The Federal Reserve left interest rates unchanged at its June meeting. Looking ahead, don't expect a rate cut anytime soon, either. CME FedWatch projects the Fed is likely to keep rates steady again at its July meeting.

The concern about elevated inflation risks, stemming from higher oil costs, suggests that long-term interest rates will likely remain high, as noted by David Payne of the Kiplinger Letter. Even with a resolution for the Iranian conflict, prices won't drop overnight.

For consumers, the Fed's decision has mixed impacts. While it helps savers by keeping annual percentage yields (APYs) higher on savings accounts, it poses a challenge for those carrying debt or needing to borrow for upcoming purchases. I'll explain how this policy can increase borrowing costs, as well as ways to borrow money and avoid higher rates.

How the Fed's decision impacts your credit card APRs, auto loans

The Fed's decision has different implications, depending on the kind of credit you have/want. To illustrate, the annual percentage rate (APR) on credit cards is directly tied to the prime rate.

What is the prime rate? It's the benchmark that banks use to determine how much customers pay for lending products, such as credit cards, auto or personal loans. Since the prime rate is set at the federal funds rate plus 3%, no movement means credit card rates will remain high.

The current average APR on credit cards is 19.56%, per Bankrate. This means if you're carrying a balance of $10,000 and you only make the minimum payment, of around $225, it will take you 81 months to pay it off. It can lead to a hidden cost of more than $8,000 in interest, almost doubling the balance owed.

Meanwhile, lenders will use the prime rate as part of determining the rate you'll pay on an auto loan. If the Fed raised interest rates, it would increase the APR you'll pay for car financing, which could add hundreds to thousands more in total loan costs.

Other factors will also shape what you pay. Your credit score plays a major role, along with the vehicle itself (its make, model and age) and the length of your loan term, all of which lenders use to determine your final rate and total cost.

Does Fed policy impact mortgage rates?

Not directly, as with auto loans or credit cards, but it does play a small part. For longer-term loans, such as fixed-rate mortgages, the 10-year Treasury yield is a better indicator of what you'll pay.

As its name implies, this yield is the government's borrowing cost for a decade. It's a better benchmark because the average homeowner stays in their home around that long, or they'll refinance somewhere along the way.

Who or what influences the yield? Primarily, it's investors who buy mortgage-backed securities. Their expectations on short-term interest rates have an impact because risks are elevated with longer-term investments.

Furthermore, other factors could influence the yield. When inflation becomes higher, as it is now, the 10-year Treasury yield rises. Inflation is currently 4.45%, showing investors are worried about how gas prices will impact the economy.

Another factor is economic policies. When the Fed sets the federal funds rate, it can give investors a window into the future. Holding rates steady could lead to a murky future, in which a wait-and-see approach is best. When confidence in the economy wanes, investors might require higher rates to feel comfortable with their risk.

Is now a smart time to borrow money?

It will be more expensive, but there are things you can do to lower your borrowing costs, depending on your situation:

If you're carrying high-interest debt

With everyday prices rising, it's common for some borrowers to pay the minimum each month. It's frustrating because even though you're making a payment, it doesn't make a dent in your balance.

This is where transferring that debt to a balance transfer credit card with 0% APR can help. Some cards offer generous 0% APR periods of up to 21 months, giving you almost two years to pay down that balance.

There are a few things to consider before taking this approach: Transferring your balance isn't free; usually, lenders charge 3% to 5% of the balance. Some of these cards come with annual fees, which can also take away from your ability to pay off your debt more quickly.

If you decide to go with this approach, I recommend paying as much as you can each month, which can significantly reduce your debt before the introductory period ends. You'll save in interest and take years off your debt repayment. If you have other debts, this can build momentum to help you tackle them next.

You need to make a bigger purchase, but don't have the cash

If you have an immediate need and don't have the cash on hand, it makes sense to consider credit. But there are smarter approaches than using whatever credit card is in your wallet.

To demonstrate, I don't usually recommend store credit cards. They come with sky-high APRs, but if you shop at the same store regularly (Costco, Lowe's, etc.), you might be missing out on some really sweet card perks.

To demonstrate, Costco's Anywhere Visa by Citi offers 5% back on the first $7,000 charged at Costco gas stations. You'll also earn 2% back on Costco purchases. We made this switch because it allowed us to earn cash back on larger purchases and save on everyday costs, such as gas, prescriptions and groceries.

Other store credit cards offer generous interest-free promotional periods from six months to a year. I use these when buying larger appliances. As long as you pay it off within that promotional window, you won't have to incur the higher interest rates.

That said, if your purchase isn't urgent, it might be worth taking a step back and saving first. Even setting aside a portion of the cost can make a difference. Every dollar you pay upfront is one less you'll finance, helping reduce your total interest costs.

One simple way to do this is to treat your savings like a monthly bill. Set aside a fixed amount in your budget and transfer it from your checking account into a high-yield savings account. This creates a consistent habit while allowing your money to grow, with some accounts offering rates up to 4.20% APY.

Use the Bankrate tool below to find the best fit for your needs:

How to use the Fed's decision to your advantage

Ultimately, the Federal Reserve holding rates steady is good news if you’re focused on building savings. But if you’re carrying debt or planning a large purchase, borrowing costs will remain elevated.

To manage that, consider using promotional financing offers, transferring balances to cards with 0% introductory APR periods or delaying the purchase and saving in a high-yield account to take advantage of today’s higher rates while you work toward your goal.

Related content

• How the Federal Reserve Affects Mortgage Rates — and What It Means for Homebuyers in 2026
• After the Fed Meeting, 7 High-Yield Savings Accounts Worth Your While
• Kiplinger Interest Rates Outlook: Long-term Rates to Remain Elevated as Long as Oil Prices Cause Inflation Risk

Before the 2008 housing crisis, some lenders offered homeowners 80/20 “piggyback” loans to help cover a down payment while avoiding private mortgage insurance (PMI). Borrowers took out a second mortgage or HELOC for 20% of the home’s value, leaving the primary mortgage at 80% and eliminating the need for PMI.

When home prices crashed, many of those second mortgages lost value and quietly went dormant. But now, loans long assumed to be settled are resurfacing.

Known as zombie mortgages, they’re catching homeowners off guard — leaving some suddenly on the hook for far more than expected and, in some cases, facing foreclosure.

Why zombie mortgages are resurfacing now

When the Great Recession hit in 2008, home values fell and many homeowners struggled to keep up with second mortgage payments. Some borrowers defaulted, and as prices dropped, those second mortgages became largely worthless to lenders.

In many cases, lenders could have seized and resold the homes, but the math did not work. Sale proceeds often would not have covered even the primary mortgage, so second liens were written off as losses. Collection efforts slowed or stopped altogether, and many borrowers stopped receiving statements. Over time, these loans simply went dormant.

But home values have surged, changing the math behind those once-worthless loans. The median U.S. home price has nearly doubled from about $214,300 in 2009 to more than $405,000 in 2025, according to Federal Reserve Bank of St. Louis data.

That renewed equity has made these old debts valuable again. Debt buyers are purchasing them for pennies and attempting to collect. If homeowners cannot repay, those buyers may move to foreclose and sell the property for a profit.

How big is the problem?

The zombie mortgage problem is widespread. An estimated hundreds of thousands of these second mortgages still exist nationwide, and some homeowners are receiving collection notices decades after they believed the debt had been resolved.

The sudden reappearance can be jarring, and for those unable to pay, the consequences are serious — including the risk of foreclosure, even if they are current on their primary mortgage.

Why homeowners didn't know they still owed the debt

Several factors have led homeowners to believe their second mortgage debt was discharged or resolved. In some cases, borrowers assumed the second loan was included in a modification of their primary mortgage. But if the second loan was held by a different servicer, it often was not included and simply went dormant.

Communication issues have also played a role. Some homeowners received little to no contact from servicers for years, sometimes more than a decade, even as interest continued to accrue in the background.

In other cases, tax documents suggested the debt had been cancelled, and the second mortgage disappeared from credit reports. Together, these signals reinforced the belief that the loan had been resolved, when in reality it remained outstanding.

What happens when a zombie mortgage comes back

A zombie mortgage can quickly turn a homeowner’s finances upside down. Debt collectors often arrive with sudden payment demands, leaving borrowers scrambling to understand a debt they may not have known still existed.

The situation is often compounded by time. Years of missed payments mean interest and fees have continued to build, leaving borrowers owing far more than the original balance.

Even homeowners who are current on their primary mortgage can face foreclosure if they cannot pay the second lien. As a result, many are forced to quickly negotiate repayment plans or risk losing their homes.

Are zombie mortgages legal?

Zombie mortgages are typically legal if the debt was never formally discharged, but there are some grey areas around how the debt is handled.

In 2023, the Consumer Financial Protection Bureau (CFPB) provided guidance to debt collectors, indicating that foreclosing on homes with mortgages that are past the statute of limitations may violate the Fair Debt Collection Practices Act.

According to the National Consumer Law Center Digital Library, the statute of limitations for foreclosures varies from state to state, but in many jurisdictions, the statute of limitations for foreclosures is six years.

Debt collection practices have also raised concerns. Some debt buyers use aggressive tactics, including threatening foreclosure on loans that have been dormant for years. In some cases, documentation has been called into question. Bloomberg has reported on families contacted by collectors whose records appeared inconsistent, including instances where documents were dated years before the debt was actually acquired.

Regulatory oversight remains uncertain. The CFPB was working to address the gray areas of zombie mortgages, but its work is still in limbo after the Trump Administration ordered the Bureau to stop all work in 2025, according to CNBC. Consumer Reports states that CFBP employees filed a lawsuit to stop mass layoffs, but most of the Bureau’s enforcement actions have been dropped, leaving consumers with fewer protections as these cases resurface.

How these old loans can resurface

Zombie mortgages are often tied to second mortgages or HELOCs issued during the early 2000s housing boom. After a foreclosure, refinance or bankruptcy involving the primary mortgage, the second lien may have gone quiet, leading homeowners to assume it was dismissed or satisfied.

In many cases, however, the loan was never formally released, even if statements stopped arriving. Over time, those dormant loans were sold to debt buyers, who can attempt to collect years later. With home prices rising, these old second mortgages have become more valuable, making them an attractive target for collection.

Many homeowners only discover the debt when they try to refinance or sell their home. Others are alerted by a notice from a new loan servicer demanding payment. In some cases, the loan surfaces during a review of property or title records.

How today's borrowing trends echo the past

Today’s borrowing trends are increasing the likelihood of another wave of zombie mortgages. According to HousingWire, rising property taxes, higher home insurance costs and elevated home prices have made refinancing or moving less practical for many households.

Instead, more homeowners are turning to second liens and HELOCs to tap their home equity for large expenses, increasing the use of these types of loans.

While these tools can serve a purpose, the growing risk of zombie mortgages highlights the pitfalls tied to second liens and HELOCs. These loans can become problematic when borrowers lose track of terms, balances or servicing changes over time.

The lesson is practical: homeowners should closely review loan documentation, monitor balances and not assume a debt has been resolved simply because statements stop arriving.

Periodically checking property and title records can help confirm whether a second lien is still attached to the home and reduce the risk of costly surprises later.

Related content

• Americans, Even With Higher Incomes, Are Feeling the Squeeze
• The Best Week to Sell Your Home in 2026 Could Boost Your Price
• Mortgage Rates Are Rising Again — Here's What You Should Do

After briefly dipping earlier this year, average 30-year mortgage rates have jumped from roughly 5.99% to around 6.38% in a short window, according to Freddie Mac.

That's not a dramatic spike compared with the highs of 2023, but it's enough to rattle a housing market that was already on edge heading into the spring buying season.

For buyers, sellers and homeowners hoping to refinance, the latest move underscores a frustrating reality: The housing market is not following a smooth recovery path. Instead, it's reacting in real time to inflation concerns, global instability and shifting expectations about where interest rates are headed next.

Mortgage rates are moving higher again

The recent rise in mortgage rates reflects a broader shift in the economic outlook. Rates don't move in isolation. They're closely tied to the 10-year Treasury yield, which has been climbing as investors price in renewed inflation risks.

Those risks have been amplified by rising oil prices, ongoing geopolitical tensions and concerns about supply chain disruptions.

Even a modest move from 6.0% to 6.5% can have an outsize effect on buyer behavior. Housing affordability is already stretched, and many buyers are highly sensitive to changes in monthly payments. When rates move quickly, hesitation tends to follow.

What's pushing mortgage rates higher right now

Several forces are converging at once:

• Inflation expectations are rising again. Energy costs, shipping disruptions and broader supply pressures are feeding concerns that inflation might stay elevated longer than expected.
• Oil price volatility is back in focus. Higher energy costs ripple through the economy, influencing everything from construction materials to transportation.
• Geopolitical instability is adding uncertainty. Global conflicts and trade disruptions are pushing investors toward safer assets and driving bond market volatility that directly impacts mortgage rates.

It’s also important to keep in mind that mortgage interest rates don't move directly with Federal Reserve rate decisions. Instead, they reflect where investors think inflation and economic growth are heading over the long term.

The housing market was already softening before rates jumped

This latest mortgage interest rate increase is landing on a housing market that was already showing signs of strain.

Recent data from Redfin shows that 13.7% of pending home sales fell through in February, the highest cancellation rate since 2017 and up from 12.8% a year earlier. That is a clear signal that buyers were already struggling to follow through on purchases.

Affordability remains the central issue. Even when home prices stabilize or dip slightly, higher borrowing costs can quickly offset any savings. In other words, the math matters more than the listing price.

Buyers are gaining leverage — but it's complicated

There is one notable shift working in buyers' favor: Inventory is rising.

In many markets, there are now more sellers than buyers, creating a near-record gap. That imbalance is giving buyers more negotiating power than they've had in years.

In many markets, this is showing up as:

• More price reductions
• Seller concessions (closing costs, rate buydowns)
• Greater flexibility around inspections and contingencies

Here's the catch: Higher mortgage rates can erase those advantages.

Even if you negotiate a lower purchase price, your monthly payment might still be higher than it would have been a few months ago. That tension is what's keeping many buyers on the sidelines.

What higher rates mean for monthly payments

Small changes in rates can translate into meaningful differences in affordability. For example, on a typical mortgage, moving from 6.0% to 6.5% can increase both your monthly payment and raise total borrowing costs over time.

That roughly $130 monthly difference can translate into about $48,000 more in interest over the life of the loan.

This is why buyer behavior tends to shift quickly when rates move. It's not just psychological; it's also mathematical. When monthly payments cross a certain threshold, deals are more likely to fall apart as budgets get stretched and buyers pause their search.

Refinancing is getting pushed further out of reach

For homeowners, the current rate environment is keeping refinancing activity subdued. Most borrowers locked in mortgage rates below 4% or 5% in recent years. Compared with today's ~6.5% mortgage interest rates, refinancing into a higher rate doesn't make financial sense for most.

