Home Ownership

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Many people consider homeownership a rite of passage, a part of the American Dream, and a key way to build wealth. But recently, as home prices and mortgage interest rates have risen, some may wonder, “Is buying a home a good investment, no matter what?”

It can be challenging to gather enough funds for a down payment, qualify for a mortgage, and then afford all of the costs that go along with homeownership, such as property taxes, maintenance expenditures, and utilities. But to live in a place you love while building equity can be a win-win.

So if you’re wondering “Is buying a house a good investment?” vs. say, investing your money, you’ll have to take a closer look at how homeownership relates to your personal financial situation. Read on to learn how to evaluate what will be the right decision for you, starting with important questions to contemplate.

Is It a Good Investment to Buy a House?

In order to determine if buying a home is a good investment for you, you’ll need to estimate the amount of time you plan to own the house and the real estate marketplace dynamics.

•   If you don’t plan to own the house for at least five years, you may not break even when you sell the home. When you buy a home, you pay for more than just the house and those costs can add up. You’re often paying for appraisals, mortgage application fees, inspections, movers, real estate agent fees, and that can add up to thousands of dollars.

In order to recoup all those fees, conventional wisdom says you need to wait at least five years for your home to appreciate before selling it. If you plan to live somewhere for less than five years, it could make the most financial sense just to rent property.

•   You may also want to consider other aspects of whether it’s a good time to buy a house. For example, is it a hot or cool market? Are you likely to wind up in a bidding war (and possibly overpay) because there isn’t enough supply to meet demand? Are interest rates likely to fall over the next year? These dynamics can impact whether now is the right time to jump into the housing market.

💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Do You Have Sufficient Savings to Buy a House?

In order to buy a home, you’ll generally have to take out a mortgage to finance your home purchase. Before that’s not the only expense. These costs must also be covered:

•   Before you even get to the mortgage stage, you’ll have to save for a down payment (which is often anywhere between 3% and 20% of the property’s purchase price) and closing costs, which are typically 3% to 6% of the loan amount. This can mean a significant chunk of change.

•   There are continuing costs you’ll have to account for, such as home insurance, property taxes, general maintenance, and emergency home repairs.

When you are renting, if the kitchen sink springs a leak, your landlord will take care of it. But when you own a home, those repairs will be entirely your responsibility. Having an emergency fund saved up will help you deal with unexpected costs associated with homeownership.

Also, if you are purchasing a house as an investment vs. using it as a primary residence, can you afford to buy a house while still renting? That is a situation in which you will want to map out your cash flow and make sure you are prepared if you can’t flip or rent the property as quickly as anticipated. An emergency fund could also be invaluable in that scenario.

Are You Confident in the Housing Market?

The housing market rises and falls; take a close look to evaluate current trends. Home prices skyrocketed during the Covid pandemic and have continued to rise recently. This can make it difficult for first-time homebuyers to find a suitable home that is in their price range. It’s important to be prepared as you start to look at homes. Understand your budget and make sure you have saved enough money to make a down payment on the property.

Also be sure that you understand how mortgage rates can impact the affordability of housing and what your home shopping budget looks like.
💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

Are You Ready for the Responsibility?

When you own your own home, you have a lot of freedom to make the space completely your own. With all of this flexibility comes a lot of responsibility. If the house has a yard, you’ll be responsible for regular maintenance and upkeep.

Will you need to pay for a new roof soon? Buy a lawn mower? If you live in an area with harsh winters, will you need to get a snow blower or hire someone to clear the driveway after each snow storm? These costs can add up.

So make sure you are ready for the financial responsibility that comes with owning a home before you make the purchase. You’ll have to account for repairs, improvements, general upkeep, insurance, and taxes. Not only does all of this cost money, it will take your time and attention as well, which isn’t necessarily the case when you rent. If you’re not ready to always be “on call” for your property’s needs, it could be a homebuying mistake to purchase.

Recommended: Should I Sell My House?

Are You Willing to Live with a Long-Term Loan?

Buying a home can mean you’re taking on a loan for perhaps 15 or 30 years. That’s a major undertaking. Part of the process of learning how to buy a house is educating yourself on how mortgages work and the different types available. Generally, there are two types: fixed rate and adjustable-rate mortgages.

•   A fixed-rate mortgage keeps your payment level over time, typically 15 or 30 years, because the interest rate remains stable.

•   The interest rate on an adjustable-rate mortgage loan fluctuates over time. They usually start out lower than a fixed-rate loan but often rise in later years.

To see what a mortgage could mean for your finances, take a look at an online mortgage calculator to compare different types of loans and see what your costs might look like. If a loan could be part of your life for three decades, you want to make sure you’re comfortable with it.

Remember that while it may seem daunting to take on a 30-year obligation, a mortgage helps you build equity in an asset that generally increases in value as time passes. Is a house a good investment? Historically, yes, if you take the long view.

Over the years, homeowners build up equity in the house as they methodically pay off more and more principal with less monthly payments on each loan payment. Many smart borrowers pay extra each month toward the principal to pay off the mortgage sooner.

Recommended: Quiz: Should You Buy or Rent a Home?

Pros and Cons of Buying a Home as an Investment

Before a major financial move, it’s important to consider the benefits and downsides. You’ll want to know what are the pros and cons of buying a starter home or a subsequent property. Consider these points.

Pros of Buying a House

Here are some of the upsides of buying and owning a home:

•   You will build equity in your home over time, which can help you grow your wealth. Your home value may appreciate as well.

•   There may be tax advantages to homeownership, such as deducting mortgage interest.

•   Paying your mortgage payments on time can help build your credit.

•   You can renovate the property as you see fit, unlike the case with rental units.

•   You likely have a good idea of your monthly housing costs for the long term. If you are renting, you could face significant fluctuations.

•   There’s a feeling of security for many people when they know they own their home.

Cons of Buying a House

Next, it’s wise to consider the disadvantages of buying a home:

•   You typically need to pay for the down payment and closing costs, which can be a significant financial hurdle.

•   You are likely locking into long-term debt, and it can take a while to build equity.

•   There is no guarantee that your home’s value will grow over time.

•   The costs related to owning a home can be significant. This includes expenses like property taxes and insurance, as well as home repairs.

•   You will have less flexibility if you need to move for a job, say, or want to relocate to be closer to friends and family. Selling a house can involve time, energy, and money.

Ready to Buy? Consider a SoFi Mortgage

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is it wise to buy a house as an investment?

Whether it’s wise to buy a house as an investment will depend on many factors, such as your personal finances and current economic and real estate trends, as well as whether the property is a place that’s a good home for you to live in for at least several years.

Is buying a house worth it in 2023?

Buying a house in 2023 can be challenging because home prices and mortgage rates have been rising. However, if you can afford the monthly mortgage payments, plus the down payment and ongoing costs of homeownership, it may still be the right move for you.

Is owning a home an asset?

In general, a home is considered an asset. Yes, you typically have a mortgage, which is a liability, but on the plus side, you are building equity while having a place you enjoy living.


*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 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.

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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Source: sofi.com

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Adding a garage to your property can make your life easier while also adding value to your home. But building a garage can be expensive — and if you can’t afford the cost upfront, some type of financing will likely be required in order to move forward with the project.

The good news is homeowners have several options to choose from so they can get the garage they want now and pay for the project over time — including a personal loan, a home equity loan or line of credit, or a cash-out refinance.

But how do you decide which type of garage financing is best for you? Read on for a breakdown of the different options, some of their pros and cons, and how to choose the right financial product for you when you decide to build your new garage.

How Do People Afford to Build a Garage?

Most people probably can’t afford to add a garage to their home without borrowing at least part of the money for the build. And even those who have enough cash to cover the cost might not want to dip into their savings to foot the entire bill upfront.

There are several ways to finance a garage build, and the option that works best for you may depend on several factors. Before you make your choice, it can be good idea to look at:

•  How much equity you have in your home, and if you want to tap that equity for funding.

•  Your credit score nd what kind of interest rate you might be offered if you apply for a loan.

•  How long you want to make payments, and how those payments might affect your other goals.

•  How much you expect the full cost of your project to be, and how much of that you want to finance.

💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is the Average Amount Needed to Build a Garage?

