SoFi

If you get paperless mortgage statements or have autopay set up on your home loan, or even if you get statements in the mail, it can be easy to miss important information.

By paying close attention to exactly what’s included in your mortgage statements, you’ll avoid unpleasant surprises.

What Is a Mortgage Statement?

You probably became well versed on mortgage basics during the homebuying process. And you likely did the hard work of using a home mortgage calculator, qualifying for a mortgage, and getting that loan.

But what is a mortgage statement? It’s a document that comes from your home mortgage loan servicer. It’s typically is sent every month and includes how much you owe, the due date, the interest rate, and any fees and charges.

In the past, the information that was included and the format of a mortgage statement varied widely among lenders. Thanks to the Dodd-Frank Act, enacted in 2010, mortgage servicers must now include specific loan information and follow a uniform model for mortgage statements.

Statements also include information on any late payments, how much you’ll need to pay to bring your account back to where it should be, and any late fees you’re dinged with. You can also find customer service information on your mortgage statement.

Mortgage Statement Example

A mortgage statement has elements similar to those on a credit card or personal loan statement. As a picture is worth a thousand words, here’s a mortgage statement example, courtesy of the Consumer Financial Protection Bureau:

How to Read a Mortgage Statement

Deciphering what’s on a mortgage statement can help you understand how much you owe in a given month, how much you’re paying toward interest and principal, and how much you’ve paid for the year to date.

Let’s dig into the different parts of a home loan statement.

Amount Due

This can usually be found at the top of your mortgage statement and is how much you owe for that month. Besides the amount, you’ll find the due date and, usually, the late fee you’ll get hit with should you be too slow with your payment.

Explanation of Amount Due

This section breaks down why you owe what you owe. You’ll find the principal amount, the interest amount, escrow for taxes and insurance, and any fees charged. All of these will be tallied for a total of what you’ll owe that month.

Past Payment Breakdown

Below the section that explains the amount due, you’ll find a breakdown of your past payment: the date the payment was made, the amount, and a short description that may include late fees or penalties and transaction history.

Contact Information

This is typically located on the top left corner of the mortgage statement and contains your mortgage loan servicer’s address, email, and phone number, should you need to speak to a customer service representative. Note that like student loan servicers, a mortgage loan servicer might be different from your lender.

Your mortgage loan servicer processes payments, answers questions, and keeps tabs on your loan payments, and how much has been paid on principal and interest.

You probably know what escrow is. If you have an escrow account, your mortgage loan servicer is also tasked with managing the account.

Account Information

Your account information includes your account number, name, and address.

Delinquency Information

If you’re late on a mortgage payment, within 45 days you’ll receive a notice of delinquency, which might be included on your mortgage statement or be a separate document. You’ll find the date you fell delinquent, your account history, and the balance due to bring you back into good standing.

There should additionally be other information, such as costs and risks should you remain delinquent. There also might be options to avoid foreclosure. One possible tactic is mortgage forbearance, when a lender agrees to stop or reduce payment requests for a short time.

Escrow Account Activity

Many mortgages include an escrow account, from which the mortgage servicer pays the homeowner’s property taxes and/or homeowners insurance. If you have an escrow account, you should see how much of your current payment will go to it listed in the explanation of the amount due. You may also see how much you have paid into it during the past year in the past payment breakdown.

Your lender is also responsible for conducting an escrow analysis each year to assess what your costs will be for the next year. It must let you know the results, what your payments will be in the coming year, and whether your account currently has a surplus or a deficit.

Recommended: Refinance Your Mortgage and Save

Understanding the Details

Your mortgage statement includes many details, all to help you understand what you’re paying in interest, the fees involved, and what your principal and interest amounts are. It’s important to look at everything to make sure you understand what information is included. If you have trouble deciphering the information, call your mortgage servicer listed on the document.

If you have an adjustable-rate mortgage, the mortgage statement also might include information about when that interest rate might change.

Important Features to Know

Here are a few key elements related to your mortgage statement to be on the lookout for.

