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Almost everyone has financial goals — whether it’s eliminating student loan debt, saving for a home, building a million-dollar retirement fund, or all of the above.

No matter what your objectives are, achieving them generally takes more than just wishful thinking. With the right strategies, you can take control of your finances, boost your savings, pay down debt, and make steady progress toward your goals.

Here, we’ll explore some of the smartest personal finance tactics to help you move closer to the financial future you envision.

Strategies to Build Financial Wealth

No matter what your current income, these seven smart money moves can put you on the path to financial stability and long-term security.

Build and Maintain an Emergency Fund

If you get hit with a large unexpected expense (like a car repair or medical bill) or temporarily lose your income and don’t have any emergency savings, you might end up relying on credit cards to get by. This can lead to a cycle of debt that can take months, even years, to break out of, turning a small bump in the road into a major financial setback.

To build financial security, it’s important to have an emergency fund that can cover your basic living expenses for anywhere from three to six months, or more. So, if you normally spend $3,000 per month on bills and essentials, you would aim to set aside $9,000 to $18,000 in your emergency fund.

If that dollar amount sounds a little daunting, it’s fine to start small — you might gradually build your fund by setting aside $50 or $100 dollars per paycheck in a high-yield savings account earmarked for emergencies.

Consider setting up a recurring transfer from your checking account into this account each month. Over the course of a year, that bit-by-bit approach to saving money can add up to a much larger sum.

Tackling Debt Strategically

Debt can be one of the biggest obstacles to reaching your financial goals. High interest rates and fees often mean you end up paying far more than the original balance — especially with credit card debt and student loans.

Take credit cards, for example. The average interest rate for credit cards as of May 2025 is 28.63%. If you’re only making the minimum payment, most of that payment is going toward those toward interest charges rather than reducing your balance. This means your debt continues to go up and you’ll end up paying significantly more (possibly hundreds or thousands more) than your original purchases were worth.

If you’re looking to build a solid financial foundation, one of the smartest moves you can make is to prioritize paying off high-interest debts quickly.

Two proven strategies to help with debt repayment are the snowball method and the avalanche method:

•   The Snowball Method: Focus on paying off your smallest debts first, regardless of the interest rate. Once the smallest balance is paid off, roll that payment into the next-smallest debt. This strategy builds momentum and motivation as you see debts disappear one by one.

•   The Avalanche Method: Prioritize paying off the debt with the highest interest rate first while making minimum payments on the others. Once the highest-interest debt is gone, apply that payment to the next-highest interest debt. This method typically results in paying less interest overall.

While the avalanche method is more cost-efficient in the long run, some people find the snowball method more encouraging because of the quicker psychological wins.

Make the Most of Credit Cards

Credit cards can either be a financial trap or a useful tool — it all depends on how you use them. When managed responsibly, they offer several advantages:

•   Cash back and rewards: Many cards offer 1% to 5% back on everyday purchases or points you can redeem for travel, dining, or other perks. These benefits allow you to save money without making any sacrifices.

•   Fraud protection: Credit cards often include strong fraud safeguards, meaning you’re not liable for unauthorized charges if your card is lost or stolen.

•   Purchase protection: Some credit cards offer automatic purchase protection. This benefit provides coverage for items purchased with the card if they are damaged, stolen, or lost within a specific timeframe.

•   Credit building: Using credit cards responsibly — by making on-time payments and keeping your balances low — can strengthen your credit profile. Keeping old accounts open also helps extend your credit history, which lenders like to see.

•   Balance transfers: If you’re carrying a balance on a high-interest card, a 0% APR balance transfer offer could help. These promotions give you a period — often 12 to 18 months — where you can pay off debt interest-free. Just be sure to pay off the balance before the promotional period ends to avoid steep interest charges.

To use credit cards to your best advantage, aim to pay off your balance in full and on time each month, and keep your credit utilization (how much of your available credit you’re using) below 30% to maintain healthy credit.

Build and Stick to a Budget

Budgeting is a cornerstone of smart money management. It helps you see what’s coming in, what’s going out, and where you can make adjustments.

There are many different types of budgets but one simple framework that can help you get started is the 50/30/20 rule. This divides your monthly after-tax income into three categories:

•   50% goes toward needs like housing, groceries, transportation, and minimum payments on debt.

•   30% is for wants — entertainment, dining out, and nonessential purchases.

•   20% is allocated to savings, investments, and paying more than the minimum on debt.