According to HomeAdvisor, the average cost of building a garage is about $28,326. The typical price range in 2022 was between $16,424 and $40,287.

Of course, your costs may vary significantly based on the size of the garage, the materials you choose, labor costs in your area, and the type of structure you plan to build. Here’s a breakdown of what some garage projects can cost:

Carport

Average cost: $2,400 to $8,400 for one car; $4,000 to $14,000 for two cars, fully installed

A carport can be a great option if you’re looking to protect your car from the sun, snow, sleet and hail, pollen, bugs and birds, etc. A carport is typically less expensive than a fully enclosed garage.

Square footage is usually the most important factor when it comes to determining price. A fully installed (parts, labor, etc.) 12-foot-by-20-foot carport, built for just one car, averages between $2,400 to $8,400; while a two-car, 20-foot-by-20-foot carport would be around $4,000 to $14,000.

Here are some other factors that can impact the cost:

•  Whether the carport is temporary or permanent

•  The roofing and other materials used

•  Whether it’s a prefab or custom build

•  Whether it’s freestanding or attached to another structure or a concrete foundation.

Attached and Detached Garages

Average cost: $10,500 to $27,000 for one car; $14,500 to $40,300 for two cars, fully installed

If you’re looking to keep tools, bikes, or even a washer and dryer in your new space, along with your car or cars, you’ll probably want a completely enclosed garage with doors you can lock.

Your storage needs will help determine the size of the garage you build — and, yes, that size will figure into the cost. A standard one-car garage is 12 to 16 feet wide and 20 to 24 feet long, while a two-car garage is usually 22 to 26 feet wide and 20 to 24 feet long.

Keep in mind that if the garage is attached to your home, you may pay 10% to 15% less than you would if the garage is detached. The materials you choose for the walls and roofing will also influence the cost. And you can expect the price to increase if you add windows, plumbing, and/or electricity.

Storage Shed

Average cost: $2,500, fully installed

If you’re just looking for additional storage and not a place to park your car, a shed might be a more affordable option. The average price range for building a shed ranges from about $200 (for a small prefab shed) to $30,000 (for a custom structure that could serve as an office, man cave, or she-shed).

The size of the shed (both square footage and ceiling height) will make a big difference in the cost, as will the materials you choose, the type of foundation you use, if the project requires a permit or professional installation, and if you want to add plumbing and electricity.

Garage Doors

Average cost: $1,200, fully installed

The door you choose for your new garage can be important to your home’s curb appeal, but you may also want to consider energy efficiency and how the door will hold up against rough weather — or energetic kids who use it as a backdrop to their sports practice.

Factors that can affect the cost of a garage door include the style, materials, size, and the type of installation required. The cost can also increase if you opt for an automatic door with sensors, a keypad, and other bells and whistles.

Installation Costs

Unless you plan to build your garage yourself, your labor costs could add up to at least half of your project’s price tag — and your location could be an important factor.

HomeAdvisor found, for example, that if you live in Austin, Boston, or Los Angeles, you could end up paying twice as much for your garage as you would if you lived in Chicago, Oklahoma City, or Kansas City, Mo.

Permit Fees

Average cost: $150 to $500

Here’s a cost homeowners tend to overlook: Almost any building project requires a permit.

Permitting needs and costs can vary depending on the type of project and where you live. If you’re working with a contractor or installation company, they should be able to tell you what’s required and the cost. You also can contact your local government agency for information.

The average cost for a garage permit is $150 to $500, but if you’re adding electricity, plumbing, or air conditioning, the price could be as much as $800 to $1,500.

Recommended: The Cost of Buying a Fixer-Upper

Garage Builders Financing Options

Because the cost of building a garage can get pretty expensive, homeowners often decide to use some type of financing to pay for the project.

There are several options available if you prefer to break down the cost of your project (large or small) into affordable monthly payments. Here are some common choices:

Personal Loan

With a personal loan, you’ll get a lump sum of money that can be repaid in monthly installments, usually at a fixed interest rate that’s based on your credit score, income, and how much debt you’re currently carrying. This type of financing can be used for just about anything, but home improvement projects are among the most popular uses of a personal loan.

Borrowers typically aren’t required to provide collateral to get a personal loan (unlike a home equity loan or HELOC). This can make the approval process go faster, which means you can get your money sooner. Another plus: You won’t be putting your home or any other asset at risk if you can’t make your loan payments. But there’s also a downside in that your interest rate may be higher than it would be with a secured loan. And you may have less time to pay back the money you borrowed.

Recommended: 11 Types of Personal Loans and Their Differences

Home Equity Loan

Borrowers who have built up some equity in their home (at least 10% to 20%) may want to look into financing a garage build with a home equity loan. With this type of loan, you’ll get your money upfront and pay it back, with interest, in fixed monthly payments.

The upside to a home equity loan is that a lender may offer a lower interest rate because the financing is secured with your home as collateral. The downside, of course, is that if you default on the loan, the lender could choose to foreclose. And if you sell your home, you’ll be expected to pay off your loan balance. You also can expect a more complicated application process and to pay closing costs and other fees with this type of loan.

HELOC

A HELOC is like a home equity loan in that it allows you to borrow against the equity you have in your home. But with a HELOC, you don’t have to borrow all the money at once — you can use your line of credit to borrow just what you need as the project moves along. And you’ll pay interest (usually a variable rate) only on the amount you currently owe, much like a credit card.

The major drawback is that your home will serve as collateral for the line of credit, so if you default, the lender could foreclose on your home. And if interest rates increase, your loan payment could end up being higher than the amount you originally budgeted.

203(K) Loan

The Federal Housing Administration offers 203(K) loans as a way for current homeowners and homebuyers to refinance their home and roll the costs of a renovation into the mortgage. Because they’re backed by the FHA, these loans can come with lower interest rates and qualifying may be easier. But your home and your garage project will have to meet FHA requirements.

Construction Loan

Construction loans traditionally have been used to finance the building of a new home, but they also may be used to make substantial renovations to a current home.

These loans typically have a variable interest rate, and because they’re unsecured, the rate may be higher than other types of garage financing options. Construction loans also have shorter terms than most loan options: They generally must be rolled into a mortgage or paid off within a year.

Cash-out Refinance

With a cash-out refinance, borrowers take out a new and larger mortgage on their home, then pay off the old mortgage and keep the difference to pay for their renovation project.

If you can find a competitive, fixed interest rate and other loan terms that work for you, this might be an alternative worth considering. But again, the loan is secured with your home as collateral, the application and approval process can be more complicated and slower than with other options, and there may be closing costs and fees.

What Type of Loan Is Best for Building a Garage?

If you’re hoping to build a garage, it makes sense to thoroughly research all the financing possibilities. But you’ll likely find that a personal loan is among the top contenders.

Benefits of a Personal Loan

There are several benefits to using a personal loan to finance a new garage.

•  You can borrow a fairly high amount (up to $100,000, for example, with a SoFi personal loan).

•  With an unsecured personal loan, you won’t have to put up your home or any other asset as collateral.

•  If you have a good credit history, you should qualify for a competitive interest rate.

•  Personal loans typically come with a fixed interest rate, which can make budgeting easier.

•  If you make timely payments and pay off the loan on time, it can help your credit.

•  The application process can be faster than other options, so you’ll get your money sooner.

Qualifying for a Personal Loan

Personal loan requirements can vary from one financial institution to the next, but here are three things lenders typically look at when reviewing an application:

•  Credit score and credit history: The higher your credit score, and the cleaner your credit report, the better your chances of qualifying for a loan with a competitive interest rate.

•  Employment history and income: Borrowers should be prepared to provide recent tax returns, bank statements, and other documents to verify their employment and their wages or salary.

•  Debt-to-income ratio: Lenders can have different requirements, but generally, the lower your debt-to-income ratio (how much you spend on monthly debt payments relative to your income), the better chance you’ll qualify for the loan terms you want.

Things to Consider When Applying for a Personal Loan

Before you apply for a personal loan, it can be a good idea to think about:

•  How much you need: With a personal loan you’ll receive a lump sum of cash, so it can be helpful to have an estimate for your project’s overall cost — and how much what you’ll need to borrow — before you begin researching lenders.

•  How much you can afford to pay back each month: You may want to run the numbers to see how your loan payments will fit into your monthly budget.