That said, there are still a few scenarios where refinancing might be worth considering:

• Cash-out refinancing to consolidate high-interest debt or fund home improvements
• Borrowers who purchased at peak rates (around 7% or higher) who might benefit from even a modest reduction

Still, for the majority of homeowners, refinancing is likely to remain on hold unless rates fall substantially.

What to watch next

Mortgage rates don't move randomly. They respond to broader economic signals, many of which are shifting right now.

Energy markets will be a key factor to watch, particularly oil prices. Rising energy costs can feed into inflation, which tends to push mortgage rates higher. At the same time, inflation reports such as the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) will provide important clues about whether price pressures are easing or persisting.

Investors will also be closely tracking movements in the 10-year Treasury yield, which mortgage rates tend to follow. If yields continue to rise, borrowing costs for homebuyers are likely to remain elevated.

Within the housing market itself, trends in inventory, price reductions and buyer behavior (including cancellation rates and time on market) will help signal how much pressure higher rates are putting on demand.

Taken together, these factors suggest that mortgage rates might remain volatile in the near term, rather than settling into a steady downward trend.

What buyers and homeowners can do now

In a market like this, strategy matters more than timing perfection.

For buyers

Instead of trying to perfectly time the market, buyers might benefit from focusing on affordability and flexibility. This means prioritizing a monthly payment that fits comfortably within your budget, even if rates fluctuate.

It's also important to shop around and compare mortgage offers from multiple lenders, as interest rates and fees can vary more than usual in a volatile environment. Buyers might also have more room to negotiate right now, including asking sellers for closing cost assistance or temporary rate buydowns to lower upfront costs.

For homeowners

Homeowners should approach refinancing decisions carefully and avoid rushing into a new loan without a clear financial advantage. In many cases, keeping an existing low-rate mortgage will make more sense than refinancing at today's higher rates.

For those who need access to cash, alternatives such as a home equity line of credit (HELOC) or a structured repayment plan for other debts might be worth exploring instead.

For both

Both buyers and homeowners should be prepared for continued rate volatility and avoid making decisions based solely on short-term market movements.

The most important factor is how a housing decision fits into your broader financial picture, including your income stability, long-term plans and comfort with monthly costs.

If you're curious about today's rates, use the tool below, powered by Bankrate, to explore and compare some of today's top offers:

Related Content:

• 5 Ways to Shop for a Low Mortgage Rate
• The Best Week to Sell Your Home in 2026 Could Boost Your Price
• What to Watch for When Refinancing Your Home Mortgage

As mortgage rates ease from their recent highs, home equity lines of credit (HELOCs) are regaining traction among homeowners looking for flexible ways to borrow.

At the same time, many homeowners are sitting on record levels of equity after years of rapid home price growth that began during the pandemic. That combination is driving a shift away from cash-out refinancing and toward HELOCs as a more adaptable financing option.

But HELOCs aren't the same as they were a few years ago. New lender rules, evolving rate dynamics and tighter borrowing requirements are changing how these loans work in practice. Understanding those changes is key to deciding whether a HELOC fits your financial strategy in 2026.

What's changing with HELOCs and why it matters

A growing shift toward nonbank lenders is reshaping how HELOCs are structured. In the past, banks and credit unions dominated the market and typically allowed homeowners to open a line of credit without requiring an immediate draw.

Today, nonbank lenders, including institutional investors and fintech companies, are introducing stricter terms. Some now require borrowers to draw a minimum percentage of the credit line upfront, which can limit flexibility and might not align with how many homeowners prefer to use a HELOC.

Traditionally, many homeowners used HELOCs like a credit card, drawing only what they needed, repaying it, and borrowing again as needed. But that flexibility is starting to change. According to HELN News, some lenders are beginning to require an initial draw of 50% or more of the credit line, with certain products requiring even higher amounts. These requirements move away from the traditional borrow-as-you-go model.

Being forced to take a larger upfront draw can significantly increase the costs of a HELOC. Borrowers might end up paying interest on money they do not need yet, while also taking on higher monthly payment obligations. That added financial strain can become risky, especially if income changes unexpectedly.

How HELOC rates really work (and why timing matters)

HELOC rates are variable, which means they can change over time based on broader interest rate movements. Most HELOCs are tied to the prime rate, which is closely influenced by decisions made by the Federal Reserve. According to The Mortgage Reports, changes in Fed policy can filter through to HELOC rates and monthly payments within weeks.

The Federal Reserve sets the federal funds rate, a key benchmark that influences borrowing costs across the economy. When the Fed raises or lowers that rate, banks typically adjust the prime rate in response. Because HELOCs are priced using the prime rate plus a lender margin, those changes can directly affect how much borrowers pay, both now and over the life of the line of credit.

The Federal Reserve cut the federal funds rate several times in late 2025 but has held rates steady at its most recent meetings. As a result, HELOC rates remain relatively elevated, hovering in the low-to-mid 7% range, according to Bankrate. While many forecasts call for rates to gradually decline this year, that path is far from certain.

Borrowers opening a HELOC now could benefit if rates move lower. But variable rates cut both ways. With economic conditions still uncertain, there is also a risk that rates stay higher for longer or even rise again, which would push HELOC payments up over time.

How to compare HELOC offers like a pro

Since every lender sets their own HELOC terms and rates, it's important to shop around and compare offers. Consider the following factors as you evaluate HELOC offers:

• Look for draw flexibility: Choose a HELOC with no minimum initial draw requirement. The ability to borrow only what you need, when you need it, can help reduce interest costs and keep payments manageable.
• Compare margin and index, not just the teaser rate: Introductory rates are temporary and often last 12 months or less. Focus on the lender's margin and the index, typically the prime rate. Together, these determine your long-term rate once the teaser period ends.
• Check rate caps and adjustment frequency: HELOC rates can adjust as often as monthly. Most lenders set a lifetime cap on how high your rate can go, and some include periodic caps that limit how much it can increase at one time. These details directly affect your risk and potential payment changes.
• Watch fees closely: HELOCs can come with appraisal, application and title fees, along with ongoing costs like annual maintenance or inactivity fees. Closing costs might range from little to no upfront cost to as much as 2% to 5% in some cases.

Use the tool below to explore and compare some of today's top home equity offers:

When a HELOC makes sense — and when it doesn't

HELOCs can be a good fit in certain situations, particularly for home improvement projects where costs might change and funds are needed in stages. They can also help cover short-term liquidity needs, giving you flexibility to borrow and repay as expenses arise.

Some homeowners use a HELOC to consolidate higher-interest debt. While this can lower borrowing costs, it comes with added risk. Because HELOCs have variable rates and are secured by your home, missed payments could put your property at risk.

In other cases, a HELOC might not be the right choice. If your income is unpredictable or you might struggle to keep up with payments, the risk increases significantly. HELOCs are also less suitable for long-term borrowing, where a fixed-rate loan can offer more stability and predictable payments.

Keep in mind that payments can rise over time. If you aren't confident you can handle higher costs down the road, a HELOC might not be the best option.

Alternatives that might offer better value

Several alternatives might provide a better value and better overall fit than a HELOC:

• Home equity loan: A home equity loan offers a fixed interest rate and predictable monthly payments, which can make budgeting easier over time. This stability can provide peace of mind compared with a variable-rate HELOC.
• Cash-out refinance: A cash-out refinance replaces your existing mortgage with a larger one, allowing you to take a portion of your home equity as cash. With rates still relatively high, this option might not make sense right now, but it could become more attractive if borrowing costs decline.
• 0% introductory APR credit card: If you have strong credit, you might qualify for a card with a 0% introductory APR for 12 to 21 months. This can be a cost-effective way to finance short-term expenses. However, once the promotional period ends, rates can jump significantly, often into the teens or higher, so any remaining balance could become expensive quickly.

Smart borrowing strategies Kiplinger readers can use

If you're considering a HELOC, put smart borrowing strategies to use:

• Borrow in stages: Rather than maxing out your line with a large initial draw, borrow in stages as you need the money. This strategy can help avoid paying interest on funds that you didn't actually need.
• Lock in fixed-rate portions: Some lenders give you the chance to convert part of your HELOC balance into a fixed-rate loan. This option offers more predictable interest and payments, while the remainder of your HELOC retains that variable interest rate.
• Use a HELOC as a tool: HELOCs are a tool to help with short-term funding needs. They're not ideal as a long-term crutch. If you need a long-term funding solution, look at other options, such as a home equity loan.
• Match borrowing to ROI: Consider the return on investment (ROI) you'll get from a HELOC. For example, you might use the funds for a renovation that can significantly increase your home's value. Make sure that the ROI justifies the cost and the potential risk of a HELOC.

Used strategically, HELOCs can be valuable tools to help with your short-term funding needs. Just be sure that you understand how this tool works and that it's really the best option for your needs.

Related Content

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• What Home Equity Is and Why It's a Valuable Long-Term Investment
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If you're thinking about selling your home this year, timing could make a bigger difference than you expect.

New housing market data point to a key window in mid-April that might give sellers an edge. Listing during this period could lead to stronger buyer demand, higher offers and fewer price cuts compared with other times of the year.

There is no perfect week for every seller. But understanding seasonal trends can help you position your home more strategically and potentially walk away with thousands more at closing.

Why mid-April gives sellers an edge

Real estate follows predictable seasonal patterns, and spring consistently stands out as the busiest time of year. Within that season, mid-April often hits a sweet spot.

By then, buyer activity is ramping up, but inventory has not fully caught up. That imbalance can work in a seller's favor.

Several factors come together during this window:

• High buyer demand. Many buyers begin their searches in early spring and are ready to act by April
• Rising seasonal prices. Home values typically trend upward as the spring market heats up
• Less competition. More listings arrive later in the season, giving early sellers a head start

Warmer weather also improves curb appeal, making homes show better both online and in person. Buyers are also motivated to secure a home before summer, especially families hoping to move before the next school year.

How timing can impact your sale price

When you list your home can directly influence how much buyers are willing to pay and how much leverage you have during negotiations.

Homes that hit the market during peak demand periods, such as mid-April, tend to benefit from increased buyer activity. More buyers competing for a limited number of homes can drive stronger offers, sometimes even leading to bidding wars. That kind of competition often translates into a higher final sale price.

There are a few key ways timing can boost your bottom line:

• More competitive offers: When multiple buyers are actively searching at the same time, sellers are more likely to receive offers at or above asking price.
• Stronger negotiating power: Sellers might be able to negotiate better terms, such as fewer contingencies or flexible closing timelines.
• Fewer price reductions: Homes listed during high-demand windows are less likely to sit on the market, reducing the need for price cuts.

Even small differences in timing can have a meaningful financial impact. For example, selling for just 2% to 3% more during a peak week could mean an extra $6,000 to $9,000 on a $300,000 home, and significantly more in higher-priced markets.

The ripple effect goes beyond the sale price. A faster sale can reduce carrying costs such as mortgage payments, utilities and property taxes, while also lowering the risk of price cuts if the home sits on the market.

Why 2026 might look different

While seasonal trends still matter, the 2026 housing market isn’t identical to the frenzied conditions of recent years.

Inventory has been gradually increasing, and homes in some areas are taking longer to sell. According to the National Association of Realtors (NAR), existing-home sales rose 1.7% month over month in February but were still down 1.4% from a year earlier, a sign that demand remains uneven.

At the same time, price growth has slowed. The median existing-home price reached $398,000, up just 0.3% year over year, suggesting the market is stabilizing after years of rapid gains.

Supply is also improving, though not dramatically. Housing inventory increased to about 1.29 million homes, but economists note it's still growing slowly, which continues to limit affordability in many markets.

As NAR Chief Economist Lawrence Yun put it, "Inventory is growing, but sluggishly," adding that if demand outpaces supply, prices could continue to rise. At the same time, mortgage rate fluctuations continue to shape buyer demand and affordability.

That means:

• Buyers might have slightly more leverage than during the pandemic-era market
• Sellers might need to price more carefully and focus on presentation
• Timing alone won't guarantee a bidding war

Your local market matters more than national trends

National data can provide helpful guidance, but real estate is ultimately local. For example, some Midwest and Northeast markets might see stronger seasonal demand. Parts of the South and West might also have more inventory, increasing competition.

Micromarket factors such as neighborhood demand, school districts and local job growth can influence how quickly homes sell and at what price.

This is why it's important to review recent comparable sales ("comps") in your area and pay attention to how long homes are staying on the market. You might also want to work with a local real estate agent who understands your market dynamics.

When it might make sense to sell outside spring

While spring gets most of the attention, it's not the only time to sell successfully. In the fall, there is typically less competition, and buyers tend to be more serious.

During winter, the market does slow down, but buyers are often highly motivated due to job relocations or timing needs.

In many cases, your personal situation matters more than the calendar. You might need to sell because of a job change, family needs, financial goals or lifestyle shifts. In those situations, waiting for the "perfect week" might not be practical, and that's OK.

How to prepare now if you want to sell this spring

If you're aiming for a mid-April listing, preparation should start well in advance. Experts often recommend beginning at least four to six weeks before your target listing date.

A simple prep checklist includes:

• Decluttering and staging your home to appeal to buyers
• Handling minor repairs and touch-ups
• Setting a competitive price based on local data
• Interviewing multiple real estate agents to find the right fit

One of the most common seller regrets is waiting too long to prepare. Getting an early start can help you avoid rushed decisions and position your home more effectively.

The bottom line

Mid-April is shaping up to be a statistical sweet spot for home sellers in 2026, offering a potential boost in price and buyer interest.

But timing is only one piece of the puzzle.

To get the best results, focus on pricing strategically, preparing your home early and understanding local market conditions. Timing can help, but a strong overall strategy is what ultimately sells your home.

Thinking of making a move? Use the tool below to explore and compare some of today's top mortgage offers:

Related Content:

• 6 Myths About Downsizing in Retirement
• How the Federal Reserve Affects Mortgage Rates — and What It Means for Homebuyers in 2026
• Kiplinger Housing Outlook: Existing-Home Sales Fall Despite Lower Mortgage Rates

While inflation has slowed, affordability continues to be a key issue for many Americans. Here, Kiplinger speaks with Matt Schulz, chief consumer finance analyst at LendingTree and author of Ask Questions, Save Money, Make More about affordability and what people can do to get by.

It seems that most Americans, even many with higher incomes, are facing affordability issues these days. Is this something you're seeing in LendingTree data?

Yes, it's clear that affordability issues aren't just hitting lower-income Americans. For example, data from a recent report we put out on rising theft from self-checkout showed that the biggest reason people steal is because prices are high — and, surprisingly, self-checkout users making $100,000 or more a year are more likely to say they've intentionally taken an item without scanning. We've also found in a recent survey that the higher your income is, the more likely you are to say you expect to use a buy now, pay later plan, splitting the cost of an item into four no-interest payments, for an upcoming purchase.