This approach helps you prioritize spending, manage debt, and build a financial safety net.

You can set up a budget using pen and paper, a simple spreadsheet ,or a dedicated app. Many banks also offer budgeting tools that track spending and categorize purchases automatically.

Cut Monthly Costs Without Sacrificing Comfort

Once you’ve assessed your spending, the next step is identifying areas to trim back. Here are some common expenses you may want to reassess:

Housing: If rent is taking a big chunk out of your income, you might look into getting a roommate, moving to a less expensive area, or downsizing.

Transportation: Consider carpooling with friends and coworkers, taking public transit, and swapping a costly car lease for a more affordable vehicle. You might also save by comparing car insurance providers.

Cable and subscriptions: Consider replacing a pricey cable package with more affordable streaming services. If you already subscribe to multiple streaming services, you might get rid of the ones you rarely watch. Another way to save on streaming is to rotate your subscriptions (i.e., canceling one service and then subscribing to another when you want to watch something specific).

Dining out: Cooking at home can significantly reduce weekly food costs. Consider doing some meal prepping or batch cooking on the weekends and using a slow cooker on work days to make it easier to resist going out or ordering in.

Online shopping: Consider deleting saved payment methods on your favorite shopping sites to add more friction to impulse purchases. It’s also a good idea to unsubscribe from promotional emails that tempt you to spend.

Also keep in mind that you may be able to cut some of your so-called “fixed” monthly costs, like your cell, internet, and insurance bills. Call around to see if you can get a better deal from a competitor, or simply reach out to your current providers and ask for a better price. Many companies will offer promotions to retain existing customers.

If you’re carrying a balance on your credit card, you might contact the card issuer and ask for a lower interest rate — especially if you have a good payment history or competing offers from other cards.

Start Saving for Retirement Now

The earlier you begin saving for retirement, the easier it will be to reach your goal. Thanks to compound returns (when the returns you earn get reinvested and earn returns of their own), small contributions now can grow significantly over time.

Popular retirement accounts include:

•   401(k): This is a retirement savings plan offered by many employers, often with contribution matching (which is essentially free money). You don’t pay taxes on contributions or earnings until you withdraw the money in retirement.

•   Traditional IRA: A traditional individual retirement account (IRA) is an account you open on your own, not through an employer. Contributions may be tax-deductible, and withdrawals are taxed in retirement.

•   Roth IRA: A Roth IRA is also an individual account, but you fund it with after-tax dollars. This means you pay taxes on the money now but the account grows tax-free and qualified withdrawals in retirement are tax-free.

Financial advisors often recommend putting at least 15% of your pre-tax income each year for retirement (this includes any employer match).

Keep in mind that all retirement accounts come with annual contribution limits set by the Internal Revenue Service (IRS). These limits are influenced by factors such as age, income, and whether or not you (or your spouse) have access to a workplace retirement plan.

Be Smart About Loans

Large expenses, such as purchasing a house, car, or starting a business, typically require more cash than most individuals have sitting in their bank accounts. Loans provide a way to finance these expenses by borrowing money, which is then repaid over time with interest. When considering a loan, keep these smart borrowing tips in mind:

•   Shop around: Compare different lenders and loan types to find the best interest rate, terms, and fees. You can often rate shop online without any impact to your credit.

•   Understand the loan: Familiarize yourself with the loan terms, repayment schedule, and any associated fees or penalties.

•   Only borrow what you need: It’s important that you only borrow the amount necessary for your specific needs, as borrowing more can lead to higher overall debt and interest payments.

•   Assess your ability to repay: Determine if you can comfortably afford the monthly payments based on your income and monthly expenses.

•   Set up automated payments: Automate your loan payments to ensure you never miss a payment — this helps you avoid late fees and potential dinks to your credit.

•   Make extra payments when possible: Pay more than the minimum amount whenever possible to reduce the principal balance and save on interest.

•   Consider refinancing: If at some point you can lock in a better interest rate, consider refinancing your loan. Just keep in mind that extending the loan term can lead to increased overall costs.

The Takeaway

Smart financial strategies aren’t just about cutting back — they’re about making intentional choices with your money. Whether you’re paying down debt, investing for the future, or fine-tuning your budget, every step you take brings you closer to your financial goals. With the right tools and mindset, long-term financial success is within reach.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

What are the top 3 financial habits?