Delinquency Notice

As mentioned, you’ll receive a delinquency notice within 45 days should you fall behind on payments. Besides how much you owe to get back in good standing, the delinquency notice might also include your account history, recent transactions, and options to avoid foreclosure.

Escrow Balance

If you have an escrow account for your mortgage, the balance is how much money you currently have in your escrow account. This may be included in your annual escrow statement. (Your mortgage statement should show what you have paid for the year to date.) If you have difficulty finding your escrow balance, contact your mortgage servicer.

Interest Rate and Loan Term

Your loan’s current interest rate will appear on your mortgage statement. If you have an adjustable rate, you’ll also see the date that the rate will next adjust. Your loan term or the maturity date of the loan may be included on the statement as well. If they don’t and you want the information, contact your mortgage servicer.

Recommended: Mortgage Calculator with Taxes and Insurance

Using Your Mortgage Statement

Now that we’ve covered the elements of a mortgage statement, let’s go over how to use your mortgage statement and make the most of it.

Making Sure Everything Is in Order

Comb through your mortgage statement and check to see that everything is accurate and up to date. Inaccurate information can lead to overpaying, potentially falling behind on payments, and/or other headaches.

Keeping Annual Mortgage Statements

While you might not need to hold on to your monthly mortgage statements for too long, make sure you have access to your annual mortgage statements for a longer period of time. If you run into an IRS audit, you may be required to provide documentation for the past three years.

Making Your Payment

There are a handful of ways you can make payments on your mortgage.

Online. This is probably the most common and simplest way to submit a mortgage payment. It’s usually free, and once you set up an account online and link a bank account to draw payments from, you’re set. You can also set up autopay, which will ensure that you make on-time payments. In some cases, you might be able to get a discount for setting up auto-debit.

Coupon book. A mortgage servicer might send you a coupon book to use to make payments instead of sending mortgage statements. A coupon book has payment slips to include with payments. The slips offer limited information.

Check in the mail. As with any other bill, you can write a check and drop it in the mail. However, sending a payment by snail mail might mean that your payment doesn’t arrive on time. If you are going this route, send payments early and consider sending them via certified mail.

Spotting Errors or Irregularities

If you discover an error on your mortgage statement, it’s important to get it corrected as soon as possible, even if it’s just a misspelling of a street name. To do this, you can start by telephoning your mortgage servicer to report the problem. Some problems the company may be able to fix over the phone.

If the mortgage servicer can’t resolve the issue over the phone, it may ask you to send a letter. This will allow you to document what the problem is and offer any evidence you have to support your case. The provider is generally obligated to make the change or conduct an investigation. The provider also has to let you know what their ultimate decision is.

How Long to Keep Mortgage Statements

Just as you’d want to hold on to billing statements for other expenses, you’ll want to keep your mortgage statements in case you find inaccuracies down the line. Plus, the statements come in handy for tax purposes and for your personal accounting.

So how long should you keep your mortgage statements? Provided you can find your statements online by logging in to your account, you don’t need to hold on to paper statements for long. In fact, you can probably get rid of paper copies if you have access to them online. It might be a good idea to download the documents to your computer.

Other documents, such as your deed, deed of trust, promissory note, purchase contract, seller disclosures, and home inspection report, you should keep as long as you own the home.

Consider holding on to annual mortgage statements for several years in a safe place. It’s a good idea to store them on your computer and have hard copies on hand.

The Takeaway

It’s easy to gloss over mortgage statements, but not knowing what’s in them every month and not noticing any changes can result in costly mistakes. It’s also eye-opening to see how much of a payment goes to principal and how much to interest. Having that information at hand can also be helpful if you are considering a mortgage refinance.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is a mortgage interest statement?

A mortgage interest statement is a tax form (Form 1098) used to report potentially tax-deductible expenses, including mortgage interest payments. It’s not the same as a mortgage statement, which is a document you receive from your mortgage servicer, usually every month, that shows how much your next payment will be, the due date, and any fees and charges, as well as other information.

How do I get my mortgage statement?

You should receive a statement monthly, either in the mail or via an alert from your mortgage servicer saying the bill is due. If you don’t receive a statement and can’t access it online, contact your lender promptly.

