SpendPar Archives

Jan

2025

8 Ways to Access Fancy Airport Lounges

By Jason Steele | credit card, Family Finances, Life & Career | Comments Off

Private airport lounges offer a comfortable refuge from crowded waiting areas by your flight’s gate. They’re a place to recharge (yourself and your devices), have a glass of wine, and sample upscale prepared foods that are a major improvement over that bag of chips from the vending machine.

These facilities are typically only accessible via a pricey plane ticket or membership. Here, you can learn ways to enjoy luxury airport lounges, for a fee or possibly even for free, including by accessing credit card rewards.

Key Points

• Airport lounges can offer a luxurious place to spend time before flights or during layovers.

• Opening a premium travel rewards credit card often includes lounge access as a perk.

• Trading in miles or using credits can purchase lounge access.

• Flying in business class or first class typically provides lounge access, or you might get a guest pass if a friend is traveling in these classes.

• Active military members and families can claim free lounge access from some airlines.

How Do Airport Lounges Work?

There are several types of airport lounges, and they vary from basic to luxurious. The no-frills lounges simply have snacks and drinks, while the most lavish ones will feature such complimentary perks as a full buffet, table-service restaurant, open bar, and even showers. The seats are typically way more comfortable than what you find in the standard waiting area, and you may have your choice of reading materials and streaming shows.

Not only can this help fill the time before your flight, but it can save money on food in the airport or onboard your flight, which can be one way families can afford to travel.

If you are traveling with pets, you may find a lounge that allows you to hang out with little Bailey in less crowded conditions than the main terminal. This can be more comfortable for you and your furbaby.

There are a few main types of lounges:

• The original airport lounges are those run by the airlines, and several major carriers still offer lounges at the airports they use as hubs. In the U.S., American, Delta, and United offer large lounge networks, while Alaska Airlines has a much smaller network. Some foreign carriers also offer lounges at major international gateways, such as New York’s JFK and Los Angeles.

• Another type of airport lounge is the contract lounge. These are third-party facilities that are open to those who have membership with an affiliated network. These lounges are also used for business and first-class passengers of airlines that don’t have their own branded lounge. In the U.S., the most common lounge network is Priority Pass Select, which offers members access to over 1,700 “airport experiences” around the world. There are numerous travel rewards credit cards that offer a Priority Pass Select membership.

• You’ll also see lounges that are branded with the name of a credit card issuer, for use by its premium cardholders. The American Express Centurion lounges are the largest credit card lounge network. Capital One and Chase are also in the process of constructing their own branded lounge network. These lounges tend to be the most luxurious.

• Finally, there are USO lounges that are available to U.S. Armed Forces active duty, Reserve, and Guard service members, as well as their families.

How to Access Airport Lounges for Free

With most lounge networks, the easiest way to gain entry is to purchase a membership or a day pass. However, there are some ways to access airport lounges without forking over cash.

Open a Premium Travel Rewards Credit Card

There are several travel credit cards that offer the perk of airport lounge access. For example:

• The American Express Platinum Card offers lounge membership with the Delta SkyClubs, Plaza Premium, Priority Pass, American Express Centurion lounges, and others.

• The Chase Sapphire Reserve offers Priority Pass and Chase Sapphire Lounge memberships.

• The premium airline credit cards from American, Delta, and United each offer membership to their branded lounges.

When you’re deciding about which credit card rewards are most valuable to you, consider whether luxury airport lounge access is an important factor.

Trade in Miles or Use Credits

Another way to enter fancy lounges for free is to redeem airline miles for a membership (you might also be able to redeem credit card miles vs. cash back to gain access). For example, you can redeem 85,000 United miles for a United Club membership, rather than paying the $650 annual fee. Since you are receiving less than one cent in value per mile redeemed, this is considered a poor use of your miles, but no judgment. If it works for you, go for it!

Fly in Business Class or First Class

When you have a ticket in business class, first class, or international first class, most airlines will give you a pass to an airport lounge. It could be a lounge branded by that airline, especially in their main hubs. But if you are traveling from a city with little service on that airline, you’ll likely get a pass to a contract lounge.

Befriend a Business or First Class Passenger

One of the great things about flying in business or first class is that you will often receive a lounge pass that includes guest access. So if you are flying in economy class but have a friend or colleague with a business class ticket, he or she may be able to “guest” you into the lounge either for free or at a reduced rate.

Claim Free Access for Active Military

If you’re an active duty member of the U.S. military, then you may have free access to some lounges. For example, both United and American offer free access to active duty military personnel and their families. However, they may require that you be in uniform and traveling on orders.

Access Airport Lounges for a Fee

If you’re unable to access an airport lounge for free, you might consider paying for it. Here are some ways to do just that:

Buying an Airport Lounge Pass

Airport lounge memberships are available for sale, either through an airline that brands the lounge, or through a network such as Priority Pass Select. Memberships generally start at a few hundred a year, but discounts are available for those with elite status in the airline’s frequent flier program. If you’re saving up for a few upcoming flights, you might also consider stashing away the price of a lounge pass where you keep a travel fund.

Buy a Day Pass

Many lounges (but not all) offer day passes that can typically cost $25 to $80 per person. Some online platforms and apps may sell discounted access to certain airport lounges. Depending on your situation — how much time you have to fill before your flight, whether you’re hungry or thirsty, whether you need a quiet place to work — this might be a good buy.

Upgrade Your Ticket

If you are on an international flight and are seated in business or first class, then you’ll already have access to the lounges. But rather than pay full price for these tickets, you may be able to book a less pricey class of service and then buy up to business class at check in, perhaps for just a few hundred dollars. Doing so will also result in a pass to the airport lounge.