•  How much time you’ll need to repay the loan: If you have big dreams — and a big price tag to match — you may want to look at a long-term loan (five to seven years) so the payments don’t overwhelm you. Keep in mind, though, that the longer the loan term, the more you can expect to pay in interest.

•  Where you can get a personal loan that’s a fit for your needs: When you’re ready to look for a loan, your focus will likely be on finding the most competitive interest rate. But when you’re deciding where to get a personal loan, don’t forget to consider other costs — including origination fees, late payment charges, and prepayment penalties.

Alternative Garage Builders Financing Options

There are a couple of alternatives to financing your garage build with a loan or a secured line of credit. And like the other options listed here, they, too, have pros and cons.

Cash

If you have plenty of money to finish your project without financing, and you want to avoid interest charges, paying cash is definitely an option to consider. But if it would require pulling money from your emergency fund, or affect your budget or other important financial goals, you might want to look at other options. Of course, you could save up until you feel comfortable about paying for the project with cash. But depending on the total cost of the project, that might mean a long delay.

Credit Card

A credit card is a convenient way to pay for costs as you go, and this type of financing could be easier to obtain than a secured loan or secured line of credit. But unless you’re eligible for a card with a low or 0% introductory rate — and can pay off your balance before the introductory period expires — the interest rate could be much higher than with other borrowing options. If you’re building a storage shed or DIY carport, a credit card might be an appropriate financing tool. But for a pricier project, you may find there’s a more affordable option.

The Takeaway

Building a garage — whether it’s a prefab shed, standalone carport, or attached garage — can be an expensive project. Depending on the scale of the project and where you live, you could easily spend close to $30,000.

Most people opt to finance their garage build project, either with a personal loan or a line of credit. This allows them to break up the cost over several months and keep their cash in savings for a rainy day.

If you know what kind of garage or similar structure you hope to build, and you need or want to find financing to help pay for it, a personal loan can be a solid option.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

FAQ

How do people afford to build a garage?

If paying cash to build a garage isn’t feasible, there are several financing options available, including a personal loan, home equity loan, or home equity line of credit (HELOC).

Can you finance a garage?

You can finance a garage if you can’t pay cash — or don’t want to. There are several financing options available, whether you’re planning to DIY a small carport or you’re working with a contractor to install a super-sized garage with all the amenities.

What type of loan is best for building a garage?

If you have solid credit, a personal loan may be the best type of financing for building a garage. You can borrow the money you want upfront, get the funding quickly, and make fixed-rate monthly payments while enjoying the benefits of adding a garage where you can keep your car, boat, tools, toys, and more.

Photo credit: iStock/PC Photography

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

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

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.

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Source: sofi.com

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The cost to replace a chimney ranges from $1,000 to $15,000, depending on the type and size of the chimney. You can install a smaller or prefabricated chimney for $1,000 to $5,000, but a full masonry chimney replacement cost can reach $15,000.

Below, we’ll explain new chimney cost factors, break down labor and materials expenses, discuss financing options, and help you determine if you might be able to replace the chimney yourself.

Chimney Replacement Costs: An Overview

How much does a chimney replacement cost? Anywhere from $1,000 to $15,000. A full chimney replacement is on the higher end of that range while a partial replacement — or a basic prefab chimney installation — is on the lower end.

In some cases, it might be possible to repair the chimney instead of replacing it. Chimney repair costs typically range between $1,000 and $3,000, though it varies depending on the extent of the damage.

Recommended: The Ultimate Home Maintenance Checklist

Full Chimney Replacement

A full chimney replacement costs between $5,000 and $10,000 — or up to $15,000 in some cases. Prefabricated chimneys are the lowest-cost option. You’ll pay moderate prices for a metal chimney and the highest prices for a brick chimney.

Partial Chimney Replacement (Rebuild)

You may only need to replace part of a chimney, like the stack, which extends above the roof. In other cases, you may need to pay for the repair of specific elements, like collapsing mortar, a damaged chimney crown, or a cracked flue.

Partial chimney replacement costs may top out at $5,000 while repair typically ranges between $1,000 and $3,000 per job.

Recommended: Home Improvement Calculator

Chimney Installation Labor Cost

Labor makes up a large portion of the cost to replace a chimney. Depending on your geographic location, if you can reach the chimney by ladder or you need scaffolding, and the type of chimney being installed, labor rates may range from $50 to $150 an hour for an experienced mason.

You will usually need to hire a structural engineer before the mason can begin their work, which adds to your overall labor costs. Depending on where you live, that can cost around $500.

Chimney Installation Material Costs

Material costs vary depending on the type of chimney being replaced, rebuilt, or repaired. Prefab chimneys have lower material costs while masonry chimneys require more expensive materials like bricks and mortar.

Chimney Installation Cost Financing

Paying for a new chimney — or even a more basic chimney repair — can be difficult on a tight budget. If you don’t have the money in emergency savings, you can explore other options like:

•  A payment plan with the contractor: Ask the contractor if they can set you up with a payment plan over a set number of months, rather than requiring the full payment all at once. Costs may be higher if you go this route.

•  A credit card: Some contractors will let you pay with a credit card but be careful. Your credit card may have a high APR, and if you can’t afford to pay the full bill at the end of the month, you could end up paying a lot of interest, which will make the new chimney even more expensive.

•  A home improvement loan: Home improvement loans are a low-cost option for homeowners. These personal loans typically have a lower interest rate than your credit card, and you can choose repayment terms — often three to five years — that make sense for your budget. A personal loan can be a cost-effective way to pay for common home repair costs.

•  Home equity loans: Homeowners can also tap into their home equity with a home equity loan or home equity line of credit (HELOC).

Before you decide on the best financing option, you will want to compare the difference between home equity loans vs. home improvement loans.

Can I Replace the Chimney Myself?

A chimney replacement requires special skills and training. A lot can go wrong if you install or repair a chimney incorrectly. It could become a fire hazard or potentially collapse. No matter your DIY skills, we highly recommend hiring a qualified mason to tackle all repairs and replacements.

Recommended: How to Keep Inflation From Blowing Your Home Reno Budget

What Factors Impact a Chimney Replacement Price?

Several factors can impact your overall chimney replacement cost, including:

•  Permits needed: You’ll almost always need to get a permit for larger chimney replacement projects. Permit costs vary depending on your state and municipality.

•  Level of work required: Wholesale chimney replacements cost significantly more than minor work. For example, chimneys may just require some repointing or tuckpointing to keep them in good shape, or you may need to replace the crown or cap or only rebuild the stack. If you have to replace the whole chimney, it may require demolition, which can be expensive. Talk with your contractor about the extent of the work to get a better idea of the total chimney installation cost.

•  Type of chimney: Prefab chimneys are the most affordable to install. You’ll spend more to replace a metal chimney, but the most expensive type of chimney to replace is a brick one.

•  Size and location: Larger chimneys will cost more to replace than small ones. Chimneys that are easy to access (by ladder, for example) are also more affordable to repair or replace. If the positioning of the chimney makes it harder for the contractor to access, labor costs will be higher.

Signs Your Chimney Needs to Be Replaced

How do you know when it’s time to replace your chimney? Here are a few signs to watch for:

1.   Crumbling brick: If the brick is visibly crumbling or deteriorating, call a mason quickly to determine the extent of the damage and begin the repair or replacement work.

2.   Leaks: If your chimney is the source of leaks (look for water damage to the surrounding walls and ceiling), it’s time to call a contractor to look at it.

3.   Cracks: It’s good practice to have your chimney inspected each year. During the inspection, the contractor will look for large cracks. These could be a sign that it’s time to repair or replace the chimney.

The Takeaway

Chimney replacement costs can range from $1,000 to $15,000 — it’s not a cheap project, but luckily, it’s also not a common one. Get your chimney inspected every year, and keep up with regular maintenance and cleaning. Unless there’s unexpected storm damage or the chimney is old, you may not have to replace the chimney the entire time you live in your home.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

Replace your chimney asap with a home improvement loan from SoFi.

FAQ

How long does it take to replace a chimney?

Basic chimney repairs can be quick: A professional should be able to repair a partially damaged chimney in one to four days. Significant damage may lead to longer timelines — in some cases, it might take weeks or even months to repair and rebuild a chimney.