Top financial habits include: 1) Budgeting: Tracking income and expenses to manage money effectively. 2) Saving: Setting aside a portion of income for emergencies and future goals. 3) Investing: Growing wealth over time by putting money into stocks, bonds, or other assets. These habits help ensure financial stability and long-term security.

What is the SMART concept in finance?

The SMART concept in finance stands for Specific, Measurable, Achievable, Relevant, and Time-bound. It helps in setting clear and actionable financial goals. For example, instead of a vague goal like “save more,” a SMART goal would be “save $5,000 for a vacation you want to take in one year by setting aside $417 each month.” This framework ensures goals are well-defined and easier to achieve.

What is the 70/20/10 rule in personal finance?

The 70/20/10 rule in personal finance suggests dividing your income into three parts: 70% for monthly bills and everyday spending, 20% for savings and investments, and 10% for additional debt payments or charitable giving. This rule helps maintain a balanced budget, ensuring you cover essentials, build wealth, and manage debts or contribute to causes you care about. It’s a simple and effective way to manage your finances.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

Homeownership has long been a part of the American dream, and it opens the door to benefits like the mortgage interest deduction for those who itemize deductions on their taxes.

Itemizing typically makes sense only if itemized deductions on a primary and second home total more than the standard deduction, which nearly doubled in 2018.

Here’s what you need to know about the mortgage interest deduction.

What Is the Mortgage Interest Deduction?

The mortgage interest deduction allows itemizers to count interest they pay on a loan related to building, purchasing, or improving a primary home against taxable income, lowering the amount of taxes owed.

The tax deduction also applies if you pay interest on a condominium, cooperative, mobile home, boat, or recreational vehicle used as a residence. The deduction can also be taken on loans for second homes, as long as it stays within the limits.

States with an income tax may also allow homeowners to claim the mortgage interest deduction on their state tax returns, whether or not they itemize on their federal returns.

What Are the Rules and Limits?

The passage of the Tax Cuts and Jobs Act of 2017 was a game-changer for the mortgage interest deduction. Starting in 2018 and set to last through 2025, the law greatly increased the standard deduction and eliminated or restricted many itemized deductions.

For the 2025 tax year, the standard deduction is $30,000 for married couples filing jointly and $15,000 for single people and married people filing separately.

If you itemize deductions, you’re good to go and can deduct the interest. There’s further good news, as you may also be able to deduct interest on a home equity loan or line of credit, as long as it was used to buy, build, or substantially improve your home.

The loan must be secured by the taxpayer’s main home or second home and meet other requirements. For tax purposes, a second home not used for income is treated much like one’s primary home. It’s a home you live in some of the time.

The IRS considers a second home that’s rented some of the time one that you use for more than 14 days, or more than 10% of the number of days you rent it out (whichever number of days is larger). If you use the home you rent out for fewer than the required number of days, it is considered a rental property—one that you never live in, and not eligible for the mortgage interest deduction.

Generally, your interest-only mortgage is 100% deductible, as long as the total debt meets the limits.

According to the Internal Revenue Service, you can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of debt. Higher limitations ($1 million, or $500,000 if married filing separately) apply if you are deducting mortgage interest from debt incurred before Dec. 16, 2017.

You can’t deduct home mortgage interest unless the following conditions are met:

•   You must file Form 1040 or 1040-SR and itemize deductions on Schedule A (Form 1040).
•   The mortgage must be a secured debt on a qualified home in which you have an ownership interest.

Simply put, your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you can’t pay the debt, your home can then serve as payment to the lender to satisfy the debt.

A qualified home is your main home or second home. The home could be a house, condo, co-op, mobile home, house trailer, or a houseboat. It must have sleeping, cooking, and toilet facilities.

Know that the interest you pay on a mortgage on a home other than your main or second home may be deductible if the loan proceeds were used for business, investment, or other deductible purposes. Otherwise, it is considered personal interest and is not deductible.


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How Much Can I Deduct?

In most cases, you can deduct all of your home mortgage interest. How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds.

The IRS says that if all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category.)

1. Mortgages you took out on or before Oct. 13, 1987 (called grandfathered debt).

2. Mortgages you (or your spouse if married filing jointly) took out after Oct. 13, 1987, and prior to Dec. 16, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

(There is an exception. If you entered into a written contract before Dec. 15, 2017, to close on the purchase of a principal residence before Jan. 1, 2018, and you purchased the residence before April 1, 2018, you are considered to have incurred the home acquisition debt prior to Dec. 16, 2017.)