The Takeaway

When you have to spend time in an airport waiting for your flight, the lounge can be a comfortable place to do it, with comfortable seating, free food and drinks, and other amenities that can make killing time feel luxurious. While it can be expensive to buy membership to a lounge, you may be able to access a luxury airport lounge for free, especially if you have the right credit card. Or you might be able to buy your way in for a modest fee by purchasing a day pass or trying another smart-traveler tactic.

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

FAQ

Is it worth it to pay for airport lounge access?

If you’re taking a short trip and you want to arrive at the airport as close to departure as possible, then there’s no reason to pay for airport lounge access. But if you have a long layover in the middle of a trip or a long flight ahead, then lounge access can be worth paying for. Also, under certain circumstances, such as needing to finish a work deliverable before your flight, a luxury airport lounge can be a much more comfortable place to work.

Which airport lounges are the best?

International first class lounges, where available, are often the most luxurious. The American Express Centurion lounges are also known to feature gourmet food and drinks. Some Priority Pass Select lounges have well-regarded food options, while others are pretty basic. Domestic airline lounges can be pretty spartan.

Which credit card is best for airport lounge access?

The decision of which credit card is best for airport lounge access will depend on personal preference but two options are well-known. The American Express Platinum Card offers access to Delta SkyClubs, Priority Pass Select, and American Express Centurion lounges. The Sapphire Reserve Card offers a Priority Pass Select membership that also includes credits at select airport restaurants, as well as access to its own branded lounges.

Photo credit: iStock/andresr

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Jan

2025

Can You Retire at 62? Should You Retire at 62?

By Rebecca Lake | invest, Investing, Preparing for Retirement | Comments Off

For many, age 62 is an appealing time to step away from the workforce. You’re old enough to start claiming Social Security benefits, yet still young enough to enjoy pursuing hobbies, travel, and spending time with family. But deciding to retire at 62 is a complicated choice that requires looking carefully at your financial situation, health care needs, and lifestyle goals. Below are some guidelines that help you decide whether you can (or should) retire at 62, plus a look at the pros and cons of retiring on the early side.

Key Points

• Retiring at 62 requires assessing your savings and investments to ensure they can support a long retirement.

• Claiming Social Security early can permanently reduce monthly benefits by up to 30%.

• If you retire at 62, you’ll need to determine how to cover your health care costs until Medicare eligibility at 65.

• Experts often recommend having eight to 10 times your annual income saved before retiring.

• Working longer or taking on part-time work can help protect your savings and boost your Social Security benefits.

Factors to Consider Before Retiring at 62

If you’re thinking about retiring at 62, you’ll want to explore how it will impact your Social Security benefits, health care costs, living expenses, and lifestyle. Let’s look at each factor in more detail.

Social Security

At 62, you’re eligible to start claiming Social Security benefits, but doing so comes with a caveat. Opting for early benefits reduces your monthly payments compared to waiting until your full retirement age, which is between 66 and 67, depending on your birth year. Claiming benefits at age 62 can permanently reduce your monthly payments by up to 30%, which can significantly impact your long-term financial security.

You can check your Social Security account to see how much you’ll get when you apply at different times between age 62 and 70. If you don’t already have an account, you can create one at Login.gov.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

Health Care

Health care is a major consideration for anyone looking to retire at 62. Medicare eligibility starts at 65, leaving a potential three-year gap in coverage. That means you’ll need to secure health insurance, which can be costly. Options include purchasing private insurance, relying on a spouse’s employer-sponsored plan, or exploring coverage through the Affordable Care Act marketplace. Evaluating your health care needs and the associated costs is crucial before deciding to retire early.

Expenses

To determine if you can retire at 62, you’ll need to understand your post-retirement expenses, so that you can identify how much you may need in retirement savings. While some costs may decrease, such as commuting or work-related expenses, others may increase, like travel, hobbies, and medical care. Creating a detailed budget can help you estimate your monthly expenses and determine if your savings and income streams will be sufficient to cover them. When projecting your annual expenses, keep in mind that many expenses will go up over time due to inflation.

Lifestyle Change

Retiring at 62 isn’t just a financial decision; it’s a lifestyle shift. Leaving the workforce means more time for hobbies, travel, and family, but it can also mean a loss of routine, purpose, and regular social interaction. Many retirees struggle with the psychological transition and find themselves missing the structure and camaraderie of the workplace. It’s wise to think about how you’ll fill your days and stay engaged without your old routine. You’ll also want to make sure that your financial resources will support your desired post-retirement lifestyle.

Are You Financially Ready to Retire at 62?

To figure out if you can retire at 61, you’ll need to assess your assets and how far they will take you. Here’s how.

Savings and Investments

The earlier you retire, the longer your nest egg needs to last. Do you have enough money set aside in savings and investments to support your desired lifestyle for 30-plus years? As a general rule of thumb, experts recommend having eight to 10 times your annual income saved by the time you retire. For example, if you earn $60,000 annually, you should have $480,000 to $600,000 saved. If you’re looking to retire at 62, it can be wise to shoot for the higher end of that range or even beyond that. This can help make up for fewer earning years and (likely) more years to spend your savings.

If your savings aren’t quite where you’d like them to be, there are ways to catch up, such as working a bit longer or adjusting your investment strategy.

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

Retirement Withdrawals

Understanding how much you can withdraw from your retirement savings each year is crucial to avoid outliving your money. One guideline to consider is the 4% withdrawal rule. This rule suggests withdrawing 4% of your retirement investments (such as a 401k or an online Roth IRA) annually, adjusting that percentage each year for inflation, to fund a 30-year retirement.