Still, while many people are struggling, many others, especially those with higher incomes, are thriving. They're spending confidently because they feel good about their financial situation.

Recently, the Trump administration floated the idea of 50-year mortgages as a way to improve housing affordability. Would that help would-be home buyers?

I get the appeal, but the math just doesn't work. Our analysis found that with a $500,000 mortgage at a 6.1% interest rate, your payment might drop from $3,030 a month to around $2,700. But you would pay an eye-popping $1.1 million in interest on a 50-year loan — 86% more than the $590,000 in total interest you might pay on a 30-year mortgage.

You also build equity very slowly. Even after 40 years, you would have paid down only 52% of the principal. The average first-time home buyer now is close to 40 years old. Taking out a mortgage that you would not pay off until you are 90 seems ill advised.

Auto loans are another challenge for people, given how expensive new cars are now. What issues are you seeing?

We're already seeing terms getting longer with auto loans — six or seven years, versus the usual three to five. The initial loan balance, which now averages around $42,000, is not as high as a mortgage, but it's still a lot of money stretched out over a long time, especially with something that depreciates in value as quickly as a vehicle. If you need to finance a car for that long, you may want to consider whether that's the right vehicle for you. Used cars have gotten more expensive, but they can still save you money.

Many people are also struggling with credit card debt. Does that include higher-income households? What strategies can help?

It's a real pain point. And higher-income consumers definitely still wrestle with debt, in part because they have more access to credit and may be able to get a higher spending limit. The higher the limit, the more opportunity for debt.

Recently, the national average for card debt among cardholders with unpaid balances was $7,321, up from $6,921 a year ago, with interest rates averaging 24% on new card offers. If you have good credit, moving your debt to a balance-transfer card with a 0% introductory rate is your best weapon. Or simply call and ask for a lower rate. Last year, we found that 83% of those who asked got their request granted, with a reduction of 6.7 points on average.

You point out in your book that you can use that tactic with other businesses, too. What's the best way to negotiate a better deal?

Try to make a connection with the person on the other end of the phone or standing in front of you. It can help to give them a reason for giving you a lower rate for, say, a streaming service, or waiving a bank fee. Perhaps you're a longtime customer, or you have a personal emergency.

Do your homework, so you can point to the cheaper pricing available from competitors. Sometimes, if you don't get that lower rate, you may get a counter-offer with other perks — maybe a better hotel room or discounts on other purchases. Try not to leave money on the table.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Mortgage rates are still a lot higher than they were just a few years ago, and that’s making both buyers and sellers look for creative ways to make the numbers work. One option getting fresh attention in 2026 is the assumable mortgage.

It’s a little-known feature that could allow a buyer to take over a seller’s existing low-rate home loan instead of applying for a new one. In the right situation, that could mean locking in a mortgage rate closer to 3% when new loans are hovering around 6% or more. That kind of difference can significantly change monthly payments and long-term affordability.

While assumable mortgages aren't common, they're worth understanding, especially if you plan to buy or sell a home this spring and want to be prepared if the topic comes up.

So what exactly is an assumable mortgage?

At its core, an assumable mortgage is pretty simple: instead of getting a brand-new home loan, the buyer takes over the seller's existing mortgage.

That means the buyer assumes whatever is left on the loan like the interest rate, remaining balance, repayment timeline and terms. If the seller locked in a below-market rate a few years ago, the buyer may be able to keep that same rate today.

So rather than starting over with a new 30-year mortgage at current market rates, the buyer essentially steps into the seller's loan. It can feel a bit like inheriting a better deal from a different housing market era, but it still requires lender approval and careful planning.

In practice, finding a home with an assumable mortgage — and a seller willing to offer it — can take extra effort.

Why assumable mortgages matter right now

Assumable mortgages are getting renewed attention because of where interest rates are today.

Many homeowners purchased or refinanced when mortgage rates were between 2% and 4%. In early 2026, mortgage rates nationally are closer to the mid-6% range. That gap can make a noticeable difference in monthly payments.

For example, taking over a loan with a 3% rate instead of getting a new mortgage at 6.5% could save a buyer hundreds of dollars each month. Over time, that could mean tens of thousands in interest savings. One key detail: the loan term doesn't reset, so a mortgage with 25 years left stays a 25-year loan.

In a market where affordability is still tight, even modest payment reductions can help buyers qualify for a home or simply feel more comfortable with the long-term cost.

For sellers, offering a low-rate assumable mortgage can make a listing more attractive in a high-rate market and potentially help it stand out.

Which loans can be assumed?

Not every mortgage can be assumed, so this is where things can get a little more specific.

Most assumable loans are government-backed mortgages, including:

• FHA loans
• VA loans
• USDA loans

These programs typically allow assumptions, though buyers still need to qualify with the lender.

Most conventional mortgages, on the other hand, aren't assumable unless the lender specifically permits it and that's not very common. As a result, assumable mortgages remain more of a niche option than a mainstream financing strategy.

How the assumption process works

While the idea sounds straightforward, the process of assuming a mortgage involves a few extra steps.

Here's the general flow:

1. Buyer and seller agree on the purchase.

Both parties decide to move forward with a mortgage assumption as part of the sale.

2. Buyer applies with the current lender.

The buyer must go through a qualification process similar to applying for a new mortgage.

3. Lender reviews finances.

Credit score, income, debt and employment are evaluated to confirm the buyer can handle the loan.

4. The equity gap gets addressed.

If the home is worth more than what’s left on the mortgage — which is often the case — the buyer must cover the difference, sometimes with a large upfront payment or a second loan at today's higher rates.

5. Closing and transfer.

Once approved, the mortgage transfers to the buyer and the home sale is finalized.

The timeline can vary depending on the lender. Some are set up to handle assumptions smoothly, while others may take longer, so patience can be required. In some cases, assumptions can take longer than a traditional closing, depending on how quickly the lender processes the request.

When an assumable mortgage can make sense

Assumable mortgages tend to shine when a few key factors line up.

They can be especially appealing when:

• There’s a big gap between the existing mortgage rate and today’s rates
• The lower payment helps the buyer qualify more easily
• The buyer plans to stay in the home for many years
• The seller hasn’t built up too much equity yet
• The buyer has enough cash to cover upfront costs
• The loan is FHA or VA, which are commonly assumable

Over time, locking in a much lower rate can lead to meaningful savings. For buyers planning to stay put long term, the math often looks better the longer they hold the loan.

When the numbers don’t work as well

Even with a great interest rate, assumable mortgages aren't always the best move.

Here are a few situations where they may be less appealing:

• The seller has built significant equity, requiring a large upfront payment
• The buyer needs a second mortgage at today's higher rates
• A lot of cash gets tied up in the purchase
• Assumption fees and paperwork slow things down
• Sellers prefer faster offers in competitive markets

Sometimes a traditional mortgage, even with a higher rate, can be simpler or offer more flexibility.

Use the tool below to search for some of today's top mortgage offers, powered by Bankrate:

Watch for the less obvious costs

A low interest rate can be appealing, but buyers still need to look at the full picture.

Some assumable loans come with extra considerations, such as:

• Ongoing mortgage insurance: If the loan is an FHA mortgage, it may come with a mortgage insurance premium (MIP) that lasts for the life of the loan. That monthly cost can increase the total payment and should be weighed against the benefit of the lower interest rate.
• VA entitlement considerations: If a VA loan is assumed by a non-VA buyer, the seller’s VA entitlement may remain tied to the property. That can limit their ability to use a VA loan again until the mortgage is paid off or refinanced. In some cases, this can be avoided if another eligible veteran assumes the loan and substitutes their entitlement.
• Assumption and processing fees: Lenders typically charge administrative and assumption fees to transfer the loan. While often lower than traditional closing costs, they can still total several hundred to a few thousand dollars and should be factored into the overall deal.
• Escrow and servicing differences: Assuming a mortgage means taking over the lender’s existing servicing setup, including escrow requirements for taxes and insurance.
• Second financing costs: If the home's value exceeds the remaining loan balance, buyers may need a second loan or a large cash payment to cover the difference. That additional financing will likely come at today's higher interest rates, reducing some of the assumed loan's savings.
• Potential appraisal or repair requirements: Some lenders may still require a home appraisal or certain property conditions to be met before approving an assumption. Any required repairs or updates could add to the buyer's upfront costs depending on how the contract is negotiated.

These details don't necessarily make an assumable mortgage a bad deal, but they're worth understanding before moving forward.

Compare all your options first

Before committing to an assumable mortgage, it helps to run the numbers side by side with a traditional loan.

Look at:

• Monthly payments under each option
• Total interest paid over five, 10 and 20 years
• Cash needed at closing
• Flexibility to refinance later
• Overall long-term affordability

In some cases, a new 30-year mortgage could still offer lower monthly payments, especially if the assumed loan has a shorter remaining term or high insurance costs.

It’s a niche tool, not a shortcut

Assumable mortgages aren't for everyone, and they're not a magic fix for affordability challenges. But in the right situation, they can be a powerful tool.

They tend to work best for buyers who are financially prepared, planning to stay in the home long term and are comfortable navigating a slightly more complex process. For sellers, having an assumable low-rate mortgage can help a home stand out in a higher-rate market.

Even if you don’t end up using one, understanding how assumable mortgages work can help you ask better questions, or answer them, as the spring housing market gets underway.

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Refinancing replaces your current mortgage with a new loan, often to lower your interest rate, shorten your loan term or lock in a fixed rate. Some homeowners also choose a cash-out refinance, which lets you tap your home’s equity and receive a lump sum for larger expenses.

As housing markets shift and personal finances evolve, many homeowners periodically reassess whether their mortgage still fits their needs. Changes in income, home equity, debt levels or long-term plans can all create opportunities, or reasons to consider refinancing.

Still, refinancing isn’t automatically a win. Closing costs, extended loan terms and aggressive lender offers can quietly add thousands of dollars to your total cost. Before you apply, it’s important to understand the warning signs, run the numbers and make sure a refinance truly aligns with your financial goals.

Warning signs and red flags to watch for

Refinancing can be financially smart, but not every offer is created equal. Some lenders rely on confusing terms, aggressive marketing or hidden costs that can quietly increase what you’ll pay over time.

Be aware of warning signs and red flags that you might see when refinancing a mortgage:

• Too-good-to-be-true offers: If a refinance offer seems to be too good to be true, it probably is. Look out for aggressive pitches and offers designed to be irresistible, such as unbelievably low interest rates.
• No closing costs: Refinancing comes with closing costs, but some offers roll those costs into the loan amount, increasing your debt and the amount you’ll pay in interest. “No closing cost” offers should be reviewed carefully.
• Upfront fees: Most lenders won’t require you to pay any large fees upfront when refinancing a mortgage; you’ll just be responsible for closing costs at the closing. If the loan terms outline upfront fees, you may not be working with a legitimate lender.
• Excessive pressure: Refinancing a mortgage is a big decision, and you should take your time researching lenders before you decide to refinance. If a lender or broker is pressuring you to quickly decide to refinance, walk away.

Do the math: Rates, costs and break-even

Refinancing your home can help you get a lower interest rate, but you’ll also need to pay closing costs. Calculating your break-even point, which is the point at which your interest savings will cover the closing costs, can help you determine whether refinancing makes sense.

To get started, add up all of your closing costs, including lender fees, title costs and escrow services. You’ll also need to determine how much your new mortgage will save you per month; you can do that by subtracting your new monthly mortgage payment from your old monthly mortgage payment.

To calculate your break-even point, divide your total closing costs by your monthly savings. The resulting figure is the number of months that it will take before your savings will cover the closing costs and you’ll break even.

For example, if your closing costs are $6,000, and you’ll save $250 per month, it will take 24 months before you break even on your refinancing.

A common rule of thumb can help you decide when to refinance. If you have a 30-year mortgage, a 0.75% drop in interest rates will usually result in positive savings after three years, often justifying the cost of refinancing. With a 1% drop, you’ll break even in about 20 months.

Generally speaking, if interest rates have dropped by 0.5% or less, refinancing may not be worth it, since you won’t reach your break-even point in a reasonable amount of time.

When you refinance, you have the option to extend the loan term, taking a longer time to pay down your mortgage. Extending the loan term on a 30-year refinance could end up costing you more over time, since it starts amortization over again.

When you start paying on your new 30-year mortgage, your initial payments are interest-heavy, which increases your cost. Even if you have a lower interest rate, the longer mortgage term and interest could mean you’ll ultimately pay more. To avoid this scenario, consider refinancing while maintaining your loan term or even shortening your mortgage to a 15-year term if you can comfortably afford the payments.

Other financial traps you might overlook

Even if you avoid obvious red flags, refinancing can still come with less visible costs that affect your long-term finances. Understanding these potential traps can help you make a more informed decision.

Be aware of several other refinancing traps that could cost you money:

• Closing costs: Refinancing closing costs can range from 2% to 6% of your total loan amount, on average. If you have a $400,000 mortgage, your closing costs could be $8,000 to $24,000. Make sure that you understand these costs before you close on your refinance.
• New loan terms: Your new loan terms could delay your payoff or increase your mortgage’s lifetime interest. Carefully read the refinance terms and make sure you understand how they will impact your mortgage going forward.
• Mortgage insurance and equity requirements: If you refinance with less than 20% equity on a conventional loan, you’ll typically need to pay private mortgage insurance until you rebuild sufficient equity, which increases your monthly costs.

How to shop and compare refinance offers

Different lenders offer different terms and interest rates, so it’s important to shop around and compare quotes from different lenders. Request at least three quotes from different lenders and pay attention to factors like interest rates, closing costs and loan terms.

Consider getting offers from credit unions, online lenders and mortgage brokers, since they may offer lower interest rates and better overall terms than larger traditional banks and lenders.

Who should not refinance right now

Refinancing can offer benefits to some homeowners, but make sure that it makes sense for your specific situation. For example, if your refinance break-even point is in five years, but you plan to move within the next two years, refinancing doesn’t make financial sense, and you’ll pay more to refinance than you’ll save. Think about how long you plan to stay in your home to determine if you should refinance now.

You also need sufficient equity in your home to be able to refinance. According to A+ Federal Credit Union, you’ll generally need at least 20% equity in your home. Some lenders will work with you if you have less equity, but chances are you’ll need to pay private mortgage insurance until you build up 20% equity again, which adds onto the cost of refinancing and pushes your break-even point further out.

If you don’t have a strong credit score, refinancing may not make sense, either. Lenders often consider borrowers with poor credit scores as being higher risk, so they charge a higher interest rate to make up for that risk. If you’re refinancing to take advantage of a lower interest rate, you may not qualify for that interest rate, especially if your credit score has dropped since you initially bought your home.

Practical next steps before you apply

Before you apply to refinance a mortgage, do some calculations to determine if it makes financial sense. The Navy Federal Credit Union’s mortgage refinance calculator makes it easy to see how much refinancing could save or cost you.