Can I replace my chimney myself, or do I need to hire a professional?

Replacing and repairing a chimney requires specialized knowledge, skills, and equipment, not to mention physical strength. If you make even a small mistake when replacing your chimney, you might accidentally cause a leak, inadvertently create a fire hazard, or build a structurally unsound chimney that could collapse. Always hire a professional for this work.

What qualifications should I look for in a chimney replacement contractor?

When looking for a contractor to work on your chimney, always confirm that they are licensed and insured. You should also verify that they’re certified by the Chimney Safety Institute of America.

Ask the contractors if they offer warranties or guarantees for their work and read reviews online to make sure they provide quality services. You can also ask them for references.

How do I compare quotes from different chimney replacement contractors?

Before getting quotes from any chimney replacement contractors, read online reviews and ask the contractors about their licenses, insurance, and certifications. Only get quotes from qualified contractors.

When comparing quotes, look not just at the overall cost but also the timeline to ensure they can replace your chimney quickly, if needed. Also verify what is and isn’t covered in the quote. For example, has the contractor included the necessary permits, or is that a separate cost not part of the estimate?

You’ll also want to ask about their payment schedule and how they prefer to be paid (cash, check, or credit card, for example).

Are there permits or inspections required for chimney replacement, and how much do they cost?

When replacing a chimney, you almost always will need to get a permit and an inspection. The costs will vary depending on where you live, but you might pay up to $500 for an inspection by a structural engineer, and permits can reach $150.

How often should I replace my chimney, and what factors affect its lifespan?

A well-built chimney should last several generations of homeowners. In theory, you may never need to replace your chimney (but regular inspections are a good idea). If you do replace your chimney, you likely won’t need to replace it again as long as you’re in that house.

That said, certain elements may need to be repaired or replaced more frequently. Chimney liners, for instance, last 15 to 20 years, and mortar lasts 25 to 30 years.

Extreme weather, like high and low temperatures, hail, and earthquakes, may shorten a chimney’s lifespan, as can exposure to water. As your home settles over time, it may also lead to premature cracks in your chimney.

What are the risks of not replacing a chimney that is in disrepair?

If you ignore the signs that it’s time to replace or repair your chimney, you’re exposing your home to a lot of risk. Water could more easily get into your home, leading to mold and mildew. Walls, ceilings, and floors could deteriorate over time, and the inner workings of your chimney would be exposed to rust. Eventually, your chimney might collapse, leading to much more expensive and extensive structural damage to your home.

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

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

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Source: sofi.com

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A higher resale value of your home is one of the many rewards for carrying out home improvements and renovations. But remodeling projects cost money, and financing them can be expensive, depending on the amount you borrow and the type of loan you use.

Options for home improvement financing include home equity loans (HELOCs), home equity lines of credit, and cash-out refinancing. These types of financing allow homeowners to borrow against the equity they have built up in their home. Other financing options are personal loans, credit card financing, and government programs. Any of these could be the best option depending on the circumstances.

Here’s what homeowners need to know about the different types of home improvement loans and what factors they should consider before settling on a lender.

1. Home Equity Loans

If you have built up equity in your home, which means you have paid off a portion of your mortgage, a home equity loan could be the right choice to finance home improvements. To find out how much equity you have, subtract the balance due on your mortgage from the assessed value of your home. For example, if your home is worth $400,000 and you owe $200,000 on your mortgage, you have $200,000 in equity. A bank will let you borrow up to a certain percentage of that amount — up to 100% in some cases.

A home equity loan acts like an additional mortgage, where the homeowner pays back the loan in monthly payments. The payments are in addition to the original mortgage payments. Home equity loans often have low fixed interest rates because the home is used as collateral for the loan. However, there are closing costs to consider that could be between 2% to 5% of the loan amount.

On the plus side, home equity loans usually qualify for the mortgage interest tax deduction as long as the funds are used to substantially improve the home.

If you have plenty of equity and need a sizable amount to finance a big project, a home equity loan could make sense. You will receive a lump sum payment, and the improvements you make may increase the value of your home.

Advantages of a Home Equity Loan Disadvantages of a Home Equity Loan
Low interest and terms from five to 30 years There are origination fees and closing costs
You can borrow up to 100% of your home’s equity Funds are disbursed as one lump sum, so borrowers need to budget carefully
The interest is tax deductible The monthly payments add to existing mortgage payments

💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

2. Home Equity Line of Credit (HELOC)

A home equity line of credit also borrows against the equity you have built up in your home. But the funding works more like a credit card and is not distributed as a lump sum payment. A bank will allow a qualified homeowner to borrow up to a preapproved limit and then pay it back. HELOC loan terms are typically between five and 20 years.

Interest rates differ for HELOCs because they are adjustable and rise and fall over the life of the loan. However, interest is only due on the outstanding balance — the amount borrowed — not the full credit limit.

The amount you can borrow through a HELOC depends on your credit score, income, and the value of your home. Your lender can change the loan terms, too. For example, if your credit score drops during the loan term, your lender may reduce the amount you can borrow.

One advantage of a HELOC is that you can use funds from the line of credit, make payments, and then borrow again. A HELOC is a better option if you have smaller projects to do over a longer term. You can borrow as you go, only pay interest on how much you use, and avoid paying closing costs.

Advantages of a HELOC Disadvantages of a HELOC
No closing costs Interest rates may go up and down
Interest payments are tax deductible Interest rates are typically higher than those for a home equity loan
You only pay interest on the amount you use Your lender can change the amount you can borrow and the repayment terms

3. Cash-Out Refinancing

Another option to fund home improvements is cash-out refinancing. In the case of cash-out refinancing, a homeowner takes out a new mortgage that is higher than their original mortgage. The borrower then pays off the original mortgage and uses the leftover cash to fund home improvements. The amount of cash they can access depends on the equity they have in the home.

For example, let’s say the homeowner currently owes $100,000 on a $300,000 mortgage. They take out a new mortgage for $350,000, pay off the old mortgage ($300,000), and now have $50,000 left to spend on home improvements. The catch is that their new monthly mortgage payments will be higher because they have increased the size of the loan, and they will have to pay origination fees and closing costs.

Money from refinancing does not have to be used to improve a home; it can be used to consolidate debt, pay for school, or anything else the borrower wants to use it for. Also, the cash is not considered income from the IRS and is not taxable.

Cash-out refinancing may be a good option if interest rates have dropped since you took out your original mortgage. You can take out cash and pay a lower interest rate on the new loan. You might also be able to reduce the term length of your original mortgage and pay off your home loan sooner. This will be the case if the total cost of your new loan including closing costs is less than the total cost of your original mortgage.

Advantages of Cash-Out Refinancing Disadvantages of Cash-Out Refinancing
You will still have one monthly mortgage payment Your new mortgage will have a higher balance
You might be able to lower your interest rate and loan term Your loan term will start from the beginning, so you will be paying off your mortgage for longer
You can use the cash for anything If interest rates have gone up, your monthly payments may be higher

4. FHA 203(k) Rehab Loan

An FHA 203(k) rehab loan is a loan taken out at the time of the home’s purchase. These loans are typically used for a fixer-upper, when the owners need funding right away for improvements. This could be the best type of loan for home improvements for big projects. The advantages of this type of loan for the borrower are that they have funds available for improvements from the outset, and they only have to pay back one loan with one set of closing costs.

These loans are also backed by the government and come with benefits. Borrowers can qualify with a less-than-stellar credit score (typically, a minimum of 620), and the down payment expected is lower than it would be for a traditional mortgage loan (as low as 3.5%).

Two things to remember are that the renovation costs must exceed $5,000 for the borrower to qualify for this type of loan, and the closing process can take a long time. Lastly, work covered under an FHA 203(k) loan must start within 30 days of closing, and projects must be completed within six months.

This type of loan may be worth considering if you are buying a fixer-upper that requires significant work, and your credit score qualifies you for this type of loan.