As an example, let’s say you want to retire at 62 with $500,000 saved. If you follow the 4% rule, you’d only be able to withdraw $20,000 your first year in retirement, or just under $1,700 per month. That could constrain your lifestyle, though it doesn’t include what you may get from Social Security.

When calculating your annual retirement withdrawals, keep in mind that the 4% rule isn’t foolproof, especially during market downturns. You may need to adjust withdrawals based on your expenses and the performance of your investments.

Pros and Cons of Retiring at 62

To decide if you should retire at 62, it’s a good idea to weigh both the advantages and disadvantages of early retirement. Here’s how they stack up.

Benefits of Retiring at 62

• More time for personal goals: Retiring early gives you extra time to pursue passions, hobbies, or travel while you’re still relatively young.

• Less work-related stress: Exiting the workforce can alleviate stress and allow you to focus on your well-being.

• Family time: Retiring early lets you spend more quality time with loved ones, which might include helping with grandchildren or caregiving for aging parents.

• Opportunities for a second act: Early retirement can free up time to start a small business, volunteer, or explore a new career on your terms.

Drawbacks of Retiring at 62

• Reduced Social Security benefits: Claiming Social Security at 62 permanently reduces your monthly benefits.

• Health care costs: Without Medicare coverage, health insurance expenses can take a significant bite out of your savings.

• Longevity risk: Retiring early increases the risk of outliving your savings, particularly if you live well into your 80s or 90s.

• Missed earnings: Leaving the workforce early means missing out on additional income, savings, and potential employer contributions to retirement accounts.

Tips to Live Comfortably If You Decide to Retire at 62

If you’re looking to retire at 62, keep these retirement planning strategies in mind.

• Create a budget: Before you leave the workforce, it’s a good idea to track your expenses and come up with a realistic budget for your retirement years. Keep in mind that some expenses (like commuting to work) will go down, while others (like health care and discretionary spending) will likely go up once you retire.

• Consider downsizing: To make your retirement savings go further, you might look into moving to a smaller home or a more affordable area to reduce housing costs.

• Explore part-time work: Even if you choose to retire from your full-time job, you don’t have to fully exit the workforce. You might explore part-time work or consulting to supplement income while maintaining flexibility.

• Delay Social Security (if possible): Consider using savings to bridge the gap and delay claiming Social Security benefits for a higher payout. The amount you can receive will be higher the longer you wait to apply, up until age 70.

• Stay healthy: Prioritizing preventive health care and maintaining an active lifestyle can help minimize medical expenses.

• Maximize investments: It’s a good idea to keep your investments diversified and regularly review your portfolio with a financial advisor.

The Takeaway

Retiring at 62, the earliest age you can receive Social Security benefits, may be a viable option. But it’s important to look before you leap. To determine if you can realistically retire at 62, assess your current assets, estimate future income, consider your preferred lifestyle, and determine how you’ll pay for health care until Medicare starts. You’ll also want to weigh the benefits of retiring early (such as reduced stress and more personal time) against the potential drawbacks (like reduced income and less social interaction).

If your dream is to retire early, you’ll want to implement strategies that can help you achieve your goal. With the right preparation, retiring at 62 can be a rewarding new chapter of life.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Easily manage your retirement savings with a SoFi IRA.

FAQ

How much money do you need to retire at 62?

The amount you need to retire at 62 depends on your lifestyle, health care costs, and expected longevity. As a general rule of thumb, financial experts recommend having eight to 10 times your annual income saved before retiring. For example, if you earn $70,000 annually, you’ll need at least $560,000 to $700,000. To retire at 62, you generally want to aim for the higher end of that spectrum to make up for fewer working years and, presumably, more years to spend your savings.

How much social security will you get if you retire early at 62?

If you retire at 62, you can claim Social Security benefits, but your payments will be reduced by as much as 30%. The exact reduction will depend on your full retirement age (FRA), which is somewhere between age 66 and 67, depending on your birth year. You can see how much you’ll get when you apply at different times between age 62 and 70 by logging into your Social Security account (if you don’t have one, you can create one at SSA.gov).

Is retiring at 62 a good idea?

Retiring at 62 can be a good idea if you’re financially prepared and eager to enjoy more leisure time. It allows for early access to Social Security benefits and freedom from work-related stress. However, early retirement also comes with challenges, which include reduced Social Security benefits, a health insurance gap before Medicare eligibility at 65, and a longer retirement period to fund.
To determine if you should retire at 62, it’s important to consider your savings, expenses, and desired lifestyle. If you have sufficient resources to fund early retirement, retiring at 62 can be rewarding. Otherwise, waiting may offer greater financial stability.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Photo credit: iStock/kate_sept2004

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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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Jan

2025

Price-to-Rent Ratio in 52 Cities

By Becca Stanek | Budgeting & Goals, Home Ownership, mortgage | Comments Off

Better to buy or rent? The price-to-rent ratio is a reference point that can help gauge affordability in any city — especially for people on the move. More specifically, the price-to-rent ratio can be helpful when looking at a certain area and deciding whether to sink your life savings into a home, or pay a landlord and wait to buy.

Read on to see the home price-to-rent ratio in some of the biggest U.S. cities.

Table of Contents

What Is the Price-to-Rent Ratio
Price-to-Rent Ratio by City
How to Calculate Price-to-Rent Ratio
The Takeaway

Key Points

• The price-to-rent ratio is a measure of whether it’s more affordable to rent or buy a home in a particular city.