What is a mortgage servicer?

A mortgage servicer is a company that manages home loans. It sends your statement and collects and processes your payment every month, as well as provides customer support. A mortgage servicer may be different from your lender, which is the institution that approved your application and loaned you the funds to buy your property.

What should I check on my mortgage statement each month?

It’s a good idea to review your mortgage statement to ensure that there are no errors or unpleasant surprises. In particular, you’ll want to make sure that your last payment was received on time and check for any potential new or changed fees or rate changes.

Are mortgage statements available online?

In many cases, you can access your mortgage statements on the website of your mortgage lender or servicer.

Can I use my mortgage statement for tax purposes?

If you want to claim a mortgage interest tax deduction on your federal taxes, you can’t use your monthly mortgage statement. Instead, you’ll need to use a 1098, which is the form your mortgage lender or servicer uses to declare how much mortgage interest you have paid in the last year.

---

Photo credit: iStock/Tijana Simic

---

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi 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.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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

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.

SOHL-Q325-029

Read more

If you’re looking for a tool you can use to borrow money when you need it, you may be wondering which is the best choice: a personal line of credit, a personal loan, or a home equity line of credit (HELOC).

In this guide we’ll compare these three types of loans. The two credit lines both function similarly to a credit card but typically have a lower interest rate and a higher credit limit, while a personal loan can provide you with a lump sum of cash that you pay back over a set term. We’ll also cover some of the pros and cons of using a HELOC vs. a personal line of credit vs. a personal loan.

What Is a Personal Loan?

A personal loan is a highly flexible way to borrow a lump sum of money for virtually any reason – from paying medical bills to financing a wedding. You may be able to borrow anywhere from $1,000 to potentially as much as $100,000, typically at a fixed rate, and pay it back in regular monthly installments over a preset period of two to seven or even 10 years. These loans are usually unsecured debt, which means you don’t have to use collateral to qualify. The rate and other terms are determined by the borrower’s credit score, income, debt level, and other factors.

You’ll owe interest from day one on the full amount that you borrow. But if you’re using the loan to make a large purchase, consolidate debt, or pay off one big bill, it may make sense to borrow a specific amount and budget around the predictable monthly payments.

Personal loan rates and fees can vary significantly by lender and borrower. You can use a loan comparison site to check multiple lenders’ rates and terms, or you can go to individual websites to find a match for your goals.

What Is a Personal Line of Credit?

A personal line of credit, sometimes shortened to PLOC, is a revolving credit account that allows you to borrow money as you need it, up to a preset limit.

Instead of borrowing a lump sum and making fixed monthly payments on that amount, as you would with a traditional installment loan, a personal line of credit allows you to draw funds as needed during a predetermined draw period. You’re required to make payments based only on your outstanding balance during the draw period.

In that way, a PLOC works like a credit card. Generally, you can pay as much as you want each month toward your balance, as long as you make at least the minimum payment due. The money you repay is added back to your credit limit, so it’s available for you to use again.

You can use a personal line of credit for just about anything you like as long you stay within your limit, which could range up to $50,000, and possibly more.

Like a personal loan, a PLOC is typically unsecured, so you don’t need collateral. The lender will base decisions about the amount you can borrow and the interest rate you’ll pay on your personal creditworthiness. The interest rates are generally variable.

Can a Personal Loan or a Personal Line of Credit Be Used to Buy a House?

If you could qualify for a high enough credit limit — or if the property you want to buy is being sold at an extremely low price — you might be able to purchase a house with a personal line of credit or a personal loan. But it may not be the best tool available.

A traditional mortgage, secured by the home that’s being purchased, may have lower overall costs than a personal loan or personal line of credit. There are several different types of mortgage loans to choose from.

If you’re looking at a personal loan vs. a personal line of credit or mortgage, it’s also important to realize that a personal loan is usually for a much shorter term than a mortgage, which is typically 30 years, or most PLOCs. And since personal loans, like PLOCs, are unsecured, they typically carry much higher interest rates than traditional mortgages.