3. Mortgages you (or your spouse if married filing jointly) took out after Dec. 15, 2017, to buy, build, or substantially improve your home, but only if throughout 2020 these mortgages plus any grandfathered debt totaled $750,000 or less ($375,000 or less if married filing separately).

The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home.

What Are Special Circumstances?

Just like you need to understand your home loan options, you need to know the special situations where the IRS says you might or might not qualify for the mortgage interest deduction.

You can deduct these items as home mortgage interest:
•   A late payment charge if it wasn’t for a specific service performed in connection with your mortgage loan.
•   A mortgage prepayment penalty, provided the penalty wasn’t for a specific service performed or cost incurred in connection with your mortgage loan.

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

Is Everything Deductible?

The government is only so generous, and there are many costs associated with homeownership. Some of them are not tax deductible under the mortgage interest deduction, like homeowners insurance premiums.

One caveat: You might be able to write off a portion of insurance, as well as utilities, repairs, and maintenance, if you have a home office and deduct those expenses on Schedule C.

Also not on the list for inclusion in the mortgage interest deduction are title searches, moving expenses, and reverse mortgage interest. Because interest on a reverse mortgage is due when the property sells, it isn’t tax deductible.


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How to Claim the Mortgage Interest Deduction

An itemizer will file Schedule A, which is part of the standard IRS 1040 tax form. Your mortgage lender should send you an IRS 1098 tax form, which reports the amount of interest you paid during the tax year. Your loan servicer should also provide this tax form online.

Using your 1098 tax form, find the amount of interest paid and enter this on Line 8 of Schedule A on your tax return. It’s not a heavy lift but gets a tad more complicated if you earn income from your property. If you own a vacation home that you rent out much of the time, you’ll need to use Schedule E.

Furthermore, if you’re self-employed and write off business expenses, you’ll need to enter interest payments on Schedule C.

The Takeaway

You can take the mortgage interest deduction if you have one or more mortgages and itemize deductions on your taxes. Keep in mind that it’s typically only worth taking if the write-offs exceed the standard deduction.

As with all matters that affect your taxes, you’ll want to consult with your financial advisor about claiming the deduction.

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FAQ

Do you get a bigger tax return if you have a mortgage?

Having a mortgage won’t necessarily help your taxes, though it might. When you have a mortgage, you may be able to deduct the interest you pay on that mortgage if you itemize on your federal income tax return. However, for itemizing to be worthwhile, your combined items would have to exceed the amount of the standard deduction, and your mortgage interest deduction, even in combination with other potential deductions, may not reach that threshold.

Is mortgage interest 100% deductible?

For loans taken out before December 16, 2017, qualifying mortgage interest may be deductible up to $1,000,000. For loans on or after that date, the limit is up to $750,000. The exception is that if you signed a legally binding mortgage contract on or before December 15, 2017, with the intention of closing by January 1, 2018, you can also deduct up to $1,000,000 (as long as you closed by April 1, 2018).

Can I deduct mortgage interest if I take the standard deduction?

No. If you want to deduct your mortgage interest, you must itemize your federal income tax and file a Schedule A.

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

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As of 2025, only 26% of people say now is a good time to buy a house according to a Gallup poll. This is probably due to high home prices and high interest rates. The median home price currently sits at $438,357 and mortgage rates as of May 2025 are 6.86% for 30-year fixed-rate mortgages and 6.01% for 15-year FRMs.

We’ve seen higher interest rates in the past year, so now may not be the worst time to buy. However, whether or not now is a good time to buy a house depends heavily on your unique financial situation and local market dynamics.

Determining When You’re Ready to Buy

Before you assess the current real estate market and pay close attention to interest rate fluctuations, it’s important to understand your financial and personal situation.

Here are a few factors you may want to consider before deciding if a new home is a good play right now.

Making Room in the Budget

When buying a home, the first thing you’ll need to budget for is a down payment.

While 20% of the home’s value is the benchmark, you may only need 3.5% if you apply for an FHA loan. But even 3.5% can be a chunk of change. If you want to buy a $200,000 house, 3.5% is $7,000.

Your home-buying budget should be large enough to cover a down payment as well as closing costs, which typically include homeowners insurance, appraisal fees, property taxes, and any mortgage insurance.

Remaining Consistent

How long do you plan to live in the city where you’re eyeing a home? If you plan on staying in the home long-term, now could be a good time to buy because staying put will give your home time to appreciate (subject to market fluctuations).