• It is calculated by dividing the median home price by the annual rent.

• A price-to-rent ratio below 18 suggests that buying is more affordable, while a ratio above 18 indicates renting may be more cost-effective.

• The price-to-rent ratio varies across cities, with some cities having ratios well above 18, in many cases above 25. Others come in at 18 and below.

• Factors such as housing market conditions and local economic and environmental factors may influence the price-to-rent ratio in different cities.

First, What Is the Price-to-Rent Ratio?

The price-to-rent ratio compares the median home price and the median annual rent in a given area. (You’ll remember that the median is the midpoint, where half the numbers are lower and half are higher.) To make sense of a city’s price-to-rent ratio, here’s a general idea of what the number suggests:

• A ratio of 1 to 15 typically indicates that it’s more favorable to buy than rent in a given community.

• A ratio of 16 to 20 indicates that it’s typically better to rent than buy.

• A ratio of 21 or more indicates that it’s much better to rent than buy.

As you can see, the ratios could be useful when considering whether to rent or buy. Investors also often look at the ratios before purchasing a rental property.

The numbers also may be used as indicators of impending housing bubbles. A substantial increase in the ratio could mean that renting is becoming a much more attractive option in that specific housing market.

The ratios may warp after wildfires or other natural disasters, which can cause housing shortages and migration of residents, as well as rent spikes. Research released in 2024 by the University of Georgia and the Brookings Institute demonstrated that a succession of environmental events can drive up local rents as much as 12% over a five-year subsequent period.

If you’re exploring different areas, it can be a good idea to estimate mortgage payments based on median home prices in the place where you hope to live. That way, you can determine if they’re a cost you can reasonably afford to add to your budget on a monthly basis.

Recommended: How to Apply for a Home Loan Online

Price-to-Rent Ratio by City

Here are 52 popular metropolitan areas and their price-to-rent ratios. As of the third quarter of 2024, the median home sale price in the U.S. was $420,400, the Federal Reserve Bank of St. Louis reported.

Median sale price listed comes from Redfin as of the fourth quarter of 2024. Median rents listed come from the Zumper National Rent Report from January 2025, based on a one-bedroom apartment. Remember, as home prices and rents shift—over time or suddenly—so do the ratios.

1. San Francisco

It’s no secret that San Francisco housing prices are way up there. The median sale price was $1,350,000, and the median rent for a one-bedroom apartment was $3,160 per month (or $37,920 a year). That gives the hilly city a price-to-rent ratio of nearly 36.

2. San Jose, CA

Golden State housing continues its pricey reputation in San Jose. The median sale price here was $1,455,000, and the city had a median one-bedroom rent of $32,640 annually ($2,720 a month), leading to a price-to-rent ratio of 45.

3. Seattle

The Emerald City had a median sale price of $835,000. Meanwhile, the median annual rent for a one-bedroom was $23,400, for a price-to-rent ratio of around 36.

4. Los Angeles

A median sale price of $1,010,000 and a median one-bedroom rent of $28,800 a year ($2,400 a month) shines a Hollywood light on renting, with a rent-to-price ratio of 35.

5. Long Beach, CA

With a median home price of $855,000 and one-bedroom rent averaging $1,850 a month, Long Beach earned a ratio of 39.

6. Honolulu

The ratio in the capital of Hawaii is a steamy 22, with a $570,000 median sale price and a median rent of $26,400 per year.

7. Oakland, CA

Oakland, across the bay from San Francisco, had a median sale price of $802,500 and median rent of $24,000 a year ($2,000 a month). This earned the location a price-to-rent ratio of 33.

8. Austin, Texas

A hotbed for artists, musicians, and techies, Austin had a price-to-rent ratio of nearly 31. This was thanks to a median sale price of $550,000 and median annual rent of $18,000.

9. San Diego

Hop back to Southern California beaches and “America’s Finest City,” where a median sale price of $931,000 and median rent of $28,800 a year led to a ratio of almost 32.

10. New York, N.Y.

The median sale price here was $807,720 and median rent was $51,600 a year ($4,300 a month), which equates to a price-to-rent ratio of roughly 16.

Of course, the city is composed of five boroughs: the Bronx, Brooklyn, Manhattan, Queens, and Staten Island, and it’s probable that most of the sales under $800,000 were not in Manhattan (where the median sale price was $1.2 million) or Brooklyn (where the median was $999,000). Just looking at Manhattan using the same annual average rent figure, the ratio looks more like 23.

11. Boston

With a median sale price of $845,000 and median rent of $34,080 a year, Beantown had a price-to-rent ratio of nearly 25.

12. Portland, OR

The midpoint of buying here of late was $490,000, compared with median rent of $17,400 per year, for a price-to-rent ratio of just over 28.

13. Tucson, AZ

In Tucson, the median sale price of $340,000 and median annual rent of $10,920 came out to a ratio of 31.

14. Denver

The Mile High City logged a renter-leaning ratio of 28, thanks to a median sale price of $586,000 and median annual rent cost of $20,760.

15. Colorado Springs, CO

With a median sale price of $465,000 and annual rent of $14,880, this city at the eastern foot of the Rocky Mountains had a recent price-to-rent ratio of 31.

16. Albuquerque, NM

In the Southwest, Albuquerque heated up to a ratio of almost 31, based on a median home sale price of $350,000 and annual rent of $11,400.

17. Washington, DC

The nation’s capital is another pushpin on the map with a high cost of living. The median sale price of $699,000 compares with median rent of $27,600 annually ($2,300 a month), translating to a ratio of 25.