A variable rate, which is typical of personal lines of credit, might not be the best option for a large purchase that could take a long time to pay off. Your payments could go lower, but they also could go higher. If interest rates increase, your loan could become unaffordable. With a traditional mortgage, you would have the option of a fixed rate or a variable one.

Another consideration: If you use all or most of your PLOC to make a major purchase like a home, it could have a negative impact on your credit score and future borrowing ability. The amount of revolving credit you’re using vs. how much you have available — your credit utilization ratio — is an important factor that affects your credit score. The rule of thumb is typically to aim for less than 30%.

What Is a HELOC?

A HELOC is a revolving line of credit that is secured by the borrower’s home. It, too, usually has a variable interest rate.

Lenders typically will allow you to use a HELOC to borrow a large percentage of your home’s current value minus the amount you owe. That’s your home equity.

A lender also may review your credit score, credit history, employment history, and debt-to-income ratio (monthly debts / gross monthly income = DTI) when determining your borrowing limit and interest rate.

Recommended: Learn More About How HELOCs Work

Personal Line of Credit vs HELOC Compared

If you’re comparing a personal line of credit with a HELOC, you’ll find many similarities. But there are important differences to keep in mind as well.

Personal Loan vs HELOC Compared

If you’re looking at a HELOC vs. a personal loan, you’ll find many ways in which the two are different, but also some ways they’re alike.

Similarities

Here are some shared aspects of a personal loan vs. a home equity line of credit.

•   The money that you borrow can be used for virtually any purpose you choose.

•   Easy access to your money. A personal loan gives you the money in a lump sum and a HELOC allows you to draw funds at will (up to a set limit) during the draw period.

•   You must pay interest on your loan, and rates are typically lower than they would be for credit cards, for instance.

•   There are defined periods during which your loan and interest must be repaid in regular installments.

•   Lenders may charge a variety of fees, including late or prepayment fees on either. Be sure you know about potential fees before closing.

Differences

There are also many points of difference to take into account when you’re considering a HELOC vs. a personal loan.

•   HELOCs are secured by your house, which serves as collateral. Personal pans are typically unsecured. This means that your interest rate is likely to be higher with a personal loan.

•   HELOCs are revolving lines of credit and work like credit cards – you use what you need when you need it. A personal loan generally comes as a lump sum.

•   Personal loans typically have fixed interest rates, meaning that your monthly payments will always be the same for the length of the loan. HELOCs typically have adjustable rates, meaning that your payments can change with the market as well as with how much you withdraw.

•   Personal loans generally have terms of 10 years at most. HELOCs often have a 10-year draw period followed by a 20-year repayment period, for a total of 30 years.

•   Lender requirements vary, but you’ll generally need a FICO® score of at least 610 for a personal loan, while for a HELOC, it may be 680. Higher scores are likely to result in better interest rates and possibly higher loan limits.

•   Since your home is collateral for a HELOC, you may need to pay for an appraisal to establish how much your home is worth. Depending on your lender, you may also need to pay other closing costs.

Personal Loan vs. Home Equity Line of Credit
	Personal Loan	HELOC
Flexible borrowing and repayment	✓	✓
Convenient access to funds	✓	✓
Annual or monthly maintenance fee	Not typically	Varies by lender
Typically a variable interest rate		✓
Secured with collateral		✓
Approval based on creditworthiness	✓	✓
Favorable interest rates	✓*	✓*
*Rates for secured loans are usually lower than for unsecured loans. Rates for personal loans are generally lower than credit card rates.

Personal Line of Credit vs HELOC Compared

If you’re comparing a personal line of credit with a HELOC, you’ll find many similarities. But there are important differences to keep in mind as well.

Similarities

Here are some ways in which a personal line of credit and a HELOC are alike:

•   Both are revolving credit accounts. Money can be borrowed, repaid, and borrowed again, up to the credit limit.

•   Both have a draw period and a repayment period. The draw period is typically 10 years, with monthly minimum payments required. The repayment period may be up to 20 years after the draw period ends.

•   Access to funds is convenient. Withdrawals can be made by check or debit card, depending on how the lender sets up the loan.