Advantages of a FHA 203(k) Rehab Loan Disadvantages of a FHA 203(k) Rehab Loan
One loan and one set of closing costs Only old homes or homes in bad repair may qualify
Federally-backed with low interest rates and low closing costs You are likely to be charged costly monthly mortgage insurance
You can qualify with a lower credit score Cash must be used for specific home improvements

5. Personal Loans

If you don’t have sufficient equity in your home to take out a home equity loan or a HELOC, a personal loan is an option. A personal loan will come with a higher interest rate, adjustable or fixed, because this type of personal loan is unsecured. Your home is not used as collateral. These loans are processed much quicker than home equity loans or HELOCs, sometimes the same day.

Personal loan terms are shorter, from two to five years, which will mean higher monthly payments, and you’ll have to pay closing costs.

These loans may work if you lack equity or if you have an emergency, such as a broken water heater or HVAC system. That said, they are probably one of the most expensive borrowing options.

Advantages of a Personal Loan Disadvantages of a Personal Loan
Fast financing Higher interest rate than mortgage loans
You can qualify for a good interest rate even with an average credit score Shorter terms, which increases monthly payments
Your home is not used as collateral and is not at risk Fees and possible prepayment penalties

6. Credit Cards

A credit card can be used for financing, and it’s a fast, simple way to access funds. The amount you can spend on improvements will depend on your credit limit (although you could use multiple cards), and the interest charges are likely to be much higher than other financing options.

A credit card can be a good option if you think you can finish your renovations quickly and pay off the balance on the card. Look for cards with an introductory 0% annual percentage rate (APR). Some cards allow you up to 18 months to pay back the balance at that introductory rate. If you can pay off the balance by the deadline, that’s interest-free financing. However, check for fees and other hidden costs.

The danger here is that if you don’t pay off the balance by the end of the interest-free rate, the interest charges can skyrocket. That’s why credit cards should not be used for long-term financing.

A credit card can be a great option for home improvement financing if you can find one with a low introductory rate, low fees, and you are confident you can pay off the balance within the introductory rate period.

Advantages of Credit Card Financing Disadvantages of Credit Card Financing
Fast financing High interest rates, particularly after a low introductory interest rate period has expired
Some cards offer 0% introductory rates Possibly low credit limits
Less paperwork High fees

7. Government Assistance Programs

The federal government has grants and programs that can help homeowners pay for renovations. Two home renovation loan options are Title I loans and Energy Efficient Mortgages. Lenders for Title I property improvement loans for your state are listed on the U.S. Department of Housing and Urban Development’s website.

Title I Loans

An FHA Title 1 loan is a fixed-rate loan used for home improvements and rehabilitation. Loans under $7,500 are usually unsecured, but bigger loans may use your home as collateral. These loans may be used in conjunction with a 203(k) rehabilitation mortgage.

The maximum loan terms are between 12 and 20 years, and loan amounts are $7,500 to $60,000, depending on the home’s size and type.

The loan must be used for property improvements, and an FHA mortgage insurance premium of 1% of the loan amount will be added to your interest rate. There is no minimum credit score required, but your debt-to-income ratio may factor into your loan terms.

Energy Efficient Mortgage

FHA’s Energy Efficient Mortgage program (EEM) finances energy-efficient improvements with their FHA-insured mortgage. The borrower must qualify for the loan amount used to purchase or refinance a home. However, they’re not required to be qualified on the total loan amount that includes the amount used to finance energy-efficient improvements. The FHA insures the loan to protect the lender against loss in the event of payment default.

Starting in 2023, homeowners can also get tax credits for some energy-efficient updates, including windows, insulation, new doors, heat pumps, and air conditioners.

These types of programs will reduce the cost of financing for home improvements and are great options if you meet the criteria.

Advantages of Government-Assisted Financing Disadvantages of Government-Assisted Financing
Low interest rates Financing must be used for property improvements.
Broad range of loan terms Strict qualification standards
Tax credits Larger loans may require your home as collateral.

How to Decide the Best Type of Home Improvement Loan for You

If you’re trying to decide what home improvement loan is best for you, consider the following factors:

Are You Purchasing a Fixer-Upper?

If you are buying a fixer-upper, check if you qualify for either an FHA 203(k) rehab loan or a government-assisted program. You may get cheaper financing this way.

Do You Need Funds Right Away?

If you need funds quickly — for example, you have a broken heat pump or HVAC system — a personal loan or credit card financing are options to explore.

Do You Have Equity Available?

If you have built up equity, a home equity loan or line of credit will provide cheaper financing than a personal loan and over a longer term, so that your monthly payments will be lower. A cash-out refinancing loan might also mean that you could lower your payments and reduce your term if interest rates have dropped significantly since you took out your original mortgage.

How to Get a Home Equity Loan

The first step in getting a home equity loan is to decide which loan is best for your situation. Next, find a lender with the best terms and fill out an application to see if you qualify.

1. Check Your Financial Health

The better your credit score, the better the loan terms will be. If you can boost your credit score before you apply for financing, you’ll boost your chances of getting a better deal. Lenders will also look at your debt-to-income ratio when setting the interest rate and term, so lowering your debt before you apply for a home improvement loan can help lower the cost of your financing.

2. Compare Lenders

You should contact a few different lenders to compare their rates and loan terms. Look for benefits, such as rate discounts for enrolling in autopay, and watchouts, such as late payment fees and minimum loan amounts.

3. Gather Documentation

You will need to submit a few basic pieces of information when you apply for a loan. As a general guide, you will need:

•  Proof of income, such as W-2s or 1099s, bank statements, pay stubs, or tax returns.

•  Proof of residence, such as your Social Security number and utility bills.

Your current debts, housing payment, and total income will also play a role. Be sure to have all the information your lender may need on hand when you apply to speed up the application process.

💡 Quick Tip: With home renovations, surprises are inevitable. Look for a home improvement loan with no fees required — and no surprises.

4. Apply for Prequalification

Some lenders will prequalify you, which will tell you your interest rate and how much your monthly payments will be. Prequalification should not affect your credit score, whereas a formal loan application could. Applying for too many loans in a short space of time could lower your credit score.

5. Complete the Loan Application Process

Your loan application might be fully online, via phone and email, or in person at a local branch. In cases where you are borrowing against equity, your lender may require a home appraisal. Provided your finances are in good shape, the lender should approve your application, and you’ll receive funding.

How Your Credit Affects Your Home Improvement Loans

Your credit score will affect the total cost of a home improvement loan. The higher your score, the less of a risk you pose to a lender, so the better the loan terms will likely be for a mortgage or long-term loan. The same goes for credit cards and personal loans. Also, if you have good credit, you’ll probably have an easier time securing a home improvement loan.

Can You Use Home Equity Loans for Non-Home Expenses?

Home equity loans and HELOCs are flexible and can be used for anything, not just home expenses or renovations. However, these loans are best suited for long-term, ongoing expenses like home renovations, medical bills, or college tuition.

The Takeaway

The types of loans for home improvements include loans based on the equity you have built up in your home, such as a home equity loan, a HELOC, or cash-out refinancing. You can also use personal loans, credit card financing, and government programs. Loans based on equity tend to cost less over the loan’s lifetime, but they also tend to have longer loan terms. Equity-based loans also tend to be best when you need to borrow a larger amount, because you can spread out the cost over a longer period.

A personal loan will have a higher interest rate and a shorter term, but the higher your credit rating, the better the interest rate tends to be. Alternatively, credit card financing is favorable if you need funds quickly, the amount you need is not too high, and you can take advantage of a 0% introductory rate and pay off the balance before the rate expires.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2023 winner for Best Online Personal Loan overall.

FAQ

What type of loan is best for home improvements?

The type of loan that is best for home improvements depends on your finances and how much you need to spend. If you hold a fair amount of equity and need a sizable amount of cash, a home equity loan, HELOC, or cash-out refinancing may be good options. Cash-out refinancing might be particularly appealing if interest rates have dropped, and you can refinance with better loan terms.

If, on the other hand, you have a smaller project that you expect to complete in a short timeframe, using a credit card that gives a 0% interest rate for a period could be the way to go.

What is the best renovation loan?

If you’re taking on a big project, buying a fixer-upper or planning to renovate an older home, you may want to consider the FHA 203(k) mortgage. The 203(k) rehab loan lets you consolidate the home and renovation costs into a single remodel home loan and avoid paying double closing costs and interest rates.

If your home is newer or higher-value and you have equity, cash-out refinancing can be a good option, particularly if interest rates have dropped.