18. Mesa, AZ

With a median sale price of $463,000 and median annual rent of $14,640, Mesa has a price-to-rent ratio of nearly 32.

19. Las Vegas

Sin City has reached a ratio of almost 31, based on a $444,000 median sale price vs. $14,400 in annual rent.

20. Phoenix

Phoenix’s price-to-rent ratio has revved up to 29, with a median home sale price of $450,000 and $15,360 in rent.

21. Raleigh, NC

North Carolina’s capital, the City of Oaks, logs a ratio of 30. This is based on a $460,000 median home sale price and median annual rent of $15,000.

22. Tulsa, OK

Tulsa had a price-to-rent ratio of 19, with median annual rent of $12,000 and home sale prices at a median of $228,000.

23. Dallas

This sprawling city had a recent median sale price of $410,000 and median annual rent of $17,760, leading to a price-to-rent ratio of 23.

24. Sacramento, CA

This Northern California city had a recent median sale price of $485,000 and median annual rent of $18,120, for a price-to-rent ratio of nearly 27.

25. Fresno, CA

Fresno makes the list with a price-to-rent ratio of 22, based on median home sale prices of $374,750 and median annual rent of $16,680.

26. Oklahoma City

The capital of Oklahoma had one of the lower price-to-rent ratios until recent home price spikes. It logs a ratio of nearly 24 lately, based on a median sale price of $260,000 and median annual rent of $10,920.

27. Arlington, TX

Back to the Lone Star State, this city between Fort Worth and Dallas has a price-to-rent ratio of 24. This is thanks to a median sales price of $320,000 and median annual rent of $13,200.

28. San Antonio

This Texas city southwest of Austin had a median sale price of $251,750 and median annual rent of $12,840, resulting in a price-to-rent ratio of close to 20.

29. El Paso, TX

El Paso traded a low price-to-rent ratio for a higher one when home prices rose. It’s at a 24, based on recent figures of a median sale price of $254,970 and median rent at $10,560 a year.

30. Omaha, NE

With a median sale price of $277,000 and median annual rent of $13,920, Omaha has a lower home price-to-rent ratio than in recent years at 23.

31. Nashville, TN

The first Tennessee city on this list is the Music City, with a rising price-to-rent ratio of 23. Nashville has a median sale price of $455,000 and a median annual rent of $19,680 ($1,640 per month).

32. Virginia Beach, VA

The ratio here has nearly reached 20, based on a median home sale price of $376,000 and median rent of $19,200 per year.

33. Tampa, FL

This major Sunshine State city has a price-to-rent ratio of 23, based on a median home sale price of $450,000 and median annual rent of $19,320.

34. Jacksonville, FL

This east coast Florida city had a recent ratio of 22, based on a median sale price of $312,000 and median rent of $15,040 per year.

35. Charlotte, NC

Charlotte’s price-to-rent ratio of 23 arises from a median home sale price of $400,000 and median annual rent of $17,160.

36. Fort Worth, Texas

Panther City’s price-to-rent ratio has crept up to 22, based on a median home sale price of $345,000 and median rent of $15,720 per year.

37. Houston

Houston, we have a number: It’s a price-rent-ratio of 22. That’s based on a median sale price of $339,370 and median annual rent of $15,600.

38. Louisville, KY

Kentucky’s largest city has a median home sale price of $255,000 and median annual rent of $12,240. That leaves Louisville with a price-to-rent ratio of almost 21.

39. Columbus, OH

The only Ohio city on this list has a price-to-rent ratio of 19, due to a median sale price of $275,700 and median annual rent of $14,520.

40. Atlanta

Heading South, Atlanta has a median sale price of $400,000 and median annual rent of $19,080, for a price-to-rent ratio of 21.

41. Miami

Those looking to put down roots in this vibrant city will find a price-to-rent ratio of 20, based on a median home sale price of $635,000 and median rent of $32,280 annually.

42. Minneapolis

The Mini-Apple is sweeter on renting, with a ratio of 21. This is based on a median sale price of $344,000 and median annual rent of $16,200.

43. New Orleans

Next up is another charming southern city. New Orleans has a price-to-rent ratio of nearly 18, given a median sale price of $335,000 and median rent of $19,200 per year.

44. Kansas City, MO

In this Show-Me State city, a median home value of $275,000 and median annual rent of $13,560 equate to a price-to-rent ratio of 20.

45. Chicago

The Windy City’s almost 15 price-to-rent ratio is based on a $350,000 median home sale price and $23,760 median annual rent.

46. Memphis, TN

Memphis logs a price-to-rent ratio of 13, with a median home sale price of $170,000 and median annual rent of $12,960.

47. Indianapolis

The ratio in this capital city drifted down to 17, thanks to a median home sale price of $243,450 and median annual rent of $14,160.

48. Philadelphia

This major East Coast city had a recent median sale price of $260,000 and median annual rent of $18,600, for a price-to-rent ratio of 14.

49. Baltimore

Charm City had a recent median home sale price of $224,000 and median annual rent of $15,840, resulting in a price-to-rent ratio of 14.

50. Newark, NJ

Newark, anyone? The median sale price here is $510,000, with median rent at $1,750 a month (or $21,000 a year), leading to a ratio of 24.

51. Milwaukee

Milwaukee is hanging on as a city more favorable to homebuyers than renters, thanks to a price-to-rent ratio of 18. This Midwest city had a recent median sale price of $220,000 and median annual rent of $12,360.

52. Detroit

Detroit has seen a consistent rise in home sale prices, though the latest median sale price was a relatively low $97,200, compared with median annual rent of $12,600. This resulted in a price-to-rent ratio that is approaching 8.