•   Lenders may charge monthly fees, transaction fees, or late or prepayment fees on either. It’s important to understand potential fees before closing.

•   Both typically have variable interest rates, which can affect the overall cost of the line of credit over time. (Each occasionally comes with a fixed rate. The starting rate of a fixed-rate HELOC is usually higher. The draw period of a fixed-rate personal line of credit could be relatively short.)

•   For both, you’ll usually need a FICO® score of 680. Your credit score also affects the interest rate you’re offered and credit limit.

Differences

The biggest difference when you’re looking at a personal line of credit vs. a home equity line of credit is that a HELOC is secured. That can affect the borrower in a few ways, including:

•   In exchange for the risk that HELOC borrowers take (they could lose their home if they were to default on payments), they generally qualify for lower interest rates. HELOC borrowers also may qualify for a higher credit limit.

•   With a HELOC, the lender may require a home appraisal, which might slow down the approval process and be an added expense. HELOCs also typically come with other closing costs, but some lenders will reduce or waive them if you keep the loan open for a certain period — usually three years.

•   A borrower assumes the risk of losing their home if they default on a HELOC. A personal line of credit does not come with a risk of that significance.

Personal Line of Credit vs. Home Equity Line of Credit
	Personal LOC	HELOC
Flexible borrowing and repayment	✓	✓
Convenient access to funds	✓	✓
Annual or monthly maintenance fee	Varies by lender	Varies by lender
Typically a variable interest rate	✓	✓
Secured with collateral		✓
Approval based on creditworthiness	✓	✓
Favorable interest rates	✓*	✓*
*Rates for secured loans are usually lower than for unsecured loans. Rates for personal loans are generally lower than credit card rates.

Recommended: Credit Cards vs. Personal Loans

Pros and Cons of HELOCs

A HELOC and personal line of credit share many of the same pros and cons. An advantage of borrowing with a HELOC, however, is that because it’s secured, the interest rate may be more favorable than that of a personal line of credit or a personal loan.

A HELOC may offer a tax benefit if you itemize, spend the funds on buying, building or significantly improving your home, and can take the mortgage interest deduction. But there are potential downsides, too.

Pros and Cons of Personal Loans

A personal loan can be a good choice when you need a lump sum of money – say, for a major purchase or bathroom remodel – especially if it’s not an extremely large amount. You’re likely to get a better interest rate than you would on a credit card, and a shorter repayment term than you’d have for a PLOC or HELOC. But there’s a lot to consider.

Pros and Cons of Personal Lines of Credit

Because you draw just the amount of money you need at any one time, a personal line of credit can be a good way to pay for home renovations, ongoing medical or dental treatments, or other expenses that might be spread out over time.

You pay interest only on the funds you’ve drawn, not the entire line of credit that’s available, which can keep monthly costs down. As you make payments, the line of credit is replenished, so you can borrow repeatedly during the draw period. And you don’t have to come up with collateral.

But there are other factors to be wary of. Here’s a summary.

Alternatives to Lines of Credit

As you consider the pros and cons of a HELOC vs. a personal LOC or personal loan, you may also wish to evaluate some alternative borrowing strategies, including:

Personal Loan

As you’re thinking about a personal loan vs. a personal line of credit, the big difference is that, with a personal loan, a borrower receives a lump sum and makes fixed monthly payments, with interest, until the loan is repaid.

Most personal loans are unsecured, and most come with a fixed interest rate. The rate and other terms are determined by the borrower’s credit score, income, debt level, and other factors.

You’ll owe interest from day one on the full amount that you borrow. But if you’re using the loan to make a large purchase, consolidate debt, or pay off one big bill, it may make sense to borrow a specific amount and budget around the predictable monthly payments.

Personal loan rates and fees can vary significantly by lender and borrower. You can use a loan comparison site to check multiple lenders’ rates and terms, or you can go to individual websites to find a match for your goals.

Auto Loan

If you’re thinking about buying a car with a personal loan, you may want to consider an auto loan, an installment loan that’s secured by the car being purchased. Qualification may be easier than for an unsecured personal loan or personal line of credit.