Take some time to talk with a trusted financial adviser or mortgage professional about your goals and what you should consider when refinancing. These experts can provide advice tailored to your specific situation and can also help you spot potential financial pitfalls.

Curious about today's refinance interest rates? Use the tool below, powered by Bankrate, to explore and compare some of today's top offers:

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For homebuyers struggling with today's higher mortgage rates, new construction communities are suddenly full of tempting offers: 4% mortgage rates when the market is closer to 6% or 7%, tens of thousands of dollars in closing cost credits, or "free" upgrades thrown in at signing.

These incentives aren't necessarily a trick, and they're not all bait and switch. But they're also not free money. Builders are using financial carrots strategically, and buyers who don’t understand how those deals are structured can end up paying more over time.

Here's how builder mortgage incentives work, where the catches tend to be and how to decide whether a deal makes sense for your budget.

Why builders are leaning on incentives instead of price cuts

Many large homebuilders are sitting on completed or near-completed inventory at a time that affordability is stretched and buyers are highly rate-sensitive. Instead of slashing sticker prices, which can upset previous buyers, hurt appraisals and reset neighborhood comps, builders often prefer incentives.

Mortgage rate buydowns and closing cost credits allow builders to advertise lower monthly payments without officially reducing the home's base price. That protects perceived value while helping buyers qualify.

For buyers, this can feel like a win-win. But the structure of those incentives matters more than the headline number.

What builder credits and rate buydowns look like

Builder incentives typically fall into a few common buckets, and they're often bundled together.

Temporary and permanent rate buydowns

A temporary buydown lowers your interest rate for the first one to three years. For example, a 2-1 buydown might reduce your rate by 2% in year one and 1% in year two before reverting to the full rate.

A permanent buydown reduces the rate for the entire life of the loan, usually by paying upfront points (a percentage of the loan amount paid at closing to lower the interest rate).

Closing cost credits

Builders might offer credits to cover lender fees, title insurance, escrow or prepaid taxes. This can significantly reduce the cash you need at closing, especially for first-time buyers.

Free upgrades or appliance packages

Instead of cutting prices, builders might include premium flooring, countertops, landscaping or appliances. These perks can feel valuable, but they don't lower your mortgage payment.

Preferred lender requirements

Most of the best incentives are tied to using the builder's preferred lender. If you bring your own lender, the offer often shrinks or disappears.

Use the tool below, powered by Bankrate, to search some of today's top mortgage offers:

The catch: Where buyers might pay more

Builder incentives usually come with trade-offs, and they're not always obvious upfront. Here are some things to consider.

Higher home prices to offset incentives

In some cases, the cost of the rate buydown or credit is baked into the home price. You might get a lower rate, but you’re financing a higher balance.

Limited lender choice

Preferred lenders can be convenient, but they might not offer the best overall deal. Fees, rate structures and loan terms can differ from outside lenders.

Short-term buydowns that expire

Temporary rate buydowns can lower payments now, but buyers need to be comfortable with the higher payment once the buydown ends.

Less room to negotiate base price

Builders often treat incentives as the negotiation lever, not price. That can limit flexibility if you’d rather reduce the purchase price instead.

When builder incentives can make sense

Despite the trade-offs, builder incentives aren't inherently bad, and in the right situation, they can be helpful. They might work well for buyers planning to refinance if rates fall and who can comfortably afford the long-term payment.

They can also help buyers who are cash-constrained at closing, allowing them to preserve emergency savings instead of draining accounts for upfront costs.

In markets with tight resale inventory, incentives can also make new construction more competitive when existing homes are scarce or overpriced.

When buyers should be cautious

There are also scenarios in which builder deals deserve extra scrutiny.

One of the biggest red flags is a deal that only works if you refinance quickly. Temporary rate buydowns can make payments feel manageable today, but if mortgage rates stay higher longer than expected, buyers could find themselves locked into a payment they didn't fully plan for once the buy down expires.

Another caution sign is pricing that looks out of sync with comparable homes (comps). If a new build is priced significantly higher than similar resale properties in the area, even after incentives, the buyer might be financing perks rather than value. That can matter later when it’s time to refinance, sell or tap home equity.

Buyers should also be wary of inflexible lender requirements. Preferred lenders aren't inherently bad, but they can limit transparency. If rate sheets, fees or annual percentage rate (APR) comparisons are difficult to obtain or if you’re discouraged from shopping around, that’s a signal to slow down and ask more questions.

Finally, pay close attention to how future payments are explained. If a sales pitch emphasizes the initial monthly payment without clearly walking you through the full payment schedule, including taxes, insurance and post-buydown rates, buyers risk underestimating their long-term housing costs.

How to evaluate a builder deal the smart way

The safest way to assess any builder incentive is to zoom out and focus on total cost. Compare the APR, not just the advertised interest rate, to capture fees and buydown costs.

Get several lender quotes, even if you plan to use the preferred lender. This gives you leverage and context. Ask how incentives might affect resale value and appraisals, especially if the home is priced above nearby comps.

Most important, you'll want to run the numbers on your total cost over time, including what your payment looks like after any buydown expires. A deal that looks attractive upfront might not be the most affordable over time, and clarity now can prevent financial strain later.

Making sense of today’s builder incentives

Builder mortgage incentives can be a useful bridge in a high-rate environment, but they’re not a substitute for careful math. These offers are designed to move inventory and protect pricing, not necessarily to minimize your long-term costs.

For buyers willing to slow down, understand the details and compare offers carefully, builder incentives can be easier to navigate and less likely to lead to unexpected costs later.

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Buying a house is a goal for many Americans, but achieving that goal is becoming increasingly difficult. As housing costs climb faster than paychecks, many buyers wonder how far their money will really go.

As home prices and interest rates rise, the income needed for a house has also increased. The median sale price of homes sold in the United States in March was $408,800, according to the National Association of Realtors.

Buying more house than you can afford is an expensive and stressful mistake, so it’s essential to do some calculations before you start shopping for a home. As the price for even modest homes reaches the $500,000 range, let’s look at just how much income you need to buy a $500,000 home.

What income realistically buys a $500,000 house

The income needed to buy a $500,000 home will depend on many factors, including the cost of your home insurance, the size of your down payment, your interest rate and the length of your mortgage.

The U.S. Department of Housing and Urban Development defines affordable housing as paying no more than 30% of your gross income toward your housing costs, including utilities.

Using that general rule, let’s break down a few different scenarios with the Fannie Mae mortgage calculator.

Buying a $500,000 home with 10% down:

• Home price: $500,000
• Down payment: $50,000 (10%)
• Loan amount: $450,000
• Interest rate: 6.5%
• Mortgage term: 30-year fixed
• Private mortgage insurance (PMI): $165
• Taxes and insurance: $833
• Principal and interest: $2,844
• Total monthly mortgage payment: $3,842

Let’s assume that the home’s utilities average $200 per month, meaning your total home’s monthly payments are $4,042.

In this scenario, you would need to earn $13,473.33 per month, or about $161,680 per year, to afford the home.

If you save up more money for a larger down payment, the figures change, since your loan balance decreases and you won’t need to pay for private mortgage insurance.

Buying a $500,000 home with 20% down:

• Home price: $500,000
• Down payment: $100,000 (20%)
• Loan amount: $400,000
• Interest rate: 6.5%
• Mortgage term: 30-year fixed
• PMI: $0
• Taxes and insurance: $833
• Principal and interest: $2,528
• Total monthly mortgage payment: $3,466

Once we add in $200 for utilities, your monthly payment is $3,666.

To afford this mortgage, your monthly income would need to be $12,220, or you'd need a salary of about $146,640.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below:

Why income isn't the whole story: Other factors that affect affordability

In addition to considering your income, you’ll need to weigh how other factors can affect a home’s affordability:

• Debt load: Your existing debts, including student loans, car loans and credit card payments, impact your debt-to-income ratio. If your debt-to-income ratio is high, mortgage lenders assume more risk in lending to you and will often charge you a higher interest rate because of that risk.
• Down payment and savings: Making a larger down payment often helps you qualify for a lower interest rate because you’re less likely to default on your mortgage, reducing the lender’s risk. Saving up a larger down payment will also reduce your mortgage principal, so you’ll ultimately pay less in interest.
• Local property taxes: Local property taxes vary. If you live in an area where property taxes are high, you’ll need a higher income to afford those taxes and your home.
• Homeowners insurance: Your home’s value partially affects your homeowner’s insurance rates, but other factors, such as the home’s location, your policy limits, discounts you qualify for and even your past history of filing homeowners insurance claims will all affect your rates.
• HOA fees: If your home is part of an HOA, you’ll also need to budget for monthly HOA fees, which can vary significantly.
• Maintenance: Homes require ongoing maintenance, and those costs can quickly add up. State Farm recommends setting aside 1% to 4% of your home’s value each year to cover maintenance. Using that general rule, you would need to set aside $5,000 to $20,000 each year for maintenance on a $500,000 house.
• Unexpected expenses: Owning a home comes with many unexpected expenses. Pest infestations or an emergency repair can cost thousands of dollars, so it’s important to have an emergency fund set aside to cover these costs.
• Interest rates and loan type: Even small changes to your interest rates and loan type can significantly affect your monthly payment. If you have a variable interest rate mortgage, your payments could fluctuate as the interest rate changes. A fixed interest rate mortgage provides you with more predictability, but if interest rates drop during your mortgage term, you’ll need to refinance your home to take advantage of those lower rates.  

How to get the clearest affordability picture before you buy

Before you buy a home, it’s essential to make sure you can really afford it. Start by getting pre-approved for a mortgage to make sure that you’re likely to be able to get the loan amount you’ll need.

Just because you’re pre-approved for a mortgage doesn’t mean you can necessarily afford a mortgage of that amount, though. Consider how you’ll pay for future expenses, such as repairs, homeowners' insurance increases and potential changes in your interest rate.

Think about your long-term financial goals, too. For example, if you know you’ll be helping pay for your kids’ college educations in eight or nine years, you’ll want to make sure you don’t buy a home that’s so expensive, you’re not able to save toward that financial goal.

What it takes to afford a $500,000 home

Using the 30% rule as a guide, most buyers would need an annual income from $146,640 to $161,680 to comfortably afford a $500,000 home, depending on their down payments and monthly expenses.

While these figures can serve as a helpful benchmark, your true affordability depends on your debt load, savings, interest rate and long-term financial goals. Taking time to understand the full picture can help you make a confident, sustainable homebuying decision.

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Half a century might seem like forever to own your home, but a 50-year mortgage is the Trump administration’s latest proposal to address the U.S. housing affordability crisis.

Earlier this month, President Donald Trump released a graphic on his social media platform Truth Social titled “Great American Presidents.” Inside the graphic were the words “30-Year Mortgage” above a photograph of former President Franklin D. Roosevelt, and “50-Year Mortgage” above a photo of Trump.

The post sparked debate as industry experts and elected officials weighed in on a proposed 50-year loan term to help first-time buyers afford a home.

But would such a proposal actually help or hurt a homebuyer’s financial situation? And how would a 50-year mortgage affect another pain point for homeowners: Taxes?

Read on.

Are 50-year mortgages coming?

When homeowners buy a house, they typically secure a 30-year mortgage. This loan lifecycle follows a process called amortization, where the borrower pays fees and interest first, then slowly pays down the principal balance over time. Ideally, after 30 years, the homeowner owns the house.

By stretching the loan term from 30 to 50 years, the buyer effectively pays less every month for the same principal balance.

Consequently, on the surface, a 50-year mortgage might seem to help a first-time homebuyer afford a home, as shown by Fannie Mae’s mortgage calculator:

• A 30-year mortgage on a $200,000 home with a 5% down payment and 6% interest rate could result in a monthly mortgage payment of $1,512.
• A 50-year mortgage home with the same price and terms as above could lead to a monthly mortgage payment of $1,373.
• Compared to a 30-year term, the proposed 50-year mortgage would result in a monthly payment savings of approximately $139 for the homebuyer.

Director of the Federal Housing Finance Agency, Bill Pulte, who reportedly proposed the idea to Trump, called the proposal “a complete game changer,” while sharing Trump’s post on X. Pulte later added that the Trump administration is developing a “WIDE arsenal of solutions” to the housing affordability crisis.

Home affordability has become a recent issue for the Trump administration, as housing prices have skyrocketed more than 50% over the last five years.

And those who can afford a house spend an average of 39% of their income on housing expenses — well over the 30% recommended amount given by financial experts, according to Redfin. Yet some elected officials and industry experts claim the 50-year mortgage proposal could boomerang, leading to significantly higher home costs over time and even threatening future generational wealth.

50-year mortgage Trump proposal

A 50-year mortgage may yield slightly lower monthly payments than a 30-year term. But the total loan cost would be staggering, according to the latest LendingTree analysis using a $500,000 mortgage and a 6.1% interest rate:

• For a 30-year fixed loan, a homebuyer would pay $590,791 in interest over the life of the loan.
• For a 50-year fixed loan, a homebuyer would pay over $1.1 million in interest alone.
• Effectively, the amount of interest you pay on a 30-year vs. a 50-year loan would be more than double, even though your loan only increased by 20 years.

“This is not a good idea,” remarked Richard Green, a professor at the University of Southern California’s Marshall School of Business, who told CNN, “The monthly payment savings would be really small. At the same time, you’re putting people at risk, because it takes a really long time for them to start paying down their loan.”

Just days after the proposal, Trump told Fox News in an interview, “It’s not even a big deal,” and “All it means is you pay less per month. You pay it over a longer period of time. It’s not like a big factor.”

Meanwhile, the average age of a new homebuyer has increased to a record-breaking 40 years old, according to the National Association of Realtors.

If the first-time buyer purchases a home at that age, there’s a good chance they could be dead before their 50-year mortgage matures. Future generations could be on the hook for paying the loan, which means less wealth would be passed down to younger generations.

"I don’t like 50 year mortgages as the solution to the housing affordability crisis,” wrote Rep. Marjorie Taylor Greene (R-Ga.) on X. “It will ultimately reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home. In debt forever, in debt for life!"

In the meantime, Opendoor’s CEO, Kaz Nejatian, praised the idea on X. “50 year mortgage is probably the most pro-homeowner government policy of the last two decades.”

50-year mortgage vs. 30-year mortgage: Interest tax deduction

Some may wonder whether the cost of a 50-year mortgage could be offset through tax savings. After all, homeowners may take advantage of the mortgage interest deduction (MID) if they itemize their federal returns.

• MID allows you to deduct up to $750,000 on qualifying loans after 2017 (before that date, the limit is $1 million).*
• Interest paid on a proposed 50-year loan would be higher compared to interest paid on a 30-year loan (even though your monthly mortgage payment would be lower).
• Because of this, your annual MID could be potentially higher on a hypothetical 50-year loan compared to a 30-year mortgage.
• However, because the MID is capped at $750,000 for new loans, you might not be able to recoup all your interest paid over the life of the loan (plus you’d have to itemize your federal taxes every year just to claim it instead of the standard deduction).
• And since the average homeowner typically sells their home after 12 years, you likely wouldn’t see a more advantageous tax benefit from the mortgage tax deduction than on a 30-year loan.