Recommended: Cost of Living Index by State

How to Calculate Price-to-Rent Ratio

If you don’t see your city on the list, rest assured that it’s possible to calculate price-to-rent ratio yourself. To do so, you’ll simply take the median home sale price in your area and divide it by median annual rent.

Here’s an example: Let’s say the median rent in a city is $3,000 a month, and the median sale price is $1 million. You’d divide $1 million by $36,000 ($3,000 per month multiplied by 12, the number of months in the year). The result is a price-to-rent ratio of nearly 28.

The Takeaway

The price-to-rent ratio lends insight into whether a city is more favorable to buyers or renters. Usually in a range of 1 to 21-plus, the ratio is useful to house hunters, renters, and investors who want to get the lay of the land.

No matter what your dream city’s price-to-rent ratio, looking at the listings for homes for rent and for sale will tell you a lot about the market. Who knows, you might even happen on just what you wanted at an accessible price.

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.

Photo credit: iStock/sl-f

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

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

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

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

SOHL-Q424-136

Jan

2025

What Is Mortgage Forbearance?

By Jody McMaster | Budgeting & Goals, Financial Independence, Home Ownership, mortgage | Comments Off

Some mortgage servicers allow borrowers with unforeseen financial troubles to trim or pause mortgage payments short term through a process called mortgage forbearance. So if a homeowner hits a snag and can’t pay, a sudden hardship — such as temporary unemployment or health issues — doesn’t necessarily lead to credit damage or foreclosure.

The goal of forbearance is to give the borrower a chance to become more financially stable. If this sounds like something you need — or if you simply want to read up on forbearance so you’ll be prepared if the unexpected happens — this guide is for you.

Identifying Your Loan Servicer

If you want to ask if mortgage forbearance is an option, you’ll first need to determine your mortgage servicer, which may not be the lender that originally provided the loan. The name of the servicer typically appears on the bill that arrives in the mail or on the website where mortgage payments are made. You could also try looking up your servicer on the MERS® website. Those who think they may have Fannie Mae or Freddie Mac-owned loans can check online as well.

💡 Quick Tip: Have you improved your credit score since you made your home purchase? Home loan refinancing with SoFi could get you a competitive interest rate with lower payments.

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

Questions? Call (888)-541-0398.

What Does Mortgage Forbearance Really Mean and How Does It Work?

During forbearance, interest is not paid but accrues and is later added to the loan balance. All suspended payments also will need to be paid back. If rough seas are rising around you, it doesn’t make much sense to wait to ask for a lifeline. Similarly, if you’re experiencing a hardship, before missing even one mortgage payment, it would be smart to contact your servicer to ask about options, go over the details, and formalize an agreement.

It’s important to ask whether skipped payments are expected to be paid in a lump sum when the forbearance ends, paid in installments, or added to the end of the loan term. Forbearance is often only granted after a financial review to gauge the likelihood that you can resume regular payments at the end of the forbearance period.

Do You Have to Pay Extra Interest for Forbearance?

Typically no. The interest rate and amount of interest follow the loan agreement.

The loan interest might change only if the lender extends the loan term or increases the loan interest rate.

Pros and Cons of Mortgage Forbearance

Pros	Cons
It’s a chance to avoid foreclosure	Often higher monthly payments after forbearance
Usually has no impact on credit	You normally have to prove hardship
Good for short-term hardships	Interest accrues
	Missed payments must be repaid

Federally Backed and Private Mortgage Options

Thanks to the CARES Act, both conventional and government-backed mortgages were eligible for forbearance due to Covid-related hardships. But these programs wound down in the fall of 2023. This means forbearance programs are specific to your lender, as they were prior to the pandemic. So whether you have a conventional home loan or government-insured home loan (an FHA, USDA, or VA loan), if you’re experiencing hardship it’s important to contact your loan servicer as soon as possible to discuss options and the exact terms.

Lenders typically ask for documentation to prove the hardship, including current monthly income and expenses. They also will want to know whether your hardship is expected to last six months or less (short term) or 12 months (long term). Depending on the lender, you may need to call to discuss options or might be able to start the forbearance request process online.

Coming Out of Forbearance

When a forbearance period ends, how will the amount that was paused be repaid? The answer depends on the lender and type of loan.

• It’s possible that the sum unpaid during the forbearance period will be due in full once a loan is out of forbearance.

• That is not true with a Fannie Mae, Freddie Mac, FHA, USDA, or VA loan. With these loans, the amount that was suspended will not be required to be paid back in a lump sum.

• Other lenders may extend the loan period, adding the forbearance dollars to the end of the loan.

• Yet other lenders may raise monthly payments once a loan is out of forbearance to make up the amount that wasn’t being paid during the mortgage forbearance period.

Deferred Mortgage Payments and Credit Scores

Even one missed mortgage payment will dent your credit scores, and late payments will stay on your credit history for seven years. Forbearance, on the other hand, usually does not show up on credit reports as negative activity.

Alternatives to Mortgage Forbearance

For those who can’t afford to pay their mortgage, mortgage relief options like these may be available.

Mortgage Loan Modification

If you cannot refinance your loan, loan modification is an option. Loan modification changes the original terms of your mortgage long term or permanently. The point is to make your payments more manageable, usually with a lower interest rate, a longer loan term, or both. If the length of the loan is extended, you’ll probably pay less per month than before but pay more interest over the life of the loan.