Since mortgage lenders pay close attention to job consistency and a steady income, you may also want to consider your job security. Especially during uncertain times, it’s crucial to feel confident knowing you can make your mortgage payments every month.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Checking Your Financial Profile

It’s a good idea to check your financial profile. Doing so may help you secure better financing terms when you purchase a home. Lenders will review your credit history, debt-to-income ratio, and assets, among other factors, to determine your eligibility for a mortgage.

Lenders review your credit history to gauge your creditworthiness and the level of risk to lend you money. They look at your debt-to-income ratio to indicate how much of your income goes toward debt payments every month.

If your ratio is high, it can show you’re overleveraged, which may mean you’re not in a position to take on more debt like a mortgage. You may also face a higher interest rate.

Last, a mortgage applicant can list assets like cash and investments. The more assets you have, the less risky lenders view you.

Weighing Renting Vs. Buying

You may want to compare renting vs. buying a home.

If renting a home in your community is less expensive than buying, you may want to hold off on a home purchase. Conversely, if renting is more expensive, you may be more eager to purchase a new home.

Overall, if you find that these factors point you in the direction of homeownership, it’s possible you’re ready to buy a home and can begin determining the perfect time to pounce.

Observing Interest Rates

When determining if now is a good time to buy a house, buyers should look closely at interest rates.

Financial institutions charge interest to cover the costs of loaning money when they offer you a mortgage. The interest rate they charge is influenced by the Federal Reserve, but mortgage-backed securities are considered to be the main driver.

When interest rates are low, borrowing money is less expensive for the borrower. As interest rates rise, borrowing money becomes more costly. The government has been holding rates steady recently.

But keep in mind that the rate and terms you qualify for will depend on financial factors including your credit score, down payment, and loan amount.

And, if interest rates go down after you purchase your home, you can always choose to refinance your mortgage in hopes of getting a lower rate.


💡 Quick Tip: A home equity line of credit brokered by SoFi gives you the flexibility to spend what you need when you need it — you only pay interest on the amount that you spend. And the interest rate is lower than most credit cards.

Timing the Real Estate Market

Essentially, to time any market, you want to aim to buy low and sell high. If you’re going to buy a property, you’ll want to ideally buy when there are more sellers than there are buyers—a buyer’s market.

In a buyer’s market, buyers have an abundance of homes to choose from. This may also give you leverage to ask for more concessions from sellers eager to close a deal, such as a seller credit toward your closing costs or help covering the cost of repairs.

Conversely, in a seller’s market, real estate inventory is low and demand is high, which may drive up home prices.

To identify the current market conditions, you may want to visit real estate websites like Zillow, Redfin, Realtor.com®, or Trulia to look at inventory in your area or ZIP code.

Typically, it’s a buyer’s market if you see more than seven months’ worth of inventory.

If you see five to seven months of inventory, you’re in a balanced market that isn’t especially beneficial to buyers or sellers.

It’s a seller’s market when there is less than five months’ worth of inventory.

Recommended: How Does Housing Inventory Affect Buyers & Sellers?

Understanding Local Economics and Trends

Because prices can vary vastly vary from area to area, real estate is often considered a location-driven market. This means that general rules of thumb might not be valid in every region or city.

Also, local economics may play a role in housing demand. For instance, if a large company decides to move its operations to a city, that city may experience a housing boom that creates a spike in home prices.

That’s why hopeful buyers will want to pay close attention to the economic happenings and housing trends in their desired location.

The Takeaway

If you find a home that seems right for you, your employment is stable, and you can get a home loan with a good interest rate, buying may make sense. Then again, with interest rates and home prices still being on the high side, comparing the costs of renting and buying may be called for.

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

FAQ

Should I buy a house before rates drop?

House prices are predicted to continue rising, though at a slower rate. If you buy a house later, you’ll probably be paying more for it. If, however, you get a mortgage now and rates go down, you can consider refinancing to get the benefit of the lower rate.

What time of year is it cheapest to buy a house?

Generally speaking, you may be able to get the cheapest deal on a house in the winter. That’s because winter tends to be the slowest season for home sales and that may give you some leverage to bargain with homeowners who are in a hurry to sell. Of course, prevailing market conditions at the time will also play into how good a price you can get.

Is it better to buy a house during a recession?