And there’s home equity risk, too. The principal is paid down slowly on a 50-year mortgage, which means the homeowner's equity builds at a significantly slower rate. This exposes the homeowner to a greater risk of potential home price declines, or even “negative” equity if the housing market dips.

*Note: The MID limits for married filing separately couples are lower than other filing statuses.

Is a 50-year mortgage a good idea legally?

Before anything else, the Trump administration would need to overcome a legislative hurdle to enact a 50-year mortgage.

The Dodd-Frank Wall Street Consumer Protection Act, which was designed (in part) to protect homebuyers after the 2008 housing financial crisis, doesn’t currently embrace 50-year mortgages.

So if a 50-year loan were issued, it would likely be “non-qualified,” meaning it wouldn’t be backed federally. The lack of federal assurance increases lender risk, which would likely increase the interest rate for the buyer.

Yet a policy change might not be off the table.

According to ABC News, a White House official said that the administration is "always exploring new ways to improve housing affordability" and will announce any official policy changes directly.

So stay informed and stay tuned.

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As policymakers seek ways to unfreeze the housing market, one idea under review is the portable mortgage, which would let homeowners transfer their existing mortgage interest rate to a new property. Federal Housing Finance Agency Director Bill Pulte confirmed on X that the agency is "actively evaluating portable mortgages."

More than half of U.S. mortgage holders have rates at 4% or lower, and about 80% are below 6%, according to Realtor.com. These historically low rates have created a "lock-in effect," where millions of homeowners are staying put because moving would mean giving up a once-in-a-lifetime mortgage interest rate.

Supporters argue that portability could loosen up inventory by making it more affordable for current homeowners to move. Critics say that it may introduce significant complications and offer little benefit to renters or first-time buyers struggling with today’s prices. Here’s what to know.

How portable mortgages work

A portable mortgage lets a homeowner carry their existing mortgage, including the interest rate and remaining balance, from their current home to their next one. It functions as the reverse of an assumable mortgage. Instead of a buyer taking over the seller’s loan, the seller takes their loan to the new property.

What happens depends on the next home you buy:

• Buying a cheaper home: Your sale proceeds reduce the mortgage balance, so the existing loan fits the new property’s value.
• Buying a more expensive home: You cover the difference with cash or a new loan at the current market rate.

Although portable mortgages do not exist in the U.S., they are common in Canada and the United Kingdom. In those markets, fixed-rate periods tend to be short, typically two to five years, which makes frequent renegotiation a built-in part of the system.

Why the idea is gaining attention

Portable mortgages could alleviate the payment shock for existing owners who want to downsize or relocate for work, family or health reasons. The idea could free up some inventory by providing rate-locked owners a way to move without taking on a significantly higher monthly payment.

However, with the median U.S. home price around $410,800 and the average 30-year mortgage interest rate at 6.24%, based on data from the Federal Reserve Bank of St. Louis and Freddie Mac, affording a home remains out of reach for many.

According to Chen Zhao, head of Redfin’s economic research, “America’s housing market is defined right now by caution. Buyers are walking away from deals more often, sometimes due to affordability issues and sometimes because they’re re-evaluating whether now is the right moment to commit. Others aren’t even shopping, waiting instead for prices or mortgage rates to come down. On the other side, many sellers are staying put — either because they’re locked into low rates or unwilling to accept offers below expectations. When both sides hesitate, sales naturally fall to historic lows.”

Zhao’s comment highlights why policymakers are looking for ways to thaw the market. Even if portability helps some current homeowners relocate, the larger environment remains challenging for both buyers and sellers.

Who benefits and who is left out

The homeowners who would gain the most are those holding mortgages from the low-rate years. Homeowners with 3% to 4% mortgage interest rates are the group most likely to use portability to make a move.

Renters and first-time buyers, however, would still face today’s high rates and high prices. Younger buyers in particular would continue to face large down payments and tight supply, which portability does not address. Critics also warn that giving some buyers more purchasing power could push prices higher for everyone.

Why the U.S. system makes portability difficult

The U.S. mortgage system relies on long-term fixed-rate loans that are bundled into mortgage-backed securities, which depend on predictable refinancing patterns. If homeowners could carry a 30-year loan from house to house, refinancing would become less common, and loan volume would likely fall.

Such a shift could disrupt how mortgage-backed securities are structured and priced. That change could reduce investor demand and ultimately lead to higher borrowing costs. Countries where portability works have shorter fixed-rate periods, which makes it easier for lenders and investors to adjust when a loan moves to a new property.

Would portable mortgages improve affordability?

Portability might make a move possible for some owners, and any increase in listings from sellers could provide some additional housing supply. Even if the system could accommodate portability, the core issue remains the same. Home prices are high, and supply is very limited.

The portable mortgage concept would not create new housing, lower current interest rates or reduce down payment barriers for potential buyers. It may help a small group of existing homeowners keep their payments manageable by allowing them to avoid today’s higher rates when they move. Still, it does not change the broader affordability picture for renters, first-time buyers or anyone trying to enter the market now.

What to expect going forward

The idea is still in the evaluation stage. Key questions remain regarding how lenders, regulators and investors would manage loan transfers, how pricing gaps between old and new mortgages would be financed and how the mortgage-backed securities system would adjust. How those details are resolved will determine whether portability can be introduced without disrupting the broader market.

For now, portable mortgages remain one concept under review. They may offer another option for certain homeowners with very low rates, but their overall impact will depend on how the final structure is designed and how borrowers choose to use them.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

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For those of us who lived through the 2007 to 2008 global financial crisis, the lessons are indelibly imprinted in our minds.

But it's been more than a decade, and many of those who could best make use of those lessons weren't in kindergarten yet. That's why the resurgence of the "zero-down mortgage" is concerning.

Zero-down mortgages have existed in various forms for years, but typically, you must be part of a specific group to qualify.

For example, certain military veterans have been eligible for zero-down loans for some time.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This new mortgage differs in that borrowers don't need to belong to any given organization to qualify — simply showing they have enough income and a high enough credit rating is sufficient.

Under this mortgage plan, a home buyer would borrow 97% of the purchase price, up to $500,000, with a conventional mortgage. They would then borrow 3% on a second mortgage, which would count as a down payment of up to $15,000.

That second mortgage doesn't require any payments, nor does it accrue interest. However, it's due in full immediately upon either selling, refinancing or paying off the first mortgage.

About the global financial crisis

To understand why this is concerning, a brief refresher on the causes of the financial crisis is helpful. The year 2007 started as a typical banner time for the real estate market and banks that extended mortgages to buyers.

Houses had been increasing in value for decades, which led many banks to assume that ever-rising home prices were part of a dependable rule rather than a reversible trend.

Based on that assumption, banks began issuing subprime mortgages to borrowers with almost no concern for their ability to repay the loan.

The reasoning was that, should a mortgage holder default, the bank could simply repossess the house and sell it for more than the loan amount.

This gave rise to a particularly risky and colorfully named loan scheme, the NINJA mortgage. A No Income, No Job and No Asset loan was exactly what it sounds like — a mortgage extended to people who were unemployed and broke.

Subprime, and especially NINJA mortgages, sound risky because they are.

Had the assumption of perpetually increasing home values been correct, there would have been little to no consequences for the banks. Borrowers would have lost their homes, the banks would have sold them at a profit, and 2007 to 2008 would have played out very differently.

However, home values did decline, resulting in banks holding defaulted mortgages with no way to recoup their losses. Had it not been for a $700 billion bailout package from the U.S. government, the banking system would have largely collapsed, resulting in potentially irreparable harm to the economy.

The financial crisis caused changes in the way banks issue mortgages. No longer sufficiently confident to extend loans to anyone, they began once again to require actual, verifiable evidence that a prospective borrower would be able to repay the loan — a practice that continues today.

The concern is that if the new formulation of the zero-down mortgage becomes popular, it could indicate that another lesson from the financial crisis has been forgotten: There's no guarantee that home prices will always rise.

Homeowners assume risk

Unlike NINJA loans, the zero-down mortgage protects the banks because borrowers must have sufficient income, assets or both to indicate they're likely to be able to make their loan payments.

There is no such protection for the borrower, which means that $15,000 "down payment" loan could cause significant problems.

Consider a scenario in which interest rates drop from their current levels, which are roughly 6.5% to 7% for a 30-year fixed-rate mortgage.

Even if they only drop to 5% — a far cry from the 2% to 3% range we enjoyed a few years ago — the temptation to refinance will be hard to resist.

At an average cost of about $2,300 to refinance a loan, dropping your interest rate by more than two percentage points could save a significant amount.

If you have a zero-down mortgage, however, that $2,300 would be added to the $15,000 payment to discharge the down payment loan, making refinancing considerably more expensive.

Should a zero-down mortgage holder need to sell their home during a housing price slump, this mortgage could cause even more significant problems.

If the home's value has dropped such that the homeowner loses money on the sale and is unable to pay the $15,000 balloon payment, they could default on that loan, which, because it's a second mortgage, could further jeopardize the diminished proceeds of the sale or even trigger a foreclosure.

For many prospective borrowers, the risks likely outweigh the positives.

In today's environment of high home prices and high rent, it's understandable that it would be difficult for many to save the traditional 20% down payment.

However, down payment reduction is possible through various programs and offers.

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There are several 3% down programs: essentially the same as the zero-down program with the exception that the 3% would come from the borrower's savings rather than a second mortgage.

For many, that would be a prudent option. Even though 3% is not a lot, it's still enough to give borrowers a small amount of equity in the home they're buying.

The more equity you have, the more insulated you are from housing market fluctuations and the more likely you are to be able to use that equity to refinance your mortgage should rates drop.

Who should consider a zero-down mortgage?

It might seem as if I'm completely against putting 0% down on a home. In most cases, that's true, but under certain circumstances, the leverage afforded by low or no-interest loans can be used to make money.

If you have $15,000 saved for your down payment, it might make sense to take a zero-down mortgage and invest your savings instead. If you can get a higher return on that money rather than giving it directly to the bank, you can enhance your overall financial picture.

However, you must be disciplined if you choose to use debt in this way. Many take low-interest loans intending to invest the money, but instead, spend it on enhancing their lifestyle by taking vacations or buying nice possessions.

If a careful self-evaluation of your financial habits suggests you would do the same, it's likely more prudent to spend your down payment savings on a down payment.

Either way, it's important to be aware of all facets of your mortgage, especially the risk you might be assuming.

The implications of specific mortgage terms can be hard to understand. While tempting, zero-down mortgages have enough pitfalls that it's important to enter one fully aware of the risk factors.

To be sure you choose a mortgage that will be right for you, ask your financial adviser to review options with you.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Anyone who’s tackled a home remodel knows costs can snowball fast, and today’s prices for materials, labor and financing don’t make it any easier. While mortgage rates have cooled slightly from their 2023 peak, many homeowners are still reluctant to refinance and lose their low rates.

That has sparked a new question: How can you fund a remodel without touching your first mortgage or maxing out credit cards?

Rather than relying on a traditional loan with fixed draws and paperwork-heavy funding, a growing number of lenders now offer flexible, card-based home equity lines of credit (HELOCs) that let homeowners tap their home’s value as needed. These hybrid products work much like a credit card, offering swipe access or digital transfers but with interest rates tied to home-equity lending rather than high-rate consumer credit.

Why homeowners are looking beyond traditional HELOCs

A standard home equity line of credit (HELOC) remains one of the most common ways to fund a home remodel. It offers a revolving line of credit secured by your home’s equity, typically with variable interest rates that are lower than most personal loans or credit cards.

But traditional HELOCs can feel rigid. Lenders often require a minimum draw amount, charge setup fees or impose strict repayment schedules. That’s where Trovy and similar platforms come in.

They combine the lower-rate borrowing power of a HELOC with the convenience and accessibility of a credit card. Instead of completing multiple forms and waiting for funds to transfer to a bank account, approved borrowers receive a Trovy card linked directly to their home-equity line.

With it, homeowners can pay contractors, purchase materials or move funds online, drawing only what they need, when they need it.

How a home-equity-backed card like Trovy works

Trovy’s model is designed for homeowners with built-up equity who want to finance projects gradually. You start by applying online, providing property details and verifying income and credit. Once approved, your line of credit is secured by your home but you don’t have to borrow a lump sum right away.

Instead, Trovy issues a HELOC card that functions like a credit card. You can use it for materials, appliances, contractor invoices and other purchases related to your renovation.

Because it’s tied to your home equity, the interest rate will likely be lower than a standard credit card. Trovy lists variable APRs in the 6% to 12% range, depending on your credit profile and available equity.

Other notable features:

• No minimum draw requirement. You only pay interest on what you use.
• No annual or closing fees. Trovy eliminates several costs that can make traditional HELOCs less appealing.
• Flexible repayment. Borrowers can pay down balances at any time without penalty.
• Tax-deductible interest. When funds are used for qualified home improvements, the interest may be deductible under IRS rules.

For homeowners managing multi-phase projects, say, a kitchen update now and a bathroom overhaul six months later, this flexibility can be a game-changer.

Real-world example: A remodel paid as it happens

Imagine a homeowner planning a $75,000 kitchen remodel. Rather than taking out a lump-sum home equity loan or depleting savings, they open a $100,000 Trovy line of credit. During construction, they use the Trovy card to pay a contractor’s $20,000 deposit and later buy $15,000 worth of appliances.

Because they’ve only drawn $35,000 so far, they pay interest on that amount, not on the full $100,000 line of credit. When phase two begins months later, they can use the same line to cover additional costs. This approach keeps cash flow flexible and helps avoid paying interest on unused funds.

It’s a modern take on the HELOC, built for how most renovations actually unfold one invoice, delivery or supply run at a time.

How Trovy compares to other funding options

The main advantage of a Trovy HELOC card is control. You can access your home’s value at lower rates than credit cards, but without the commitment of a lump-sum loan.

The trade-off is that, like any HELOC, your home is collateral. Missing payments could affect your credit or, in some cases, lead to foreclosure.

When Trovy makes sense and when it doesn’t

A home-equity-backed card is best suited for homeowners who:

• Have significant equity (at least 20%) and good credit.
• Prefer incremental funding over a single lump sum.
• Want a lower-interest alternative to credit cards for big-ticket home upgrades.
• Plan to deduct interest for qualifying renovations.

It may not be ideal if you:

• Don't have good credit.
• Don’t have enough equity.
• Prefer not to secure a credit line with your home.

The future of home-equity access

For homeowners who want to remodel without refinancing or racking up high-interest debt, Trovy’s home-equity-backed card offers a middle ground. You borrow only what you need, and enjoy rates below typical credit cards.

