphasizes being intentional about how you use your money. Rather than spending money impulsively or mindlessly, you’re considerate of whether a particular purchase might offer any lasting benefit. Instead of clearing out the junk in your home, you’re clearing out the clutter in your financial life.
In this way, becoming a financial minimalist can alleviate some money stress. You have guardrails in place for spending, you likely make fewer purchases, and you hopefully have less debt to worry about as well.
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How Does Financial Minimalism Work?
Financial minimalism works by requiring you to be conscious of how you spend money. Becoming a minimalist with money doesn’t mean you live a deprived lifestyle. Instead, you choose to include only those things in your life that are meaningful to you and align with your values and minimalist belief.
Here’s what financial minimalists don’t do:
• Spend money aimlessly, without thought to what they’re spending it on
• Rack up high-interest credit card debt for unnecessary purchases
• Live above their means and spend more than they earn
Because financial minimalists don’t do these things, they also don’t worry as much about money, as mentioned above.
A full 88% of adults feel some level of financial stress, and 65% say finances are their biggest source of stress, according to an April 2024 survey by MarketWatch Guides. Adhering to a minimalist finance strategy could help you to overcome the money stress in your life.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
Up to 4.30% APY on savings balances.
Up to 2-day-early paycheck.
Up to $2M of additional FDIC insurance.
Benefits of Financial Minimalism
The exact benefits financial minimalism can deliver will depend on how you apply it. But generally, financial minimalism can benefit you in the following ways:
• Minimalist finance can help you reduce or eliminate unnecessary spending from your budget.
• Spending less allows you to save more or use extra money in your budget to pay off debt more quickly.
• You may be less likely to run up new debts if you’re living within or below your means.
• Minimalism can help you clarify and prioritize needs vs. wants in your budget.
• Being intentional with spending can help you to plan out your financial goals and direct money toward the things that matter most to you.
• Your home is likely to be less cluttered with “stuff,” since you’re cutting back on unnecessary spending.
• Your mind may feel less cluttered as well if you’re not constantly worrying about how much debt you have or how to stretch your budget and bank account until your next payday.
Those are all good reasons to consider minimalism. It can be an especially wise path if you’re interested in how to gain financial freedom for yourself and your family.
Tips for Achieving Financial Minimalism
Ready to give financial minimalism a try? These tips can help you create a personal financial plan for embracing a minimalist lifestyle.
1. Removing Monthly Subscriptions
Streaming and subscription services can seem like a money-saver if it allows you to cut the cable cord. The problem is these monthly fees can add up, and many people end up paying for subscriptions they don’t use. That can include not only streaming services bit also gym memberships, subscriptions for apps or financial products like credit reporting, magazine subscriptions, and other recurring memberships.
Auditing your subscription services can help you find ones that you aren’t using and can afford to cut out. Even eliminating $25 or $50 a month in unnecessary subscriptions can free up money that you can use for something else.
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2. Budgeting
A budget can be essential for managing your money and pursuing a minimalist lifestyle. When you have a budget, you have a plan for how you’ll spend each month. If you don’t have a budget, it’s a good idea to make one (even a basic line-item budget) before tackling anything else on this list.
• Make a second list of everything else you spend money on (your wants).
• Subtract expenses from income.
Ideally, you have money left over after doing the math. Those funds might go towards savings goals. If you don’t, you’ll need to go back to your expenses to see what you can reduce or eliminate in order to bring your budget in line.
3. Being Mindful of All Your Purchases
Financial minimalism is all about not spending money on things you don’t need. If you struggle with impulse spending, you might try imposing a 48-hour waiting period on purchases that you didn’t plan for in your budget. That cooling off period can give you time to decide if it’s something you really need.
You could also try a no-spend challenge where, for a certain period of time, you challenge yourself not to spend money on anything that isn’t necessary. No coffee to-go, movies on-demand, and so on. Some people pull this off as a 30-day no-spend challenge.
4. Cutting Eating Out and Focusing on Eating at Home
Eating out can kill your budget and sabotage your financial minimalist efforts. Planning meals at home and grocery shopping only for the items on your list can be an easy way to get food spending under control.
If you’d still like to eat out occasionally, you can set up what’s known as a sinking fund just for dining out and add a little money to it every payday. For example, you could save $20 per month in the fund, then once you hit $100 you could treat yourself to a meal out. That way, you still get a reward while being disciplined about saving and planned spending.