Most auto loans have a fixed interest rate that’s based on the applicant’s creditworthiness, the loan amount, and the type of vehicle that’s being purchased.

Down the road, if you think you can get a better interest rate, you can look into car refinancing.

Beware no credit check loans. Car title loans have very short repayment periods and sky-high interest rates.

Mortgage

A mortgage is an installment loan that is secured by the real estate you’re purchasing or refinancing. You’ll likely need a down payment, and borrowers typically pay closing costs of 2% to 5% of the loan amount.

A mortgage may have a fixed or adjustable interest rate. An adjustable-rate mortgage typically starts with a lower interest rate than its fixed-rate counterpart. The most common repayment period, or mortgage term, is 30 years.

Your ability to qualify for the mortgage you want may depend on your creditworthiness, the down payment, and the value of the home.

Credit Cards

A credit card is a revolving line of credit that may be used for day-to-day purchases like groceries, gas, or online shopping. You likely have more than one already. Gen X and baby boomers have an average of about four credit cards per person, Experian® has found, and even Gen Z, the youngest generation, averages two cards per person.

Convenience can be one of the best and worst things about using credit cards. You can use them almost anywhere to pay for almost anything. But it can be easy to accrue debt you can’t repay.

Because most credit cards are unsecured, interest rates can be higher than for other types of borrowing. Making late payments or using a high percentage of your credit limit can hurt your credit score. And making just the minimum payment can cost you in interest and credit score.

If you manage your cards wisely, however, credit card rewards can add up. And you may be able to qualify for a low- or no-interest introductory offer.

Credit card issuers typically base a consumer’s interest rate and credit limit on their credit score, income, and other financial factors.

Student Loans

Federal student loans typically offer lower interest rates and more borrower protections than private student loans or other lending options.

But if your federal financial aid package doesn’t cover all of your education costs, it could be worth comparing what private lenders offer.

Home Equity Loans

If you’re a homeowner with equity in your house and you’re not comfortable with the adjustable payments of a HELOC, you might want to consider a home equity loan. These lump sum loans typically have fixed interest rates, meaning that you’ll know in advance what your payments will be every month and can plan accordingly. And since they’re secured with your home, interest rates are typically lower than they’d be for unsecured loans. Just remember that, as with a HELOC, your home is at risk if you can’t make your payments.

The Takeaway

A HELOC, a personal loan, or a personal line of credit can be useful for a borrower in need of funds. Each kind of loan has different advantages and drawbacks, so it’s important to consider each carefully in light of your financial situation so you can assess what would work best for your needs.

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

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

What is better, a home equity line of credit or a personal line of credit?

If you qualify for both, a HELOC will almost always come with a lower interest rate. However, it does put your home at risk if you can’t make your payments.

Can I use a HELOC for personal use?

Yes. HELOC withdrawals can be used for almost anything, but the line of credit is best suited for ongoing expenses like home renovations, medical bills, or college expenses. Some people secure a HELOC as a safety net during uncertain times.

How many years do you have to pay off a HELOC?

Most HELOCs have a “draw period” of 10 years, followed by a repayment period, which may be up to 20 years.

What happens if you don’t use your home equity line of credit?

Having a HELOC you don’t use could help your credit score by improving your credit utilization ratio.

How high of a credit score is needed for a line of credit?

Personal lines of credit are usually reserved for borrowers with a credit score of 680 or higher. A credit score of at least 680 is typically needed for HELOC approval, but requirements can vary among lenders. Some may be more lenient if an applicant has a good debt-to-income ratio or accepts a lower loan limit.

Does a HELOC increase your mortgage payments?

The HELOC is a separate loan from your mortgage. The two payments are not made together.

---

Photo credit: iStock/KTStock

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOHL-Q325-023

Read more

Advanced placement, or AP, classes that are offered in high school can help a student prepare for college, be a more competitive applicant, and save money on tuition. Those are among the reasons that many students consider taking AP classes in high school.

Here’s a closer look at what AP classes are, what the benefits of taking them are, and how they can affect a student’s college experience.

What Are AP Classes?