It’s not a one-size-fits-all solution, and borrowers should compare costs and read the fine print. But as more homeowners look for flexible ways to use their built-up equity amid high renovation costs, Trovy’s model offers a modern option in home-improvement financing.

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My husband, Tom, has served for 19 years. Currently, he’s a full-time pilot in the Air National Guard, and he previously spent more than a decade as an active-duty member of the Air Force.

Military life comes with plenty of challenges: frequent duty-station relocations, irregular work schedules and overseas deployments, to name a few that we’ve been through. But servicemembers also have access to some significant financial benefits. In recognition of Veterans Day this November, I’m sharing below a few that are impactful for my family.

1. Housing allowance

One helpful perk is a tax-free subsidy, known as the basic allowance for housing, that covers all or part of your monthly rent or mortgage payment if you don’t live in government-provided housing on a military base. The amount you receive depends on the location of your duty station, your rank and whether you have dependents. You can use the BAH calculator to look up the value of your subsidy based on those factors.

2. Free college

The Post-9/11 GI Bill covers the full cost of in-state tuition and fees at public colleges for up to 36 months (four academic years). Or, if you go to a private or foreign college, you get up to a certain amount per year; for the current academic year, the rate is $29,921. The Post-9/11 GI Bill also provides money for housing, books and supplies, and tutors, among other expenses. Those who served on active duty for at least 36 months or meet certain other requirements are eligible for the full GI Bill benefit.

One of the best features is that if you’ve served for at least six years and commit to four more, you can transfer your benefits to your spouse or children. Tom has done that, splitting his benefits so that our two young sons will someday be able to use them for their educational expenses.

3. Retirement security

Military members can use the Thrift Savings Plan, a tax-advantaged retirement plan that’s similar to a 401(k). The TSP has low fees, with the expense ratio on its funds recently ranging from 0.036% to 0.051%. Under the military’s blended retirement system (BRS), which went into effect in 2018, servicemembers get an automatic TSP contribution from the government equaling 1% of their basic pay, plus a matching contribution of up to an additional 4% of pay after you’ve served for two years.

Pensions have become rare in the private sector. But military members who complete at least 20 years of active-duty service are eligible for a lifetime pension, and the payments start when they exit the military. If you retire at the 20-year mark, the government calculates the average of your highest 36 months of basic pay, and under the BRS, you receive a pension equal to 40% of that amount. For each year you serve beyond 20, you get an additional 2%. (Servicemembers who joined before 2018 and did not opt in to the BRS are eligible for a 50% pension when they reach 20 years of service, with 2.5% added on for each year past 20 — but they don’t get government contributions to the TSP.)

4. Low-cost life insurance

Servicemembers’ Group Life Insurance provides coverage at a low rate regardless of the servicemember’s age or health. To get the maximum $500,000 in coverage, servicemembers pay $26 a month in premiums. Spouses can also get coverage of up to $100,000 through Family SGLI; rates vary by age. A spouse between ages 35 and 39 can get $100,000 in coverage for $4.70 a month.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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You don’t need ghosts in the attic to scare off homebuyers. Sometimes a home’s past is spooky enough. Even the most beautiful homes can give buyers pause if their backstory raises eyebrows.

Whether it’s a murder, a suicide, a notorious crime or even a rumor of paranormal activity, homes with unsettling histories are known in real estate as “stigmatized properties.”

For sellers, that stigma can raise difficult and occasionally eerie questions. Do you have to tell buyers your house is haunted? And could it hurt your home’s value? Here’s what to know about disclosing (and marketing) a home with a haunted reputation.

What is a “stigmatized” home?

A stigmatized property isn’t physically defective; it’s psychologically or socially marked in a way that might make buyers uneasy. That could include:

• A death on the property
• A crime, such as a murder or drug activity
• A history of paranormal reports or local lore
• Past ownership by someone notorious or controversial

Even when a home is in excellent condition, perception can be as powerful as reality. A death on the property might be enough to turn them away, and that’s not always something sellers can easily prove or explain.

Others might simply fear the unwanted attention that comes with a home known for ghost tales or true-crime rumors.

Stigma can influence a sale, from fewer showings to lower offers. Still, not all stigmatized properties lose value. As a young real estate agent, I was often surprised by how many of these listings drew extra interest from buyers eager to own a piece of history.

I once helped a client purchase a commercial property in Detroit, rumored to have ties to the mafia in the 1920s. The basement still showed traces of its past with remnants of a speakeasy that hinted at the city’s bootlegging era. Rather than scaring buyers away, the building's story added intrigue. The couple who bought it were thrilled to own a slice of Detroit's history.

In that case, the seller didn’t have to disclose it, but depending on where you live, the rules around what sellers must reveal can be surprisingly different.

The surprising patchwork of state disclosure laws

When it comes to disclosing a home’s haunted history, the rules are far from uniform, and in some states, silence is perfectly legal.

Only a handful of states have specific statutes addressing stigmatized properties.

• California: Sellers must disclose any death that occurred on the property within the past three years.
• Alaska: Agents must disclose a murder or suicide that happened on the property within the past year.
• South Dakota: Sellers must disclose any homicide or suicide that occurred while they owned the property.
• Massachusetts, Minnesota and New Jersey: Sellers don’t have to disclose alleged paranormal activity, but if a buyer asks directly, they can’t lie.

In most other states, the rules are broader. Sellers generally must disclose material facts that could influence a buyer’s decision, and whether a haunting qualifies often comes down to interpretation.

It’s also worth noting that many real estate agents are bound by ethical disclosure rules that go beyond state law. If something about the property’s reputation could influence the sale, most real estate agents will err on the side of transparency. Real estate works best when you lead with honesty, even if it means revealing a skeleton or two in the closet.

How to price a home with a spooky reputation

Does a haunting hurt your home’s value? The data is mixed. A Zillow survey found nearly 70% of buyers would consider a haunted house if it met their other must-haves: price, location and amenities. Most said they’d expect a discount only if the haunting were well known or the property had been the site of a serious crime.

If your home has a complicated past, stick to facts, not folklore. Work with an agent who knows your state’s disclosure laws and can help position the property to get top dollar.

A spooky story doesn’t always scare off buyers. Some of the most notorious homes in America have sold for millions, proving that the right blend of history and intrigue can still attract serious offers.

Haunted homes that still sold for a scary good price

Even the most infamous properties can find buyers. These haunted or historically notorious homes prove that reputation doesn’t always stop a sale, though it can influence the price.

The Conjuring House

Location: Burrillville, Rhode Island

Last sold for: $1.53 million (2022)

Built in 1736, this farmhouse inspired The Conjuring after reports of paranormal activity from the Perron family in the 1970s. It now operates as a destination for ghost tours and investigations.

LaLaurie Mansion

Location: New Orleans, Louisiana

Last sold for: $4.3 million

Once owned by socialite Madame Delphine LaLaurie, the mansion is infamous for the abuse of enslaved people in the 1830s. Actor Nicolas Cage later owned it before losing it to foreclosure.

Winchester Mystery House

Location: San Jose, California

Last sold for: $135,000 (1922)

Heiress Sarah Winchester spent decades expanding this labyrinth of a mansion, believed to be haunted by the spirits of those killed by Winchester rifles. It’s now valued in the millions.

Amityville Horror House

Location: Long Island, New York

Last sold for: $605,000

Made infamous by the 1974 DeFeo family murders and the Amityville Horror book and films that followed, this colonial-style home sold for well below market value due to its tragic history. Despite renovations and address changes, its reputation remains one of the most notorious in American real estate.

What to say (and not say) when listing your home

If your home has a history buyers may have heard about, be mindful of your wording to prevent any Halloween-style surprises at closing.

Be honest, but not sensational. You don’t need to include “Murder House on Maple Street” in your property description, but you shouldn’t conceal facts that might be easily discovered with a Google search.

Answer questions directly. If a buyer asks, “Has anyone died here?” and the answer is yes, say so plainly. Honesty builds trust and reduces the risk of disputes later.

Avoid feeding rumors. If neighborhood gossip claims your house is haunted, you don’t have to validate it, but it’s smart to acknowledge what’s public record or widely known. “The home has been part of local folklore” is a neutral way to address it. When possible, provide documentation, news coverage or public records to clarify the facts.

Focus on positives. Emphasize the home’s strengths, updated systems, modern design, great location while being prepared to discuss its history privately if asked.

A not-so-scary ending for sellers

Haunted or not, every home has a story. If yours happens to include one that’s a little darker, you don’t need an exorcist, just a disclosure strategy.

Understand your state’s laws, be transparent when asked and work with a knowledgeable agent who can guide you through sensitive buyer conversations. After all, one person’s nightmare listing might just be another’s dream home.

Luckily, your home insurance policy doesn’t require you to disclose any ghosts. Use the tool below to explore and compare some of today’s top home insurance offers, powered by Bankrate:

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While mortgage interest rates for 30-year loans were north of 7% at the start of the year, they’ve been slowly easing down. With interest rates trending lower, you might be wondering if now’s the right time to scoop up a vacation home.

A second home can be more than just a weekend retreat. It can double as an investment property that earns income and appreciates over time. But if you’re not careful, that dream getaway could quickly turn into a financial headache.

Before you start house hunting, it’s important to weigh the benefits and drawbacks. Here’s what to consider before buying a vacation home.

Pros and cons of owning a vacation home

A vacation home comes with a ton of upside, but if you’re careless in your research and spending, you could end up wasting your money. Still, several financial and lifestyle benefits can make a second home a smart move if the numbers work in your favor.

Pros of owning a vacation home

• Personal getaway. You get a place you can always stay, without paying for lodging. You don’t need to get a hotel or book an Airbnb.
• Potential rental income. While you’re not using it, you can make your home work for you. Smart interior design can transform your vacation home into an income-generating rental.
• Long-term appreciation. A well-chosen vacation home can do more than give you a place to relax, it can grow in value over time. When the market’s strong, selling later could mean pocketing more than you paid.
• Potential tax breaks. You might get some savings come tax time with a vacation home. For instance, you can deduct the mortgage insurance you pay on your second home. You may also qualify for state and local tax deductions.

Cons of owning a vacation home

• High upfront costs. Buying a vacation home means you’ll need to come up with a down payment and closing costs. In the second quarter of 2025, the median home sale price was $410,800. Even if you only come up with 10% down, that’s more than $41,000.
• Expensive ongoing costs. You’re on the hook for insurance, property taxes, utilities and HOA fees, if applicable. If you put less than 20% down, you'll pay private mortgage insurance (PMI). This is all on top of the expenses for your primary residence.
• Home maintenance. From routine repairs to unexpected fixes, like a burst pipe or broken appliance, those costs can add up quickly — especially if you’re managing the property from afar.
• Potential depreciating value. Home values in vacation destinations can swing with demand and the economy. A market slowdown could lower your property’s value and cut into your potential return if you decide to sell.

How to decide if a vacation home makes sense for you

Signs you’re ready to own a vacation home

A vacation home isn’t for everyone, but it could make sense if you can manage both the upfront and ongoing costs of ownership. It helps to plan on keeping the property for several years so you can build equity and weather market changes. If you also have a strategy to generate income, such as renting it out when you’re not using it, your second home can serve as both a retreat and a long-term investment.

When a vacation home might not be the right move

A vacation home may not be the best choice if the down payment and closing costs stretch your budget too far. It can also become a financial burden if you’re not prepared for ongoing expenses like maintenance, insurance, and property management.

Real estate experts often recommend holding a property for at least five years to recover transaction costs and ride out market shifts. If you’re unsure how long you’ll keep the home, the short-term costs of buying and selling could outweigh any potential rewards.

Curious about today's mortgage rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

How to prepare before buying a vacation home

Before you head to an open house or make an offer, take time to run the numbers and see how much home you can truly afford. Think through what you want from a vacation home — whether it’s a personal getaway, a rental investment, or both — and set a budget that keeps you financially comfortable.

Remember that owning a second property comes with new responsibilities. Your budget should cover not just the purchase price and closing costs, but also ongoing expenses like maintenance, insurance, utilities, and property management.

If you plan wisely, your vacation home can do more than offer a change of scenery. Turning it into a rental property when you’re not using it can help offset costs and improve your long-term return on investment.

A second home can be worth it but only with clear eyes

Buying a vacation home is a big decision that requires more than daydreaming about weekends away. It calls for an honest look at your finances, lifestyle and long-term goals. Take time to consider whether a second home will add comfort and enjoyment to your life or create more responsibility than you want to take on. The best choice is one that aligns with your budget, priorities and peace of mind.

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The number of ultra-wealthy individuals — those with net worths of $30 million or more — is climbing at a rapid pace. As this population expands, distinct real estate patterns are emerging, with the ultra-rich gravitating toward specific global hubs.

Major cities such as New York, Los Angeles and Hong Kong remain top choices, offering a mix of financial opportunity, cultural influence and international connectivity. These markets continue to evolve, reinforcing their status as magnets for billionaire buyers.

At the same time, new hot spots are on the rise. From Miami and Dubai to Lisbon and coastal Mediterranean towns, the ultra-rich are seeking destinations that combine tax advantages, lifestyle appeal and long-term investment potential.

Why New York and other global hubs remain favorites

In the past decade, the number of ultra-wealthy individuals has surged, according to Altrata’s World Ultra Wealth Report (PDF). Among the top 10 cities they call home, New York City continues to lead, with 21,380 ultra-wealthy residents — a 23.4% increase from 2024.

Hong Kong, Los Angeles, San Francisco and Chicago follow as the next most popular destinations, while Tokyo, London, Dallas, Washington, D.C., and Houston complete the top 10. Together, these cities account for one-fifth of the global ultra-rich population.

Their dominance stems from a powerful mix of finance, culture and connectivity. These global hubs offer unmatched opportunities, making them enduring favorites for the world’s wealthiest homeowners.

Curious about today's mortgage interest rates? Explore and compare some of today's top offers with the tool below, powered by Bankrate:

The new hot spots rising fast

New hot spots also draw the ultra-wealthy. Miami has emerged as both a primary and secondary home market, with Realtor.com ranking the Miami/Fort Lauderdale/West Palm Beach metro as the nation’s second top city for the ultra-wealthy in 2025.

While Miami’s cost of living is 11.5% above the national average, 43.8% of its residents own their homes outright, which is well above average when compared with other cities. Combined with a vibrant cultural scene, prime coastal location and Florida’s lack of state income tax, Miami remains a top draw.

Expats seeking tax-friendly destinations are also gravitating toward Dubai and Lisbon. Dubai’s high cost of living is offset by the United Arab Emirates’ zero income tax and a low 9% corporate tax rate, while Portugal offers generous exemptions on many types of foreign income for up to 10 years, making Lisbon a cost-saving haven for the wealthy.