When reaching out to your loan servicer to discuss loan modification, it’s wise to ask about any fees for the modification; what the new repayment term, rate, and payments will be; and whether the modification is temporary or permanent. As with forbearance, evidence of financial hardship and a letter will be required.

Mortgage Refinancing

Refinancing a mortgage is altogether different from modifying a home loan. When refinancing a mortgage loan, you’re applying for a brand-new loan that would then be used to pay off outstanding home debt. You might qualify for a lower interest rate or get a longer loan term. Closing costs apply.

If you’re struggling financially, it might be difficult to qualify for refinancing, but it doesn’t hurt to get prequalified, which takes mere minutes. You may find that you’re eligible for a refinance during or after forbearance, according to Fannie Mae. (If you do this, make sure you seek mortgage prequalification vs. preapproval and that you understand the difference.)

Draw on Savings

In an emergency, you may want to consider tapping your emergency fund or retirement account. If you have a Roth IRA, remember that you can withdraw contributions at any time tax- and penalty-free. (If you withdraw the earnings on the account, however, you may be subject to taxes, a 10% penalty, or both.)

You may qualify for a hardship distribution from a 401(k) and permanently withdraw money if your plan allows it. Your employer will likely deduct 20% upfront for taxes. The 10% penalty tax is waived if the hardship withdrawal is for a handful of specific reasons.

Sell Your Home

If the weight of mortgage payments becomes too much, you could sell your house and pay off the mortgage.

If the proceeds would fall short, an option is a short sale. Your lender decides whether or not to OK the sale or whether to work out a plan, like allowing you to make interest-only payments for a set amount of time or extending the loan term.

Declare Bankruptcy

Another option to stave off foreclosure is filing for Chapter 13 bankruptcy. Chapter 13 allows a borrower up to five years to pay missed mortgage payments. So instead of having to make one giant payment, if that’s what is being asked for, a homeowner could break up the payments over 60 months.

If, for example, a homeowner accepted a 12-month forbearance on monthly payments of $2,400, a Chapter 13 plan could allow the $28,800 in arrears to be paid over 60 months. Other debts can also be restructured and possibly discharged under Chapter 13.

💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

The Takeaway

Mortgage forbearance allows paused or reduced payments for borrowers experiencing a sudden hardship that is expected to last six months or less. It’s one way to ward off foreclosure. It’s not the only way, however, so it’s worth consider forbearance as well as other options such as a loan modification or mortgage refinance.

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.

A new mortgage refinance could be a game changer for your finances.

FAQ

Does forbearance hurt credit?

No, if you abide by all the terms of the agreement. Skipped payments during a forbearance period are typically not reported to the credit bureaus.

Is mortgage forbearance a good idea?

If the financial hardship is short term, forbearance could provide a welcome respite until you get back on your feet. And it sure beats foreclosure.

Does forbearance affect getting a new mortgage?

It depends. For Fannie Mae- and Freddie Mac-backed loans, if you paid everything back in a lump sum after forbearance, you can proceed. If not, you will need to make three consecutive payments under your repayment plan or payment deferral option.

FHA loans have a waiting period that varies by loan type if you’ve missed any payment in forbearance, even if you paid everything back in a lump sum.

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

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.

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.
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.

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

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Jan

2025

51 ARM Explained Everything You Need to Know_780x440

What Is a 5/1 Adjustable-Rate Mortgage?

By Brian O'Connell | Financial Independence, Home Ownership, mortgage | Comments Off

A 5/1 adjustable-rate mortgage (ARM) is a mortgage whose interest rate is fixed for the first five years and then adjusts once a year. Adjustable-rate mortgages often have lower initial interest rates than other loans and they can be a good choice for a short-term homeowner.

While most borrowers will opt for a conventional 30-year fixed-rate mortgage, some buyers are drawn to the low teaser rate of an ARM.

Here’s a closer look at adjustable-rate mortgages and the 5/1 ARM in particular.

Adjustable-Rate Mortgages, Defined

An adjustable-rate mortgage typically has a lower initial interest rate — often for three to 10 years — than a comparable fixed-rate home loan.

Then the rate “resets” up (or down) based on current market rates, with caps dictating how much the rate can change in any adjustment.

With most ARMs, the rate adjusts once a year after the initial fixed-rate period.

What Is a 5/1 ARM?

Adjustable-rate mortgages come in the form of a 3/1, 7/1, 10/1 (the rate adjusts once a year after the initial fixed-rate period), 10/6 (the rate adjusts every six months after 10 years), and more, but the most common is the 5/1 ARM.

With a 5/1 ARM, the interest rate is fixed for the first five years of the loan, and then the rate will adjust once a year — hence the “1.” Adjustments are based on current market rates for the remainder of the loan.

Because borrowers may see their rate rise after the initial fixed-rate period, they need to be sure they can afford the larger payments if they don’t plan to sell their house, pay off the loan, or refinance the loan.

How 5/1 ARM Rates Work

An ARM interest rate is made up of the index and the margin. The index is a measure of interest rates in general. The margin is an extra amount the lender adds, and is constant over the life of the loan.

Caps on how high (or low) your rate can go will affect your payments.

Let’s say you’re shopping for a 5/1 ARM and you see one with 3/2/5 caps. Here’s how the 3/2/5 breaks down:

• Initial cap. Limits the amount the interest rate can adjust up or down the first time the payment adjusts. In this case, after five years, the rate can adjust by up to three percentage points. If your ARM carries a 4.5% initial rate and market rates have risen, it could go up to 7.5%.

• Cap on subsequent adjustments. In the example, the rate can’t go up or down more than two percentage points with each adjustment after the first one.