AP stands for “advanced placement,” and AP classes prepare students for college by giving them college-level work during high school. Their dedication is awarded accordingly, as they can earn college credit and placement by taking corresponding AP exams.

One of the primary motivators for enrolling in AP classes is they prepare students to take and pass AP exams. Students who earn qualifying AP scores on these exams can receive credits from most colleges and universities in the United States.

Depending on their high school’s offerings, students can enroll in one or more of the 40-plus AP classes that cover a variety of subject matters such as arts, languages, sciences, mathematics, and literature.

In order to enroll in an AP class, there may be prerequisite classes that you must take first. It’s recommended that even if students meet the required qualifications in order to take an AP class, that they consider carefully if they are prepared to take a college level course.

The three main benefits of taking AP classes in high school relate to saving money, becoming a more competitive college applicant, and preparing for success in college.

Benefit #1: Saving Money on College Tuition

AP classes will take up a lot of your time in high school but can also save time and money down the line in college. When you receive a high score on an AP exam, the college you attend in the future may give you credit that cancels out the need to take a similar college class.

Some schools may offer advanced placement instead, which allows you to effectively test out of introductory level courses in the specific subject, but may not be counted toward credit.

Policies vary by school, but the more AP exams you pass, the more credits you may be able to earn. These credits could allow you to skip classes which could save you a semester of attending an introductory English literature or Spanish class. Add up enough of these credits, and you could potentially shave off an entire semester or more of your time spent at college.

Note that the policy on AP scores will vary from school to school, and not all schools offer credit for AP classes. Some schools may require a four or five on the AP exam in order to qualify for credit, while others may accept a three. It’s wise to look for details on this kind of policy when conducting your college search.

Generally, you can use AP credits to your financial advantage in two ways. You can either graduate early, which will save money on tuition, fees, and living expenses. Or, you can take lighter course loads across a four year period and can make time to take a part-time job or could add a second major or minor.

At the very least, you may be able to avoid paying for textbooks or lab fees in classes in which you have already mastered the subject matter.

Benefit #2: Making Your College Application More Competitive

When you apply for college, you typically work hard to put your best foot forward and to prove that you will thrive once you land on campus in the fall. College admissions departments carefully comb through transcripts, test scores, and personal essays to see if students will not only be a good fit at their school but to ensure the student has every chance of succeeding once they enroll.

This is one of the reasons AP classes can be beneficial to high school students. When a student thrives in an AP class, they are essentially thriving in a college class. Before an AP student arrives at college, they will clearly understand what will likely be expected of them, how rigorous the course work can be, and what steps they need to take to succeed academically.

Alongside proving preparation, AP students could receive a bit of a grade point average (GPA) boost if they earn good grades. Some high schools, but not all, will give more weight to AP grades than normal ones. For example, receiving a B in an AP class may provide as many points towards your GPA as if you earned an A in the non-AP version of the class.

Recommended: 5 Ways to Start Preparing for College

Benefit #3: Prepare for College Better

Taking an AP course is akin to taking an actual college course, which can help you get a taste for college. If structured properly, an AP course should give you a preview of what skills you need to succeed in a college class and what the workload might look like.

Learning to manage time properly, developing strong research and analytic skills, and covering material more quickly in an AP class can be helpful preparation for the rigors of college life.

Taking AP classes can also help you identify your interests and passions which may lead you to the right college. Having a preview of what it would be like to study French, Psychology, or Chemistry in college can help guide you during the application process towards schools that have strong programs in your chosen area of interest.

College Financing Options

When it comes to paying for college, there are a lot of different options available to students, including scholarships, grants, and federal financial aid.

But figuring out what you qualify for and how to apply can be overwhelming. A great first step is to complete the Free Application for Federal Student Aid (FAFSA). This will let you know what financial aid you are eligible for. For students and parents that need extra help covering the cost of attending college, student loans are a potential option. There are two types of student loans, federal and private.

Federal loans come with a fixed interest rate. With a subsidized federal loan, you don’t pay any interest while you are in school at least half-time. With an unsubsidized federal loan, interest begins to accrue right away (though you don’t have to start making payments until six months after you graduate).