There may be advantages and disadvantages to buying a house during a recession. The house price and the interest rates are likely to be lower than they might be when the economy is stronger. However, your individual financial position and job security may not be as strong during a recession, which can lead to financial stress.

About the author

Ashley Kilroy

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

SOHL-Q225-176

Reasons for paying off your mortgage early include eliminating monthly mortgage payments, saving money in interest, reducing financial stress, and more. But, just because you can pay your mortgage off early doesn’t necessarily mean you should.

Should You Consider an Early Mortgage Payoff?

It can be tempting to rush to pay off your home loan when you have the ability to, especially if you’ve struggled with debt management. And why wouldn’t you want to pay off your mortgage? Getting rid of debt could potentially increase cash flow.

When it comes to your mortgage loan, paying it off early depends on your unique financial situation and goals — there is no one right answer.

Reasons Not to Pay Your Mortgage Off Early

While it may seem like there are no reasons not to pay off your mortgage early, that is actually not the case. Here are a few reasons why it may not be a good idea to pay off your mortgage loan early:

You Have a Competitive Interest Rate

Unless you’ve reached all of your financial goals, it may not make the most sense to pay off your mortgage early when you have a competitive interest rate.

For example, if you are saving to send your child to college or you’re trying to rebuild your emergency fund after a home repair, those projects might take priority.

You could also possibly earn more by investing your money as opposed to paying off your loan. If that’s the case, it doesn’t make sense to pay off your mortgage early unless you want the peace of mind that comes with no mortgage debt. Investment decisions should be based on specific financial needs, goals, and risk appetite.

You Would Have Nothing Left in Savings

If you only have enough in the bank to cover your mortgage, it is not advisable to pay it off. Having an emergency fund is necessary and may take priority over not having a mortgage payment.

You Might Face a Prepayment Penalty

Make sure to review your mortgage terms closely. Some lenders charge an early payoff penalty, usually a percentage of the principal balance at the time of the payoff.

You Might Miss Out on the Mortgage Tax Deduction

For many people who itemize, having a mortgage helps push their itemized deductions higher than the standard deduction. It’s worth discussing the mortgage tax deduction with your accountant or other tax professional before you resolve to pay your mortgage off early.

You Have Other High-Interest Debt

If you have other high-interest debt, such as credit card debt, personal loans, or student loans, it may make sense to pay those off in full prior to paying your mortgage off early. Home loans typically have the lower interest rates of other forms of debt and are considered “good debt” by lenders. It only makes sense to pay off your mortgage early if you have no other debts in your name.

When an Early Payoff May Make Sense

On the flip side, there are some situations in which paying off a mortgage early might make more sense than waiting. Reasons to pay off your mortgage early may include:

You’ve Met All of Your Financial Goals

If your emergency savings account is right where you feel it needs to be and you’re diligently contributing to your retirement accounts, there may be no reason not to pay off your mortgage early.

Another idea, however, is to purchase an investment property instead of paying off your mortgage early. This can create a monthly cash flow in addition to the value of the property potentially appreciating over the years.

You’re Interested in Being 100% Debt-Free

Sometimes, just the idea of having loan payments can be mentally taxing, even if you’re in a good place financially. Money is not just about numbers for many; it’s also about emotions.

If paying off your mortgage loan early relieves anxiety because it’s helping you become debt-free, then that might be something to consider.

Of course, reflecting on why you want to become debt-free is important when thinking about paying your mortgage off. If, for example, it’s because you’re approaching retirement and will no longer be getting a steady paycheck, it might make sense to pay off your mortgage.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

Ways to Pay Off a Mortgage Early or Faster

If you’ve decided it makes sense for your financial situation to pay off your mortgage early, here’s how you can do it:

Lump sum. The easiest way to pay off your mortgage early is by making one lump-sum payment to your mortgage lender. Contact your lender prior to making the payment so you can make sure you’re paying exactly what you owe, including any possible prepayment fees.

Extra payments. You could potentially pay more toward your mortgage principal each month if you got a raise at work or you’ve trimmed some fat in your budget.

If you make extra payments toward your mortgage, it could lead to paying off the loan faster than if you were just to make the set payment each month. Make sure to contact your lender prior to making extra payments, though, so you know the extra amount is being applied toward the principal amount only, not the principal and interest.

Refinancing. Another option for paying off your mortgage early is refinancing. Refinancing your mortgage means replacing your current mortgage with a new one, ideally with a better rate and/or term.