Beyond these financial capitals, Florida’s coastal towns and Mediterranean cities increasingly appeal to second-home buyers looking to split their time between luxury lifestyles and idyllic climates.

What makes these cities magnets for the ultra-rich

Several factors are fueling these luxury real estate trends among billionaire buyers. Tax incentives, from favorable laws to strategic planning, help the ultra-rich reduce their overall burdens. Residency programs also make relocation easier, while political stability adds to the appeal of certain destinations.

Lifestyle is another powerful draw. Warm climates such as Florida’s, world-class golf courses, high-end shopping districts and vibrant cultural scenes all attract wealthy buyers seeking both comfort and prestige.

Luxury real estate is also viewed as a safeguard in uncertain times. Even during economic downturns, high-end properties tend to hold their value, making them a reliable investment and a hedge against inflation.

What’s next: The cities to watch

Cities such as Austin, Aspen and Naples are also becoming ultra-rich real estate destinations. According to the Altrata report, factors such as remote working trends, lifestyle appeal and the growth of emerging technology and finance hubs makes such cities appealing.

With the rise of remote work, the ultra-rich and the general public have more available real estate options. Rather than being tied to locations by a reasonable commute, individuals who work remotely can move almost anywhere with a reliable internet connection.

Private jets give the ultra-rich the freedom to buy homes wherever they choose, while global mobility programs — when companies relocate employees abroad for short- or long-term assignments — also shape where wealthy buyers settle.

Demand in Asia and the Middle East is shifting, according to the Altrata report. Regional conflict has slowed growth in the Middle East, with only moderate gains in both the number of ultra-wealthy individuals and their total net worth from 2024 to 2025.

Asia, by contrast, is expected to see the strongest growth in its ultra-wealthy population through 2030, fueled in part by the expanding Indian economy. The Middle East is projected to post the weakest growth in that same period, highlighting a clear shift in global wealth markets.

What it means for local markets

As new real estate hot spots emerge, rising demand is pushing up prices in prime neighborhoods. While higher costs aren’t a concern for the ultra-rich, they can make these areas inaccessible for other buyers. In many cases, an influx of wealthy residents accelerates gentrification, displacing long-term communities.

Higher property values also drive up tax bills. For existing homeowners — especially elderly residents on fixed incomes — steeper taxes can lead to delinquencies, foreclosures and ultimately, being forced out of their homes.

At the same time, shifting markets create opportunities for developers and brokers. By tailoring properties and services to meet the expectations of the ultra-rich, real estate professionals can tap into a lucrative and growing segment.

Following the money

The ultra-rich often act as trendsetters in global real estate, offering clues about where wealth and influence are headed next.

Their choices, shaped by economic opportunity, culture and lifestyle appeal, can signal which destinations are poised to become the next hot markets.

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For many retirees, the home they've lived in for decades isn't just a place to live. It's the single largest asset in their financial portfolio.

According to the U.S. Census Bureau (PDF), households that own their homes have a median wealth of about 44 times that of renter households, largely because of home equity. If your retirement savings feel a little tight, your house might hold untapped potential.

How and when you use that equity matters. Should you sell and downsize? Take out a loan? Rent part of it? Hold it for your heirs? Here's how to turn that built-up equity into a retirement strategy that works for your lifestyle, needs and legacy.

Equity is wealth you can put to work

Home equity is the difference between your home's market value and what you owe on it. If your home is worth $400,000 and your mortgage balance is $100,000, you've got $300,000 in equity.

For retirees who bought decades ago and stayed put, that figure could be even higher (often surpassing the size of their 401(k) or IRA.

This equity can be a source of financial flexibility. Whether you're looking to supplement income, reduce monthly expenses or help your children with college or a down payment, your home can be more than just a place to live. It can help you live better in retirement.

How to protect your home’s value in retirement

If you plan to age in place, using equity to preserve your home's value should be a top priority. Preventative maintenance, such as addressing roof issues early or servicing heating and cooling systems, can help avoid costly repairs down the line.

Consider updates that enhance both your living space and resale value. Installing walk-in showers, adding handrails or improving lighting might not seem like value-boosting renovations, but they can make a big difference for aging homeowners.

Energy-efficient upgrades such as modern windows or insulation improvements can lower utility bills while making the home more attractive to future buyers.

Proper home insurance coverage is a must. Make sure your policy reflects current replacement costs and consider additional protection for natural disasters if you’re in a vulnerable area.

Compare some of today's best home insurance offers with the tool below, powered by Bankrate:

Thinking about downsizing? When moving can pay off

Selling a larger home and downsizing to something smaller can also unlock a big chunk of equity while also cutting your monthly bills. Transitioning to a smaller, more affordable home can lead to lower property taxes, lower insurance and fewer maintenance headaches.

That freed-up equity could pad your retirement savings, cover travel or health care costs or simply give you peace of mind knowing you have a bigger cushion. Some retirees also take the opportunity to move closer to family, downsize into a condo community or relocate to a state with lower taxes and living costs.

Downsizing comes with trade-offs: Emotional attachments to your home, the hassle of moving and possible capital gains taxes if your home has skyrocketed in value. For many retirees, less really does mean more.

How to tap your home equity without selling

If selling doesn’t appeal to you, there are ways to tap into your equity without giving up your home.

• Home-equity loans provide a lump sum, usually with a fixed rate, which can be handy for one-time big expenses.
• HELOCs (Home-equity lines of credit) act more like a credit card, letting you draw money as you need it (though the rates are often variable).
• Cash-out refinancing replaces your existing mortgage with a new, larger loan, giving you the difference in cash.

Each of these options comes with pros and cons. They can be useful tools, but remember: Your house is on the line as collateral.

It's smart to run the numbers with a financial adviser to be sure the payments fit comfortably into your retirement budget.

Turning your home into income

Your house doesn't just have to sit there; it can generate income. Renting a spare bedroom, converting a basement into a small apartment, even building an accessory dwelling unit (ADU) on your property can provide steady monthly cash flow.

If you live in a popular tourist spot, short-term rentals through platforms such as Airbnb might also be worth exploring. Check local regulations, factor in the extra wear and tear and think about whether you’re comfortable hosting strangers in your home.

Done right, this can be a great way to stretch your retirement income without selling the house.

Planning for the next generation

For many people, leaving the family home to children or heirs is part of the legacy they want to build. It's worth knowing the rules so your heirs aren't hit with an unexpected tax bill.

When heirs inherit a home, they usually benefit from what’s called a "step-up in basis," which adjusts the home's value for tax purposes to its current market value. That means if they sell it right away, they might owe little to no capital gains tax.

Other strategies, such as putting the home in a trust, can simplify the transfer and avoid probate. On the flip side, gifting the home during your lifetime could complicate things for you and your heirs, especially with Medicaid eligibility. An estate planner can help you weigh the best path forward.

Is it time to sell? Decision checklist for retirees

Sometimes the best option is to sell outright. If you're weighing that choice, here are a few questions to ask:

• Am I struggling to afford the upkeep, taxes or insurance?
• Would selling give me more financial breathing room?
• Do I still want to live in this neighborhood, or would I prefer to be closer to family or health care?
• What’s the tax impact of selling now?
• Do I have a plan for where I’ll go next?

Answering honestly can help you see whether selling would bring relief, or if you’d rather keep your home as part of your retirement plan.

Make your home part of your retirement strategy

At the end of the day, your home is more than just four walls and a roof. It's a financial resource. The key is making sure your housing decisions align with your broader retirement goals.

For some, that means preserving the property and living comfortably in it for decades to come. For others, it might mean downsizing, renting part of it, or using equity to cover expenses. For many, it’s about planning carefully so the home becomes a lasting gift to the next generation.

Whatever path you choose, your home can give you options, peace of mind and a solid foundation for the next chapter.

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A mortgage refinance can provide various advantages, like reducing monthly payments, shortening a loan term, switching to a fixed-rate mortgage, or accessing cash for home renovations or other expenses.

These benefits have become particularly attractive to homeowners recently as anticipation surrounding the interest rate cut by the Federal Reserve in September drove down mortgage rates. And that led to a surge of refinancing applications and the strongest week of borrower demand in decades, according to the Mortgage Bankers Association (MBA).

“Homeowners with larger loans jumped first,” said Mike Fratantoni, MBA’s SVP and Chief Economist, regarding their weekly survey of mortgage applications for the week ending Sept. 12 . “The average loan size on refinances reached its highest level in the 35-year history of our survey.”

But as mortgage rates slide, homeowners considering a refinance should be aware of associated tax implications to maximize any potential benefits. Here's more to know.

Are cash-out refinances considered taxable income?

A cash-out refinance enables homeowners to tap into their home equity, freeing up funds to cover expenses like college tuition, medical bills, or home improvements.

The best part of a cash-out refi is that you won’t owe income taxes on the cash received. That’s because you are borrowing against your home’s equity, and the IRS expects that you’ll pay those funds back to the bank.

Additionally, money received from a home equity line of credit (HELOC) or home equity loan is also tax-free.

Aside from being tax-free money in your pocket, a cash-out refinance could provide other tax advantages. Let’s dive in.

Permanent cap on mortgage interest deduction

One of the most popular tax breaks some homeowners claim is a mortgage interest deduction when refinancing their home loan. However, you’ll need to itemize using a Schedule A of Form 1040 to claim this deduction.

There’s also a limit on the amount you can deduct on mortgage interest. President Donald Trump’s recently enacted tax cuts and spending legislation, dubbed the ‘big beautiful bill,’ makes that cap permanent for refinanced and original home loans. But there are income limits.

For 2025 and onward, you can deduct mortgage interest on the first:

• $750,000 if single or filing jointly
• $375,000 if married filing separately

For a deeper dive into how Trump’s megabill reshapes tax breaks for homeowners, see our related story: New Trump Tax Bill: Five Changes Homeowners Need to Know Now.

Tax-deductible home improvements for a cash-out refi

There are also other cash-out refinance tax rules that impact what you can claim as a tax deduction.

For instance, proceeds from the cash-out refi used to fund capital home improvements may qualify for a deduction. Capital improvements are permanent residential upgrades to enhance your property, outlined in IRS Publication 523.

If you’re a retiree in search of home improvement tax breaks, or have a family member who needs certain renovations done to make your home accessible. Some remodeling projects may also qualify for a medical expense deduction that you must itemize.

Some popular tax-deductible home improvements may include:

• Adding a swimming pool
• Implementing a new bedroom, office, or bathroom
• Installing home security systems

As a note, some tax breaks are expiring this year due to Trump’s new tax law. For example, clean energy tax credits for home improvements are being eliminated sooner rather than later. That includes tax incentives some homeowners could claim for installing energy-efficient home improvements like solar panels.

Tax breaks for buying down your rate

When you’re about to close on a mortgage refi, you have the option to buy down your rate via discount points.

Points paid during a traditional or cash-out refinance aren’t deductible in full the year you pay them. Some exceptions may allow you to deduct points fully in the year paid, like if you use part of the refinanced proceeds to substantially improve your main home.

However, discount points paid during a mortgage refi are generally deducted over the life of the loan, so you’ll have to plan accordingly.

So, what are mortgage points?

• Points are prepaid interest, which you pay upfront to lower the interest rate on your mortgage.
• One point equals 1% of the loan amount. That means that paying 1 point on a $300,000 mortgage would cost you $3,000, and could reduce your rate by about 0.25%.

To deduct mortgage points, you must meet all IRS requirements, and they should be included as an itemized deduction claimed on IRS Form 1040, Schedule A.

Rental property tax deduction

Here’s some good news: You can also claim tax deductions when refinancing a rental property, but they are generally amortized across your refinance loan term.

The rules are slightly different. For instance, when refinancing a primary residence, you can only deduct qualified points and interest, as well as certain renovations.

By contrast, refinancing a rental property also allows you to also deduct closing costs associated with obtaining a new mortgage, like loan origination fees. Other tax-deductible costs may include:

• Application fee: These are processing fees when applying for a refinance, and may include credit report fees as well.
• Appraisal costs: An appraisal for a rental property includes an analysis of potential rental income in your designated area.
• Discount points: As mentioned, these are points purchased to buy down the rate on your mortgage.
• Mortgage insurance premiums: A mortgage insurance premium can generally be deducted as a business expense in full the year they are paid.

Ensure you consult with a tax professional to determine what may qualify as a tax break when refinancing your rental property.

When to consider refinancing your mortgage

More than 81% of homeowners have a mortgage rate below 6%, according to data from Realtor.com. That’s at least 4 in 5 U.S. homeowners with outstanding mortgages, who may not be interested in refinancing at today’s rates.

However, refinancing a mortgage may be worth considering if interest rates have fallen considerably below the current loan rate. Some folks may also be interested in a refinance if they want to change their mortgage loan term, switch to a fixed-rate loan, or want to pull cash from their home equity to fund certain expenses.

All of these reasons may sway homeowners to refinance their mortgage, especially as market rates are on a downward trend.

Before refinancing your home loan, keep track of potential tax benefits you may claim, which are generally through itemized deductions. As mentioned, some may include deductions for qualifying home improvements or closing costs of the loan.

To get the best outcome, consult a trusted tax advisor who can guide you regarding potential tax breaks associated with home refinancing.

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The ripple effects of each Federal Reserve meeting reach far beyond Wall Street. They shape the rate on your mortgage, the growth of your savings, and even the value of long-term investments.

Ahead of the September Fed meeting, mortgage rates dropped to their lowest level since October 2024. The average 30-year fixed rate slipped below 6.5% for the first time in months, thanks to cooling inflation and growing confidence that the Fed may begin cutting rates in the coming quarter.

The reaction was immediate: refinance applications spiked nearly 60% last week — the sharpest increase in more than two years. As rates shift, understanding who stands to benefit and who may lose ground is the first step in adjusting your financial strategy.

The big winners: Homeowners and buyers

Falling mortgage rates are a welcome break for homeowners who took out mortgages during the peak-rate periods of 2022 and 2023. For those with rates above 7%, today’s environment opens the door to consider refinancing into lower monthly payments.

That relief can free up hundreds of dollars per month, offering a much-needed buffer against other rising costs like groceries, insurance and energy.

Homebuyers also stand to benefit, at least in theory. Lower rates slightly boost affordability by reducing monthly payment burdens, making it easier to qualify for a mortgage. However, inventory remains tight in many markets, and prices are still elevated. This means buyers may find some relief but not a complete reset of the housing affordability crunch.

Curious about today's rates? Explore and compare some of today's best offers with the tool below, powered by Bankrate:

The losers: Banks, investors and savers

Not everyone wins when rates fall. Banks and investors holding older mortgage-backed securities (MBS) face losses as new loans enter the market at lower yields. As older, higher-interest loans get refinanced, the value of those securities drops, reducing bank profitability and potentially affecting investor portfolios with heavy exposure to mortgage debt.

Savers, too, may feel the downside. If the Fed signals a pivot to rate cuts in response to softening inflation and economic data, banks will likely lower yields on CDs and high-yield savings accounts.