5. Not Showing Off for Social Media
FOMO or fear of missing out can lead you to make poor financial decisions in order to keep up with what everyone on Instagram is doing. If you’re tempted to show off on social media and purchase things to do so, consider a social media fast. Taking a break from your social accounts can be a good way to put what matters to you into perspective. You may well feel less pressured — and less tempted — to spend money on things that don’t align with your financial goals.
6. Reducing Debt If Possible
Getting rid of debt can allow you to reduce your monthly expenses and stretch your money further. If you have credit card debt, student loans, and/or other debts, consider which ones you’d like to pay off first. Then formulate a plan for paying down the balances. There are ways to pay off debt without using savings.
If you’re struggling with debt and can’t see a light at the end of the tunnel, you might also seek guidance from a nonprofit like the National Foundation for Credit Counseling, or NFCC.
7. Cutting Out Unnecessary Expenses
Anything you don’t need to live is technically an unnecessary expense. You might try minimizing purchases in certain categories that aren’t vital. Depending on what your budget looks like, that might include new clothes, electronics, online shopping, or anything else that doesn’t add positive value to your life in some way. The more unnecessary expenses you can cut out, generally the better when aiming for financial minimalism.
8. Living Below Your Means
If you’re looking for ways to improve your financial health, take note of this idea. Living below your means simply means that you don’t spend more than you earn. If you’ve done your budget and your expenses are higher than your income, you’ll either need to find ways to cut spending down or earn more money. The wider the gap between what you spend and what you earn, the more money you’ll have to fund the financial goals that are important to you.
Extra stuff can make your home feel cluttered and disorganized. Ditching things you no longer need or use can make it easier to breathe and reinforce your commitment to living simply. As you sort through your things, consider what you can donate or give away, what should be trashed, what can be recycled, and what you might be able to sell for a little extra cash. Whether you try a Freecycle site, post things on eBay, or give your excess stuff to a local charity, your loss can be someone else’s gain.
10. Investing If Possible
Saving money is important, but investing it can be the best way to build wealth. If you’ve pared down your budget and have money to save and invest, consider putting some of it into the market for long-term goals. While there is risk involved, historically you can reap the best rewards this way. Following advice about investing for beginners can help you get started.
11. Embracing Free Time
When financial minimalism is the goal, you sometimes have to be creative about how you spend your time. Rather than going out for a pricey dinner with friends, for example, you may be spending more time at home instead. Hosting a potluck or taking a walk with a friend can be an inexpensive way to socialize.
Finding ways to embrace your free time can be a good reminder of why you’ve chosen to pursue minimalism. Some of the ways you can do that include exploring free (or low-cost) hobbies, getting into an exercise or meditation routine, or contemplating your financial goals and your next steps along the minimalist path.
12. Separating Money for Yourself First
“Pay yourself first” is an oft-repeated piece of financial advice and it simply means that before you pay any other bills or expenses, you set aside something in savings. How much you should save a month will vary person to person, and where the money goes may differ.
It could mean depositing $50 to start an emergency fund whenever you are paid or contributing 10% of your annual salary to a 401k at work. Automatic transfers on payday can help whisk the money to where you want it, rather than have it hit your checking account and tempt you to spend it.
Managing Your Finances With SoFi
If you want to spend less, save more, and lower your money stress, giving financial minimalism a try could help. Becoming a financial minimalist can help you really take control of your money and grow it.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.
FAQ
Can minimalism cause financial freedom?
Minimalism can help you to achieve financial freedom if you’re committed to paying down debt, cutting out unnecessary spending, saving, and investing. If you follow minimalist principles, it’s possible to live well on less, build wealth, and perhaps even retire early.
Can minimalism hurt financial freedom?
Minimalism won’t necessarily hurt financial freedom. However, it may take some getting used to in the beginning if you feel deprived because you’re spending less. Implementing one or two steps toward financial minimalism at a time can make it easier to transition to this kind of lifestyle gradually.
Is it OK if I am not a financial minimalist?
Financial minimalism may not be right for everyone and that’s perfectly acceptable. You can, however, apply some of the principles of financial minimalism to improve your money situation. For example, making a budget and dropping a subscription or two can be relatively easy ways to help rein in overspending and avoid debt.
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SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
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