Should I use a personal loan for home improvements?

Personal loans are a more expensive option for home improvements, especially if your credit score is average. However, using a personal loan for home improvements might be the best option if you don’t have a lot of equity to borrow from.

Are home improvements tax deductible?

Home improvement loans are generally not tax deductible. However, if you use a refinance or home equity loan, some of the costs might be tax deductible. Check with a CPA or tax specialist.

What credit score is needed to get a home improvement loan?

Credit score requirements for a home equity loan depend on the lender. A credit score in the mid-600s might be enough to be approved by some lenders, while others might not approve you with a score above 700. Lenders consider many factors, including your debt-to-income ratio and equity in the home, when considering you for a home equity loan.

Photo credit: iStock/Hero Images

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.

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.

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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Source: sofi.com

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Lenders who provide VA home loans often offer better terms than a borrower might get with a conventional mortgage. Private mortgage insurance (PMI) isn’t required, interest rates may be lower than with other types of mortgages, and most VA-backed loans (90%) are made with no down payment.

Still, when you’re shopping for any type of mortgage, it can be helpful to have a good idea of where you stand and what your monthly payments might be. And that’s why a VA loan calculator table can be instrumental. By plugging in a few key numbers, you can feel better informed, whether you’re planning to buy a home or considering refinancing your current mortgage.

Why Use a VA Home Loan Mortgage Calculator Table?

If you’re a veteran, service member, or eligible survivor interested in learning about a VA loan — which is one of the different types of mortgage loans available — a VA home loan calculator can help you estimate what your monthly payments might be based on data you provide.

You can see how a 15-year mortgage might differ from a 30-year mortgage, for example, or what different interest rates might mean for your monthly payments. You also can get an idea of how much you might pay in interest over the life of your VA home loan.
💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you throughout the process.

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

How to Calculate Your VA Home Mortgage Loan Payment

To calculate your monthly VA mortgage payment with a VA loan calculator table, you’ll need to gather up a few key pieces of information, including:

Home Purchase Price

This can be the actual cost of a home you hope to buy, or what you’ve budgeted for your home purchase.

Down Payment Amount

For most eligible veterans and service members, this amount will be $0.

Loan Term

This is the expected length of your loan, usually 15 or 30 years.

Interest Rate

You won’t know your exact interest rate until you lock it in with your lender, so this will be an estimate. Lenders base their rates on current market rates, a borrower’s credit profile, and other factors.)

Property Tax Rate

If you have a particular home in mind to purchase, the tax rate may appear on the listing. You also can look for property tax rates on county websites.

The formula used to calculate a mortgage payment can be complicated, so it may be easier to use a VA home loan calculator to check how changing various numbers might affect your loan. Our VA Loan Mortgage Calculator Table, with averages used below in various fields, also can help you see what your payments might look like.

2023 VA Home Loan Mortgage Calculator Table
Purchase Price $210,000 $375,000 $675,000
Down Payment $0 $0 $0
Avg. Property Tax Rate* 1.45% (St. Louis) 1.15% (Tampa) .82% (Los Angeles)
PMI: $0 $0 $0
Interest Rate 9% 7% 5%
Loan Term 15-year/30-year 15-year/30-year 15-year/30-year
Estimated Payment $2,384/$1,943 $3,730/$2,854 $5,799/$4,085
Principal & Interest Monthly $2,130/$1,690 $3,370/$2,495 $5,338/$3,624
Taxes Monthly $254 $359 $461
Total Interest Paid $173,393/$398,290 $231,709/$523,162 $285,814/$629,475

*Property tax exemptions and special tax districts may apply

Examples from the VA Home Mortgage Calculator Table

Because VA-backed loans don’t require mortgage insurance, and most don’t require a down payment, the main factors that will influence your monthly mortgage payment are the amount of the loan, the interest rate you pay, and the length of the loan.

As you can see from the VA loan affordability calculator table above, borrowers can get a smaller, more manageable monthly payment if they opt for a longer loan term. But they’ll pay more in interest than they would if they had a shorter term. Using the Tampa home as an example, the estimated monthly payment would be $2,854 with a 30-year term, vs. $3,730 with a 15-year loan. But the total amount of interest paid for the 30-year loan could end up being more than twice as much: $523,162 vs. $231,709.

And, of course, the cost of the home you choose to buy can also be an important factor. As shown in the table, even with a much higher interest rate, both the monthly payment and total interest paid for the home in St. Louis would be lower than for the home in Los Angeles — simply because the cost of living in California is high and the St. Louis home is less expensive.

It can be helpful to check the cost of living by state if you’re deliberating between two different locations for your next home.
💡 Quick Tip: Active duty service members who have served for at least 90 consecutive days are eligible for a VA loan. But so are many veterans, surviving spouses, and National Guard and Reserves members. It’s worth exploring with an online VA loan application because the low interest rates and other advantages of this loan can’t be beat.†

Other Costs to Consider

Most VA loan mortgage calculators stick to the basics, but there are other costs you may want to consider when you’re trying to determine the monthly loan payment you can afford, including:

VA Funding Fee

Though borrowers don’t pay mortgage insurance on a VA loan, most will pay a one-time funding fee. (Some borrowers are exempt.) The fee, which can be paid upfront or rolled into the loan, is a percentage of the loan, and is based on the type of loan and other factors.

Homeowners Insurance

Homeowners insurance can help protect your home and property in case of expensive damage and other potential costs. Your lender will likely require that you buy homeowners insurance before you close on your home purchase.

HOA Fees

If the home you purchase is part of a homeowner’s association (HOA), you may have to pay a monthly or annual fee. The HOA may use this money to cover maintenance costs and amenities.

VA Home Loan Limits

Typically, the VA guarantees that it will repay the lender up to 25% of your loan amount if you should fail to make your payments. But if you’re still paying off another VA loan, your VA guarantee may be limited, and the lender may ask you for a down payment to make up the difference. Your lender can help you determine how VA home loan limits might affect your new loan.

Recommended: 2023 Home Loan Help Center

Reasons to Calculate Your VA Home Mortgage Loan First

You may want to calculate the monthly payment and interest costs for your VA loan first, then compare those numbers to other types of loans – especially if you’re a first-time buyer who’s struggling to come up with a down payment. Your VA loan may come with a lower interest rate, and you won’t have to pay private mortgage insurance, which can keep your payments lower. Your lender also may accept a lower credit score if you’re applying for a VA loan vs. a conventional loan.

Still, it can be a good idea to compare all the different types of mortgage loans for which you might be eligible. If you can afford to make a 20% down payment on a conventional loan, for example, you can avoid the VA funding fee, and you’ll have some equity in your home right away. It doesn’t hurt to keep your options open, whether you’re buying a home or refinancing your mortgage.

Tips on How to Save on Your VA Home Mortgage Loan

To get the best VA loan payment, these are a few strategies that could help you save money.

Work on Your Credit

There isn’t a required minimum credit score for VA loans. Instead, the VA asks approved lenders to review the borrower’s “entire loan profile,” which could include your credit history, debt-to-income (DTI) ratio, employment history, and assets.

Individual lenders also may have their own approval criteria you should be aware of when you’re ready to apply for a loan. The more you can do to improve your financial health, the better the chances that you’ll get the loan terms you want.

Consider Making a Down Payment

Most borrowers don’t have to make a down payment on their VA home loan, but that doesn’t mean you can’t. Putting a down payment on your loan could show the lender that you’re a serious buyer, which may help you get a lower interest rate or reduce the VA funding fee on your loan.

Roll Your VA Funding Fee into Your Loan

If you’re a first-time homebuyer or low on cash for closing, the VA’s one-time funding fee may seem like a daunting amount. But you don’t have to pay the entire fee upfront. You can ask your lender to include that amount in your loan, and it will be added to your monthly payments. Your payments will be a bit more, but it may make the difference in being able to buy a home of your own.

Recommended: Tips to Qualify for a Mortgage

The Takeaway

Because VA home loans have some different requirements and benefits than other mortgages, it can be helpful to get an idea of what those differences might mean for your monthly payment and overall loan by using a VA loan calculator table.

If you’re preparing to buy or refinance a home, a VA mortgage loan calculator table can give you a useful estimate of what your new loan might look like, depending on your loan amount, length, interest rate and other factors.