If you shorten your loan term from 30 years to 15 years, for example, it may increase your monthly payments but in turn allow you to pay your mortgage off faster. Home loans with shorter terms often come with lower interest rates, too, so more of your monthly payments will be applied to the loan’s principal balance.

The Takeaway

Should you pay off your mortgage early? Maybe. If your retirement account is fully-funded, you have no other high-interest debts, and you’re interested in becoming 100% debt-free, it may make sense to pay off your mortgage early. However, if you do not have fully funded retirement and emergency savings accounts or you could make more money by investing rather than paying off your mortgage debt, it could be best to hold off on paying your mortgage off early.

One way to save on interest and possibly pay off your mortgage early is by refinancing. Refinancing can allow you to lower your interest rate and shorten your loan term, if desired.

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

FAQ

Is it ever worth paying off your mortgage early?

It can definitely be worth paying off your mortgage early in some circumstances. If you have enough money in your emergency fund and your retirement savings, and you can’t make more money investing elsewhere, it may make sense to pay your mortgage off early. And if you’re in good shape financially and averse to debt, it can make sense to pay your mortgage off early for peace of mind.

Is there a tax disadvantage to paying off your mortgage early?

If you pay off your mortgage, you will no longer be able to take a deduction on your mortgage interest. It is possible that this could mean you can’t itemize, which might increase the amount you have to pay in taxes.

What happens after you pay off your mortgage?

Once you’ve paid off your mortgage, you fully own your home and don’t have to make payments on it every month. You will, however, have to pay property taxes and homeowners insurance.

Do extra payments automatically go to principal?

No, when you pay extra money on your mortgage, it does not necessarily go to principal. Not all lenders accept principal-only payments, but you can check with yours to see if they do and find out what the process is. After you start making the payments, it’s a good idea to check and make sure they are being applied properly.

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Other than possible lender-imposed waiting periods after a mortgage loan closes, you can generally refinance your home as many times as you like. But you’ll want to do the math first.

Homeowners choose to refinance for a number of reasons: to lower monthly payments, take advantage of lower interest rates, get better terms, pay the loan off more quickly, or eliminate private mortgage insurance.

Refinancing involves paying off the current mortgage with a second loan that has (ideally) better terms. Borrowers don’t have to stay with the same lender – it’s possible to shop around for the best deals.

Mortgage rates seem to be constantly in flux, moving mostly in parallel with the federal interest rate. In 2021, the average rate of a 30-year fixed mortgage was 2.96%. In 2022, as the Federal Reserve raised interest rates to try to tame inflation, mortgage rates began to rise and jumped to more than 7.00% in October. By mid-May 2025, the average rate of a 30-year fixed mortgage was 6.81%.

So is now the right time for you to refinance? Here are some things to consider before taking the plunge.

The Basics of Mortgage Refinancing

Because a homeowner who chooses to refinance is essentially taking out a new loan, the cost of acquiring the new loan must be compared with potential savings. It could take years to recoup the cost of refinancing.

As with the initial mortgage loan, a refinance requires a number of steps, including credit checks, underwriting, and possibly an appraisal.

Typically, however, many homeowners start with an online search for the rates they qualify for. (A lower average mortgage rate doesn’t necessarily translate to an individual offer—creditworthiness, debt-to-income ratio, income, and other factors similar to what’s required for an initial mortgage will matter.)

The secret sauce that makes up a mortgage refinance rate might seem like a mystery, but there are some common factors that can affect your offer:

•  Credit score: As a general rule, higher credit scores translate to lower interest rates. A number of financial institutions and credit card companies will give account holders access to their credit scores for free, and a number of independent sites offer a free peek, too.
•  Loan term/type: Is the loan a 30-year fixed? A 15-year? Variable rate? The selected loan repayment terms are likely to affect the interest rate.
•  Down payment: A refinance doesn’t typically require cash upfront, the way a first-time mortgage usually does, but any cash that can be put toward the value of a loan can help reduce payments.
•  Home value vs. loan amount: If a home loan is extra large (or extra small), interest rates could be higher. But generally speaking, the less the mortgage amount is compared with the value of the home, the lower the interest rates may be.
•  Points: Some refinance offers come with the option to take “points” in exchange for a lower interest rate. In simplest terms, points are discounts that lower your interest rate in exchange for a fee you pay upfront.
•  Location, location, location: Where the property is physically located matters not only in the determination of its value but in the interest rate you might receive.

What Types of Refinance Loans Are Out There?