• Lifetime cap. The rate can never go up more than five percentage points in the lifetime of the loan.

When Does a 5/1 ARM Adjust?

The rate will adjust annually after five years, assuming you don’t sell or refinance your home before you hit the five-year mark.

Pros and Cons of 5/1 ARMs

Borrowers should be aware of all the upsides and downsides if they feel a call to ARMs.

Pros of a 5/1 ARM

A lower interest rate up front. The initial five-year rate is usually lower than that of a fixed-rate mortgage. This can be an advantage for new homeowners who would like to have a little extra cash on hand to furnish the home and pay for landscaping and maintenance. And first-time homebuyers may gravitate toward an ARM because lower rates increase their buying power.

Could be a good fit for short-term homeowners. Some buyers may only need a home for five years or less: those who plan to downsize or upsize, business professionals who think they might be transferred, and the like. These borrowers may get the best of both worlds with a 5/1 ARM: a low interest rate and no risk of higher rates later on, as they’ll likely sell the home and move before the rate adjustment period kicks in.

A 5/1 ARM borrower may be able to save significantly more cash over the first five years of the loan than they would with a 30-year fixed rate loan.

Modern ARMs are less dicey. The risky ARMs available before the financial crisis that let borrowers pay just the interest on the loan or choose their own payment amount are no longer widely available.

Potential for long-term benefit. If interest rates dip or remain steady, an ARM could be less expensive over a long period than a fixed-rate mortgage.

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

Questions? Call (888)-541-0398.

Cons of a 5/1 ARM

Risk of higher long-term interest rates. The good fortune with a 5/1 ARM runs out after five years, with the possibility of higher interest rates. We’ve all seen how rising inflation affects mortgage rates. While no one can see what the future holds, it’s possible that the loan could reset to a rate that leads to mortgage payments the borrower finds uncomfortable or downright unaffordable.

Higher overall home loan costs. If interest rates rise with a 5/1 ARM, homeowners will pay more over the entire loan than they would have with a fixed-rate mortgage.

Refinancing fees. You can refinance an ARM to a fixed-rate loan, but expect to pay closing costs of 2% to 6% of the loan. A no-closing-cost refinance offers no real escape: The borrower either adds the closing costs to the principal or accepts an increased interest rate.

Possible negative amortization. Payment caps limit the amount of payment increases, so payments may not cover all the interest due on your loan. The unpaid interest is added to your debt, and interest may be charged on that amount. You might owe the lender more later in the loan term than you did at the start. Be sure you know whether the ARM you are considering can have negative amortization, the Federal Reserve advises.

Possible prepayment penalty. Prepayment penalties are rare now, but check for any penalty if you were to refinance or pay off the ARM within the first three to five years.

Recommended: Mortgage Prequalification vs. Preapproval

Comparing Adjustable-Rate Mortgages

When you take out a mortgage, you choose a mortgage term. Most fixed-rate mortgage loans, and ARMs, are 30-year loans.

5/1 ARM vs. 10/1 ARM

A five-year ARM has a five-year low fixed rate followed by 25 years with an adjustable rate. A 10-year ARM offers 10 years at a fixed rate, then 20 years of adjustments.

In general, the shorter the fixed-rate period, the lower the introductory rate.

5/1 vs. 7/1 ARM

Same song, different verse. The 7/1 ARM has a seven-year fixed rate instead of five for the 5/1 ARM. The initial interest rate on the 7/1 probably will be a little higher than the 5/1.

Is a 5/1 ARM Right for You?

Is a 5/1 ARM loan a good idea? It depends on your finances and goals.

In general, adjustable-rate mortgages make sense when there’s a sizable interest rate gap between ARMs and fixed-rate mortgages. If you can get a great deal on a fixed-rate mortgage, an ARM may not be as attractive.

If you plan on being in the home for a long time, then one fixed, reliable interest rate for the life of the loan may be the smarter move.

An ARM presents a trade-off: You get a lower initial rate in exchange for assuming risk over the long run.

Your best bet on ARMs?

• Talk to a trusted financial advisor or housing counselor.

• Get information in writing about each ARM program of interest before you have paid a nonrefundable fee.

• Ask your mortgage broker or lender about anything you don’t understand, such as index rates, margins, and caps. Ask about any prepayment penalty.

• If you apply for a loan, you will get more information, including the mortgage APR and a payment schedule. The annual percentage rate takes into account interest, any fees paid to the lender, mortgage points, and any mortgage insurance premium. You can compare APRs and terms for similar ARMs.

• It’s a good idea to shop around and negotiate for the best deal.

The Takeaway

A 5/1 ARM offers borrowers a low initial rate but risk over the long run. Tempted by a sweet introductory rate? It’s a good idea to know how long you plan to stay in the home and to be clear about how rate adjustments might affect your monthly payments.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is it a good idea to have a 5/1 ARM?

Whether a 5/1 ARM is a good idea for you will depend on how long you plan to stay in the house. If you think you will move or refinance before the initial low interest rate ends after five years, then a 5/1 ARM could be a good fit for you.

Can you pay off a 5/1 ARM early?

Maybe. Some mortgages have prepayment penalties, meaning you would pay a fee if you refinanced or paid off the mortgage during the first five years. Prepayment penalties are not as common now as they were in the past, but they do still exist so read the fine print in your loan documents.

How long does a 5/1 ARM last?

Most mortgages, even adjustable-rate mortgages, are 30-year loans. A 5/1 ARM would have one fixed payment for the first five years, then the monthly payment would adjust annually for the remaining 25 years of the loan.

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOHL-Q324-032