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

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

FAQ

Will VA home loan limits increase in 2023?

Yes, VA home loan limits increased significantly in 2023. The baseline limit for VA loans in 2023 is $726,200, compared to $647,200 in 2022.

How much do I need to make to buy a $300,000 house with a VA loan?

Your income is only one factor that goes into deciding how much you can afford to borrow. Lenders also will look at your debt-to-income (DTI) ratio, which is the amount of your monthly debt payments compared to your monthly gross income. The VA doesn’t have a required DTI ratio for borrowers, but a maximum DTI of 41% is preferred.

What is the VA benefit increase for 2023?

Military retirees and disabled veterans got an 8.7% increase in their monthly checks in 2023, thanks to the annual adjustment to the federal cost of living allowance.

Photo credit: iStock/joel-t

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

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

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.

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 .

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Source: sofi.com

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An FHA loan is a type of government home loan program that the Federal Housing Administration insures. It’s a popular mortgage choice, especially for first-time homebuyers, because an FHA loan has lower down payment requirements than conventional loans.

But there are extra costs related to these loans that you might not be aware of. You can use an FHA loan calculator. to help figure out what your monthly mortgage payment and total cost might be.

Why Use a FHA Loan Mortgage Calculator Table

An FHA loan mortgage calculator table has several benefits for homebuyers. These include:

•   Cost estimations: The calculator table can provide estimates of monthly mortgage payments. It helps borrowers plan their budget by showing the expenses involved in buying a home.

•   Time-saving: Mortgage calculations can be confusing and complicated for first-time homebuyers. The calculator table helps simplify and speed up this process.

•   Comparison tool: Buyers can compare options by entering different scenarios into the calculator table. A different interest rate or purchase price will change the monthly payment amounts. A buyer can compare homes and even different types of mortgage loans to help decide which property and loan to move forward with.

•   Informed decision-making: An aspiring homebuyer can use the table to determine the various costs involved in an FHA loan. They can plug in different numbers, such as a lower or higher down payment or a different loan term to see how that might change their monthly payments.

•   Financial planning: Overall, the calculator could help borrowers figure out what they can afford now and how to plan for future payments.

💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

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

How to Calculate Your FHA Loan Mortgage Costs

Calculating a government home loan like an FHA loan mortgage involves several steps. These include:

1.    Determining the loan’s principal amount and interest. The principal is the amount of money the homebuyer borrows from the lender. The interest is the cost of borrowing the money.

2.    Adding property taxes and homeowners insurance. Homebuyers typically pay state and local property taxes. And you’ll also need homeowner’s insurance to insure the house against theft, damage, or loss, among other things.

3.    Including the Mortgage Insurance Premium (MIP). The MIP protects lenders in case the borrower defaults on their mortgage payments. Borrowers pay an upfront MIP of 1.75% of the loan amount, and then they pay an annual MIP that’s typically charged in monthly installments as part of the mortgage payment.

4.    Adding the loan term. This is the length of the loan, which is usually 15 to 30 years for an FHA loan.

5.    Finally, plugging all the information listed above into an FHA mortgage loan calculator table to estimate the total monthly mortgage cost.

This is what the table for a mortgage calculator for an FHA loan might look like. You can use the table as a template or starting point to fill in the information, adjusting as needed, and then make your calculations.

2023 FHA Loan Mortgage Calculator Table
Purchase Price
Down Payment
Interest Rates
Property Tax
MIP
30-year vs 15-year Term
Total Interest Paid

Recommended: How do FHA 203(k) Home Loans Work?

Examples of FHA Loan Mortgage Calculations

Here are two examples of FHA loan calculations to give you an idea of how the process works. Keep in mind that there might be additional costs to consider, such as closing costs.

Example #1

•   Loan amount: $200,000

•   Interest rate: 3.5%

•   Loan term: 30 years

•   Annual property taxes: $2,500

•   Annual homeowners insurance: $800

•   Mortgage Insurance Premium (MIP) rate: 0.85%

First, calculate the monthly interest rate:
Monthly Interest Rate = 3.5% / 12 = 0.0029167

Next, calculate the monthly principal and interest:
Monthly Payment = ($200,000 * 0.0029167) / (1 – (1 + 0.0029167)^(-360)) Monthly Payment = $898.09

Then, calculate the annual and monthly Mortgage Insurance Premium (MIP):
Annual MIP = $200,000 * 0.0085 = $1,700. Monthly MIP = $1,700 / 12 = $141.67

Add property taxes and homeowners insurance:
Monthly Property Taxes = $2,500 / 12 = $208.33
Monthly Homeowners Insurance = $800 / 12 = $66.67

Calculate the total monthly mortgage costs:
Total Monthly Mortgage Costs = $898.09 (Principal & Interest) + $141.67 (MIP) + $208.33 (Property Taxes) + $66.67 (Homeowners Insurance) = $1,314.76
The total monthly mortgage cost per month is $1,314.76.

Example #2

•   Loan amount: $150,000

•   Interest rate: 4.0%

•   Loan term: 15 years

•   Annual property taxes: $3,000

•   Annual homeowners insurance: $900

•   Mortgage Insurance Premium (MIP) rate: 0.75%

First, calculate the monthly interest rate:
Monthly Interest Rate = 4.0% / 12 = 0.0033333

Next, calculate the monthly principal and interest:
Monthly Payment = ($150,000 * 0.0033333) / (1 – (1 + 0.0033333)^(-180)) Monthly Payment = $1,081.03

Then, calculate the annual and monthly Mortgage Insurance Premium (MIP):
Annual MIP = $150,000 * 0.0075 = $1,125. Monthly MIP = $1,125 / 12 = $93.75

Add property taxes and homeowners insurance:
Monthly Property Taxes = $3,000 / 12 = $250
Monthly Homeowners Insurance = $900 / 12 = $75

Calculate the total monthly mortgage costs:
Total Monthly Mortgage Costs = $1,081.03 (Principal & Interest) + $93.75 (MIP) + $250 (Property Taxes) + $75 (Homeowners Insurance) = $1,500.78
The total monthly mortgage cost per month is $1,500.78.

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is just 3.5%.

Reasons to Calculate Your FHA Loan Mortgage First

There are a number of reasons why it makes sense to calculate an FHA mortgage before you move forward with such a mortgage. Here are five ways calculating your mortgage can be helpful.

•   Determining what’s affordable: Determining the cost of the mortgage can help borrowers search for a home within their price range.

•   Financial preparation: Buyers can see how much money they should plan to spend each month. They can then create a budget and financial plan in order to be prepared to meet the monthly payments.

•   Comparing loan options: Buyers can look at different loan options to choose the one that works best for them. They can also see how a different interest rate, home price, or down payment amount will affect their monthly cost.

•   Preventing surprises: Using the calculator helps borrowers understand what the loan costs will be so they don’t get hit with expenses they weren’t expecting.

•   Helping with negotiation: The more informed a buyer is about the various costs associated with the loan and the terms, the better they may be at negotiating the best terms.

Recommended: Home Loan Help Center

Tips on How to Save on Your FHA Loan Mortgage

If you’re interested in getting an FHA mortgage, there are a few things you can do to help get the best deal for your situation.

Build your credit score. This is one of the tips to qualify for a mortgage that it’s good to know. Strengthening your credit may help you get better interest rate terms. Pay off your debts if you can, and pay your bills on time to help build your score.

Shop around for the best interest rate. Different lenders offer varying interest rates for FHA loans. See what you may qualify for. A higher credit score may help you get a better rate.

Consider making a higher down payment. This could potentially help make your overall mortgage amount and monthly payments lower.

Negotiate closing costs. Closing costs are typically 4% to 5% of the home’s purchase price. You may be able to negotiate with the lender to try to lower some of those costs.

Take advantage of down payment assistance programs. Many states and cities offer down payment assistance programs for first-time homebuyers.

Consider mortgage refinance when interest rates drop. If you get a lower rate when you refinance, you can typically reduce your monthly mortgage monthly payments.

The Takeaway

If you’re interested in an FHA loan, an FHA loan calculator can help you figure out the total costs of your loan and your monthly loan payments, which in turn can help you budget and plan for them. For instance, you’ll factor in such costs as homeowner’s insurance and Mortgage Insurance Premium.