As with first-time home loans, consumers have a number of refinance mortgage options available to them. The two most common types involve either changing the terms of the original loan or taking out cash based on the home’s equity.

A rate-and-term refinance changes the interest rate, repayment term, or sometimes both at once. Homeowners might seek out this type of refinance loan when there’s a drop in interest rates, and it could save them money for both the short term and the life of the loan.

A cash-out refinance can also change the terms or interest rate, but it includes cash back to the homeowner based on the home’s equity.

Within those two basic types of refinance options, conventional mortgages from traditional lenders are the most common. But refinancing can also happen through a number of government programs.

Some, like USDA-backed loans, require the initial mortgage to be a part of the program as well, but others don’t, such as the VA loan program, which has a VA-to-VA refinance loan called an interest rate reduction refinance loan and a non-VA loan to a VA-backed refinance. That’s why it’s important to shop around to find the best option.

How Early Can I Refinance My Home?

If a home purchase comes with immediate equity — it was purchased as a foreclosure or short sale, for example — the temptation to cash out immediately with a refinance may be strong. The same could be true if interest rates fall dramatically soon after the ink is dry on a mortgage. Especially for conventional loans, it may be possible to refinance right away. Others may require a waiting period.

For example, there can be a six-month waiting period for a cash-out refinance. Or, refinancing via government programs like the FHA streamline refinance or VA’s interest rate reduction refinance loan can require waiting periods of 210 days.

Lenders can require a waiting period (also called a “seasoning period”) until they refinance their own loans for a number of reasons, including assurance that the original loan is in good standing.

For a cash-out refinance, some lenders may also require that the homeowner has at least 20% equity in their property.

Questions to Ask Before You Refinance

Just because you can refinance doesn’t necessarily mean you should. First, ask yourself these questions.

What Is the Goal?

Identifying the endgame of a mortgage refinance can help determine whether now is the right time. If a lower monthly payment is the goal, it can be wise to play around with a refinance calculator to see just how much a lower interest rate will help.

For years, it has been a general rule that a refinance should lower the interest rate by at least two percentage points to be worth it. Some lenders believe one percentage point is still beneficial, but anything less than that and the savings could be eaten up by closing costs.

What Is the Total Repayment Amount?

It’s important to remember that a lower monthly payment—even if it’s significantly less—doesn’t necessarily equal savings in the long run.

If a mortgage with 20 years remaining is refinanced to lower the monthly payment, for example, the most affordable option could be a 30-year mortgage. But is the lower monthly payment worth it if you’ll be paying it off for 10 additional years?

Will I Need Cash to Close?

One of the biggest differences between a first-time mortgage and a refinance is the amount it costs to close the loan. Many times, closing costs for a refinance can be rolled into the loan, requiring no cash at the outset.

Closing costs typically come in at 2% to 5% of the loan amount, and although they can be rolled into the loan and paid off over time, that could mean the new monthly payment isn’t as low as planned.

One way to make sure the investment is worth the cost is to consider how long it would take you to reach the break-even point, which is when you recoup the costs of refinancing. For instance, if it takes you 24 months to reach the break-even point, and you plan on living in your home for at least that long, refinancing may make sense for you.

The Takeaway

Technically, you may be able to refinance your home as many times as you like. But there are potential limiting factors, like waiting periods with some loan types and lenders, and lender’s preferences, for instance. Additionally, having to pay multiple sets of closing costs can limit the financial benefits of refinancing. That said, if you do your homework, a refinance can be a smart, strategic choice.

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

FAQ

Is there a downside to refinancing multiple times?

Typically, the biggest potential downside to refinancing multiple times (or even once) is the cost of closing, which usually runs between 2% and 5% of the loan amount — each time you refinance. Additional downsides are losing equity in your home and, depending on the kind of refinance you get, potentially extending the period of time during which you have to make payments.

How frequently can you refinance a mortgage?

Technically, there is no limit on the number of times you can refinance your mortgage, assuming that you can find a lender willing to accommodate you. Bear in mind that each refinance will typically come with its own set of closing costs, so it’s important to calculate whether a given mortgage refi will make sense financially for you.

Does refinancing hurt your credit score?

Applying to refinance your mortgage could potentially result in a small, temporary dip to your credit score. That’s because the lender usually performs a hard inquiry to check your credit. Also, refinancing involves closing your old loan and taking on a new one, which can also affect your credit score slightly.

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