Private student loans are available through banks, credit unions, and online lenders. Interest rates can be fixed or variable and will depend on the lender. Students that have excellent credit (or have cosigners who do) tend to get the lowest rates. Just keep in mind that private student loans may not offer the same protections, like income-based repayment plans, that come with federal student loans.

The Takeaway

Advanced placement or AP classes can benefit students in three key ways. It can give them a taste of college-level work and prepare them for what’s ahead. It can make them a more competitive applicant since it shows colleges that a student has undertaken advanced work. And it can potentially help a student save on tuition since they may be able to opt out of introductory and prerequisite courses. If a student still needs help with tuition costs, scholarships, grants, federal, and private student loans are possible sources.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

What is the benefit of taking an AP class in high school?

The AP Program allows students to pursue college-level work while in high school and receive college credit, advanced academic standing, or both when they attend college. This can save money on tuition.

Do colleges care if you take AP classes in high school?

Yes, colleges often want to see evidence that applicants were able to excel in challenging classes in high school. For this reason, it can be advisable to take AP classes if they are offered and you are qualified to take them.

What are the disadvantages of taking AP classes in high school?

There can be disadvantages of taking AP classes in high school. These include an increased workload, the potential for lower grades since the courses are more challenging, and the cost of taking the AP exams (currently $99 each for students in the U.S., U.S. territories, and Canada).

---

About the author

---

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

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

SOISL-Q325-091

Read more

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

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

How to Pay Your Mortgage With a Credit Card

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

Use a Third-Party Service

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

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

Buy a Money Order

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

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

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

Transfer a Balance to Your Bank Account

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

Get a Cash Advance

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

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

Recommended: Charge Card Advantages and Disadvantages

Use a Payment App or Digital Wallet

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

Do All Mortgage Lenders Accept Credit Card Payments?

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

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

Factors to Consider When Paying a Mortgage With a Credit Card

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

Fees vs Rewards

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

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

The Cost of Interest

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

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

Effect on Your Credit Score

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

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

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

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

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

Limited Payment Channels

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

Potential for Increased Debt

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

Should You Pay Your Mortgage With a Credit Card?

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

Alternatives to Using a Credit Card for Your Mortgage

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

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

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

Refinancing or Loan Modification

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

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

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

Personal Loan or HELOC

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

The Takeaway

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

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

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can you use a credit card to pay a mortgage?

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

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

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

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

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

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

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

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

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

---

Photo credit: iStock/vgajic

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi 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.

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

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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.
SOHL-Q325-025

Read more

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

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

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

What Is a Piggyback Mortgage Loan?

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

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

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

Recommended: How to Qualify for a Mortgage

How Do Piggyback Loans Work?

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

Here’s an example of how piggyback mortgages work:

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

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

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

Recommended: First-Time Homebuyer Guide

Types of Piggyback Loans

Here are some types of piggyback loans to consider:

A 80/10/10 Piggyback Loan

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

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

A 75/15/10 Piggyback Loan

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

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

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

See how these options stack up in chart form:

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

Average Piggyback Mortgage Rate

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

Benefits and Disadvantages of a Piggyback Mortgage

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

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

Piggyback Mortgage Benefits

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

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

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

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

Potential Downsides of Piggyback Mortgages

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

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

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

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

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

How to Qualify for a Piggyback Mortgage

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

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

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

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

Refinancing a Piggyback Mortgage Loan

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

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

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

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

Is a Piggyback Mortgage a Good Option?

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

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

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

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

Piggyback Mortgage Alternatives

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

Conventional Fixed-Rate Mortgage

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

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


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

Adjustable-Rate Mortgage

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

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

Interest-Only Mortgage

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

FHA Loan

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

Other Options to Consider

Some other alternatives to a piggyback mortgage might include:

•   Speaking to a lender about PMI-free options

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

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

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

The Takeaway

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

FAQ

What is a piggyback fixed-rate second mortgage?

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

Is it hard to get a piggyback loan?

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

What is the advantage of a piggyback loan?

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

---

About the author

---

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

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

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

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

SOHL-Q325-047

Read more