Shopping around for the best interest rate and comparing different loan options may also help you save money on an FHA loan.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.

Another perk: FHA loans are assumable mortgages!

FAQ

What are the new FHA limits for 2023?

The FHA’s nationwide limit “floor” and “ceiling” for a one-unit property in 2023 are $472,030 and $1,089,300, respectively.

What is the minimum credit score for FHA in 2023?

For an FHA loan, a minimum credit score of 580 and a down payment of 3.5 percent are required. You can still qualify with a credit score as low as 500 if you can increase your down payment to at least 10%.

How is an FHA loan amount calculated?

The FHA loan amount is calculated by determining the maximum loan size that a borrower qualifies for, which is typically based on the borrower’s income, creditworthiness, and the specific FHA loan program’s guidelines. The loan amount is further influenced by factors such as the property’s appraised value and the FHA’s required loan-to-value ratio.

Photo credit: iStock/ridvan_celik

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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 and conditions apply. Not all products are offered in all states. See SoFi.com/eligibility for more information.

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

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.

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Source: sofi.com

Apache is functioning normally

Apache is functioning normally

A home loan backed by the U.S. Department of Veterans Affairs (VA) can be a great way for eligible service members and their beneficiaries to take out an affordable mortgage — but even though they don’t require a down payment, they’re not free. The VA loan funding fee is a one-time charge associated with taking out a VA home loan. The amount you’ll pay depends on what type of loan you’re taking out, how much you are borrowing, whether or not it’s your first time taking out such a loan, and the size of your down payment.

However, there are some circumstances in which you may not have to pay the VA funding fee — or in which you might be eligible for a funding fee refund. Read on to learn everything you need to know about how the VA home loan funding fee works, and how much you might expect to pay if you’re planning to get one.

What Is a VA Funding Fee?

As discussed above, the VA funding fee is a one-time fee an eligible service member, veteran, or survivor must usually pay in order to take out a VA home loan. This is separate from any down payment the borrower might make, homeowners insurance, or any other cost associated with home-buying: the funding fee’s purpose, per the VA itself, is to help “lower the cost of the loan for U.S. taxpayers.”

Whether you’re buying, building, renovating, or repairing a home, or even refinancing an existing mortgage, if you take out a VA loan, you’ll need to pay the funding fee unless you meet an exemption requirement, which we’ll talk about in more detail below. Of course you’ll also need to meet any other VA loan requirements, much the way you would if you were qualifying for a conventional home loan.
💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!†

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

How Does the VA Funding Fee Differ From Mortgage Insurance?

Mortgage insurance, also known as private mortgage insurance or PMI, is usually required on conventional mortgages when the borrower makes a down payment less than 20%. In most cases, when you take out a VA loan, you’re not required to make a down payment at all, nor to pay mortgage insurance. The VA funding fee is a totally separate cost.

Even though it might sound like a downer at first, paying the VA funding fee rather than PMI is really good news for borrowers: Although the VA funding fee is calculated as a percentage of your overall home loan, just like mortgage insurance, it’s far less expensive than having to pay mortgage insurance over time. That’s because the funding fee is assessed just once, while mortgage insurance is paid every month as part of your mortgage payment until you’ve paid off more than 20% of the home loan. That means PMI has the ability to stack up to very high amounts over time.

Recommended: The Different Types of Home Mortgage Loans

Why Is the VA Loan Funding Fee Assessed?

As discussed above, the VA loan funding fee is meant to help lower the cost of VA loans to American taxpayers, since these loans don’t require the borrower to make a down payment or pay mortgage insurance. It’s a relatively small, one-time cost that makes the whole program more affordable for everybody in the long run — what some might call a win-win situation.

How Much Is the VA Funding Fee?

The amount of the VA funding fee varies depending on whether or not this is your first time using a VA loan and how large of a down payment you’re planning to make. (Which type of loan to get is one of many things you’ll have to consider if you’re a first-time homebuyer.) The higher a down payment you make, the lower your VA funding fee will be — and the fees are always lowest the first time you take out a VA loan.These fees can be adjusted over time, and they actually went down in 2023. Today, they range from 1.25% to 3.3%.
💡 Quick Tip: Active duty service members who have served for at least 90 consecutive days are eligible for a VA loan. But so are many veterans, surviving spouses, and National Guard and Reserves members. It’s worth exploring with an online VA loan application because the low interest rates and other advantages of this loan can’t be beat.†

2023 VA Funding Fees for Purchase and New Construction Loans

Here are the rates active-duty military members, veterans, and their survivors can expect when taking out a VA loan. If you used a VA loan in the past to pay for a manufactured home, you’re considered a first-timer for the purposes of this fee. And if your loan from the VA is a Native American Direct Loan, you pay a flat 1.25% regardless of whether this is your first VA loan or how much your down payment is.

Down Payment Amount VA Funding Fee
First VA Loan Less than 5% 2.15%
5% to 9.99% 1.5%
10% or higher 1.25%
Subsequent VA Loans Less than 5% 3.3%
5% to 9.99% 1.5%
5% to 9.99% 1.5%

How Is the Fee Paid?

The VA funding fee is due when your loan closes. You can either pay it all at once as a lump sum then, or incorporate it into your financing and pay it off over time. Of course, if you choose to finance your funding fee, you will likely accrue interest on it, making it more expensive in the long run.

Are There Any VA Funding Fee Exemptions?

Yes! If you fall into one of the following circumstances, you won’t have to pay a VA funding fee:

•   You’re receiving VA compensation for a disability connected to your service.

•   You’re eligible to receive VA compensation for a disability connected to your service, but you’re being paid for active duty or receiving retirement compensation instead.

•   You’re the surviving spouse of a veteran and you receive Dependency and Indemnity Compensation (DIC).

•   You’ve received, before the date your loan closes, a proposed or memorandum rating that says you’re eligible for compensation because of a pre-discharge claim.

•   You’re an active duty service member who provides evidence before or on your closing date of having received the Purple Heart.

Is Anyone Eligible for a VA Funding Fee Refund?

In addition to the above circumstances, if you’re later deemed eligible for VA compensation due to a disability connected to your service, you may be entitled for a refund of your VA funding fee. To confirm, you’d need to call your VA regional loan center at (877) 827-3702 (TTY: 711). They’re available Monday through Friday, 8:00 a.m. to 6:00 p.m. ET.

Recommended: The Cost of Living by State

What Do You Need to Provide to Get a VA Funding Fee Refund?

While the VA regional loan center will walk you through your funding fee refund claim, be aware that you’ll need to provide some documentation to prove your eligibility for a refund. That includes:

•   A copy of your disability award letter — the office may also be able to verify your compensation in your system if you’ve lost the letter

•   A copy of the signed closing documents

•   A copy of your current mortgage statement

Some or all of your VA funding fee may be refunded depending on the eligibility of your claim.

The Takeaway

The VA funding fee is a one-time fee that borrowers must pay to take out a VA loan. It’s due at closing, and the amount varies depending on how much you borrow, the size of your down payment and other factors. First-time VA borrowers always enjoy lower fees than those who take out subsequent VA loans.

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

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

FAQ

What is the typical funding fee for a VA loan?

For a first-time borrower who doesn’t make a down payment as part of their home purchase, the VA loan funding fee in 2023 is 2.15% of the loan amount. So if you borrowed $200,000 in this scenario, the fee would be $4,300.

What is the new VA funding fee for 2023?

Fees now range from 1.25% to 3.3% of the loan amount, depending on your circumstances. The VA home loan funding fee percentage was reduced as of April 7, 2023 by 0.15% in most categories — and 0.3% for those taking out a VA loan that is not their first and who put down less than 5%.

How to avoid VA funding fee

Unless you are eligible for an exemption due to a service-connected disability (or in a few other instances), it’s impossible to avoid the VA funding fee entirely if you’re taking out a VA loan. That said, your funding fee will be lower if you put down a higher down payment. It’s also lower for first-time borrowers than those taking out subsequent VA loans.

Photo credit: iStock/kupicoo

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 and conditions apply. Not all products are offered in all states. See SoFi.com/eligibility 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.

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

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Source: sofi.com