For consumers relying on those accounts for a reasonable return, the recent gains in interest income may start to decrease. The era of 5% savings rates could be short-lived if broader rate cuts materialize.

Browse some of today's best savings account offers with the tool below, powered by Bankrate:

What it means for your financial strategy

When interest rates shift up or down, it sends a ripple effect across nearly every aspect of your personal finances. That’s especially true when mortgage rates move sharply. If you're a homeowner, a buyer, or someone with money in savings, now’s the time to pause and ask: What should I do differently?

Here are a few options to consider.

Refinance math: When it makes sense.

If you have a mortgage with an interest rate at least one percentage point higher than current offerings, now is the time to run the numbers. Just make sure you factor in closing costs, loan term changes and how long you plan to stay in the home. Refinancing isn’t always a slam dunk, but for many, it could mean real monthly savings.

Diversifying savings if yields fall.

If CD and high-yield account rates start to decline, look into laddering strategies or short-term Treasury bills to lock in higher yields while they last. Consider moving a portion of savings into I-bonds or other inflation-protected assets if you’re worried about losing ground.

Big picture: why every rate move creates both opportunity and trade-offs.

Whether you’re a homeowner, a saver or an investor, every rate change reshapes your financial landscape. With another decision coming in October, now is the time to revisit your strategy, weigh the trade-offs between borrowing and saving and make adjustments that support your long-term goals.

Falling mortgage rates can provide relief for homeowners and buyers but they also bring challenges for savers and financial institutions. Instead of seeing these shifts as purely good or bad, treat them as a signal to reassess and realign your money decisions.

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Mortgage rates have slipped to their lowest level in nearly a year, creating a pivotal moment for homeowners considering a refinance.

Those who bought after 2022, when rates climbed above 6%, now have an opportunity to reassess. Lower borrowing costs can translate into real savings, but the decision hinges on timing, long-term goals and whether the math works out after closing costs.

The current surge in refinancing isn’t just about cheaper payments. It’s being driven by signs of a cooling job market, falling Treasury yields and expectations that the Federal Reserve could enter a rate-cut cycle. Together, these forces are reshaping the landscape and prompting many homeowners to take a closer look at their options.

Mortgage rates fall, fueling a surge in refinancing

On September 11, Freddie Mac reported a 15-basis-point drop in mortgage rates from the previous week — the largest weekly decline in the past year. The average rate for a 30-year fixed mortgage fell to 6.35%, while the 15-year fixed dropped to 5.5%.

Homeowners moved quickly to seize the opportunity. Data from the Mortgage Bankers Association shows refinance applications climbed 60% in early September, rising from 1,010 on August 31 to 1,600 by September 7.

Why refinancing is back on the table

Several factors are contributing to falling mortgage rates. The August jobs report revealed that unemployment increased from 4.2% in July to 4.3% in August, suggesting a slowdown in the labor market. The Federal Reserve often cuts interest rates to help drive employment, and a rate cut could help drive mortgage rates down further.

Additionally, the Treasury yield, which can reflect interest rates, recently dropped to 4.04%. The 10-year Treasury yield, which is the borrowing cost the government pays over a decade, tends to closely correlate with mortgage rates. The recent drop in the Treasury yield means that mortgage rates will likely drop, too.

The falling mortgage rates are a welcome reprieve from the high-rate environment of the past 24 months. Beginning in 2023, mortgage rates climbed significantly, and interest rates for a 30-year fixed rate mortgage reached 8% on October 18, 2023, according to Mortgage News Daily.

Rates hovered between about 6.5% and over 7% for much of 2025, so the recent drop offers exciting opportunities for buyers and homeowners looking to refinance.

What homeowners could gain by refinancing now

If you bought a home when interest rates were higher than the current 6.35% for a 30-year fixed rate mortgage, you could potentially save money by refinancing. When you refinance, you can take advantage of a lower mortgage rate, which means you’ll pay less in interest each month, lowering your monthly mortgage payments.

Locking in a lower mortgage rate also saves you on interest over the life of a loan. Even if the interest rate has dropped just a few points, those savings can add up significantly across the life of a 30-year loan.

When you refinance, you also have the option to shorten your loan term. For example, if you’ve been paying on a 30-year mortgage but want to pay your home off sooner, you could refinance to a 15-year mortgage to speed up the process. By paying your home off sooner, you can again save on interest.

Explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

Costs and risks to weigh carefully

As refinance applications surge, it may be tempting to join in on the refinancing movement, but it’s essential to carefully consider whether refinancing makes sense for you.

Start by carefully reviewing the costs of refinancing. You will be responsible for paying closing costs to refinance, which typically range from 3% to 6% of your mortgage balance.

If you owe $250,000 on your home and want to refinance, you could pay $7,500 to $15,000 in closing costs. Those costs can vary depending on the lender you use and the type of refinance you choose, so be sure to shop around and compare costs.

Calculating the refinance break-even point can help you determine if refinancing makes financial sense. The break-even point occurs when you start saving money as a result of refinancing your home.

To start, add up all of your costs of refinancing, then determine how much money you’ll save each month. Divide your refinancing fees by the amount of money you save per month to determine how many months it will take before you start saving money.

For example, if your fees total $7,000 and you’ll save $350 a month, you’ll divide 7,000 by 350 for a result of 20 months. In this scenario, you’ll start saving money in just under two years.

Make sure that you meet the requirements to refinance, too. It’s a good idea to have built up at least 20% equity in your home before you refinance. While some lenders will allow you to refinance with less, they will typically require you to carry private mortgage insurance, which will eat into your savings.

It’s ideal to have a strong credit score, too. The better your credit score, the better the chances of a lender offering you the lowest available mortgage rate. It’s also important to keep your debt-to-income ratio as low as possible. That ratio affects your credit, plus each lender may require borrowers to meet specific debt-to-income ratio requirements.

Consider the timing of refinancing, too. If you’re planning to move in just a few years, refinancing may not make sense, especially if you could be moving before you meet that break-even date. If you refinance your mortgage and move soon after, you might never recoup the money you paid for your closing costs, ultimately losing money thanks to a refinance.

Is this window temporary?

The falling mortgage rates may be temporary. Economic instability from a volatile market and unpredictable tariffs could prompt interest rates to increase. If inflation continues to climb, the Federal Reserve might choose to keep interest rates higher to help fight inflation, which could result in higher mortgage rates.

Since it’s difficult to predict how long lower rates will hold, many homeowners are weighing their options now. The recent drop has already sparked a surge in refinancing, but future moves by the Federal Reserve and broader economic shifts could change the picture quickly.

For borrowers, the key is understanding how long it might take to benefit from a refinance and whether it aligns with their financial goals — especially in a market that could shift again in the coming months.

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Buying a second home can be an appealing way to lock in a vacation retreat or create an income-producing property. But the number of buyers taking out mortgages for second homes has fallen sharply — Redfin reports 86,604 mortgages in 2024, the lowest level since 2018 and far below the 258,289 peak in 2021.

If you have enough savings, you don’t necessarily need a mortgage to make the purchase. All-cash offers are still common, and they can make transactions faster and more attractive to sellers. But draining your savings may leave you without a financial cushion.

The real question is whether it makes more sense to pay cash for your second home or finance it with a mortgage. Both options come with trade-offs in flexibility, tax advantages and long-term costs.

Should you pay cash for your second home?

Buying a home is often the largest purchase you’ll make in your lifetime, and some buyers are in a position to cover the cost entirely in cash. According to the National Association of Realtors (NAR), 28% of all home sales last summer were all-cash transactions.

About 16% of those were for second homes, showing that many buyers are skipping financing altogether when purchasing a vacation or investment property.

By November, the share of all-cash purchases dipped slightly to 25%. Even with that decline, cash buyers continue to represent a significant portion of the market. These figures highlight how common it is, and how competitive it can be, for buyers with available funds to sidestep the mortgage process and secure a property outright.

Curious about today's rates? Explore and compare some of today's top mortgage offers with the tool below, powered by Bankrate:

Pros and cons of buying a second home in cash

Paying in cash comes with clear advantages, but it isn’t without drawbacks. Here’s what to weigh before deciding if an all-cash purchase is right for you.

Pros

• No decades-long interest charges. You’re off the hook from paying interest on your home, which could cost you more than the home itself. If you were to buy a $400,000 second home today with a 6.5% interest rate and put down 10% — $40,000 — you’re looking at about $2,742 as your monthly payment. At the end of your 30-year loan, you’ll end up paying $819,160 for that home — $459,160 of that in interest.
• Fewer fees. Paying in cash eliminates many of the costs tied to financing, such as loan origination, appraisal and lender-related closing fees. While you’ll still need to cover standard expenses like title fees, transfer taxes and insurance, the overall transaction typically costs less than if you were taking out a mortgage.
• Outright ownership. A mortgage means your lender technically owns your home until you’ve paid off your loan. Without a mortgage, you own the home in full, giving you more options if you want to sell it quickly.
• Faster purchase. Sellers like all-cash offers, since they don’t have to be at the mercy of financial institutions approving or denying potential buyers. It makes for quicker, smoother transactions and could put you at the front of the line for a hot property.
• Potential discounts. Some sellers may offer an all-cash discount if you pay for the property in full, rather than going through mortgage lenders, which could trigger more costs and fees.
• Spending freedom. Without a monthly mortgage payment, you can use that money you would’ve spent on a home loan towards other wants or needs, like investments and savings.

Cons

• Less cash flexibility. If you’re draining your savings to buy a second home, you have very little to pay for other needs. Without a cushion, you could end up borrowing for emergencies, whether unexpected repairs, car maintenance, or a health concern.
• Fewer tax benefits. While second homes don’t offer as many tax breaks as primary residences, you can still qualify for some relief. For instance, you can deduct mortgage interest, up to certain limits.

Pros and Cons of buying a second home with a mortgage

While many second homebuyers pay for their property in cash, not all do. In some cases, taking out a mortgage might be a better option.

Pros

• More financial wiggle room. Even if you can pay a sizable chunk of your home purchase in cash, taking out a small loan provides financial relief in the first few months of ownership. What if you need to cover major repairs or you want to make significant upgrades? Think about what you’ll need money for after the purchase.
• Tax incentives. Even though you’re making monthly mortgage payments on a second home, you can take advantage of the mortgage interest deduction on your taxes.
• Builds creditworthiness. While taking out a mortgage causes a temporary dip in your credit, having a home loan on your credit report looks good to potential creditors in the future, who may look at your report to gauge your creditworthiness.

Cons

• Long-term interest and fees. Taking out a mortgage means paying interest until your loan is paid in full. There’s a chance you could pay off your loan before the terms are up, lessening how much you pay in total interest. But you might get hit with a prepayment penalty if you pay it off too soon.
• Ongoing monthly payments. Unless your first home is paid in full, you’ll add another mortgage payment to your monthly budget. If you can afford the new payment, this should be fine, but you may need to rework the numbers if it's tightening your finances.
• Longer closing process. The homebuying process can take a few weeks to a couple of months. Taking out a mortgage puts you at the mercy of a financial institution that approves or denies your final application.

Deciding how to fund your second home

If you have the cash to buy your second home in full, that’s a great way to avoid the mountain of interest and fees that come with a mortgage. You’ll also have the peace of mind of owning the property outright.

Not everyone has the financial freedom to make this leap, though. And even if you do, a loan can still make sense if it helps you preserve savings, take advantage of tax deductions, or keep more flexibility in your overall finances.

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Falling job growth may be bad news for the economy, but it could bring welcome news for mortgage borrowers. A weaker-than-expected jobs report has already pushed rates lower, easing some of the pressure on today’s housing market.

For homebuyers, the shift offers a chance to secure a mortgage at a more affordable level than what we’ve seen in recent months. Lower borrowing costs can translate into smaller monthly payments and, in some cases, the ability to consider a wider range of homes.

Homeowners who purchased when rates were higher may also see an opening to refinance. A lower rate can cut monthly expenses or help shorten a loan term, giving borrowers more flexibility as they manage their finances.

Dipping mortgage rates are promising for buyers

After years of mortgage rates hovering at or above 7%, there’s finally relief in sight for homebuyers. According to Mortgage News Daily data, average rates for a 30-year fixed mortgage dropped to 6.28% on Monday, September 8 — down from 6.53% just a week earlier.

It’s a welcome shift for both buyers and homeowners looking to refinance. Rates had climbed as high as 7.26% in January and 7.08% in May, so the recent drop could mean lower monthly payments and make homeownership more affordable.

How the jobs report lowered mortgage rates

On Friday, the Bureau of Labor Statistics released its jobs report for August with disappointing results. The unemployment rate increased to 4.3%, compared to 4.2% in July. Employers added just 22,000 jobs in August, indicating a slowdown in the labor market.

There are many potential reasons for the poor jobs report, including economic uncertainty generated by tariffs. The back-and-forth nature of the tariffs make it difficult for businesses to strategically plan, so businesses may be less likely to hire.

Additionally, inflation results in higher prices, and consumers are starting to limit their spending, impacting business profits and potentially resulting in staffing cuts.

Though the jobs report indicates trouble for the economy, it correlates with declining mortgage rates, and it could help lower interest rates even further.

Cutting interest rates can help boost the job market, making operational costs cheaper for businesses, but increasing interest rates helps fight inflation. Given the poor jobs report, the Fed might decide to lower interest rates to help boost employment, which could drop mortgage interest rates even more.

The perks of lower mortgage rates for homeowners and buyers

Lower mortgage rates could make it easier and more affordable for buyers to purchase homes, and that could mean that sellers receive more offers on their homes. Lower mortgage rates could prompt more buyers to enter the market, driving sales and increasing demand.

Homeowners may also choose to refinance a mortgage to take advantage of the current lower interest rates. Refinancing at a lower interest rate can lower your monthly payments by reducing the total interest you’ll pay.

If you’re struggling to make payments, you might choose to extend your loan term when you refinance. Alternatively, if you want to pay off your mortgage faster, you could refinance to take advantage of a lower interest rate while choosing a shorter loan term to pay off your loan sooner.

Just keep in mind that you'll pay a fee to refinance your home, and that can vary depending on the type of refinancing you choose and your new loan amount.

Explore and compare some of today's top refinance offers with the tool below, powered by Bankrate:

Additional ways to get lower mortgage rates

While mortgage rates may be falling, the actual interest rate you receive depends on several factors. You can take steps to maximize your chances of getting the lowest interest rate possible:

• Build your credit score. Lenders review your credit score and offer lower interest to borrowers with higher credit scores. Focus on making all of your payments on time to improve your credit score.
• Make a larger down payment. Lenders assume less risk when you make a large down payment, so they may offer you a lower interest rate. Plus, making a large down payment reduces your monthly mortgage payments and means you’ll pay less interest over the life of your mortgage.
• Reduce your debt-to-income ratio. A lender will also review the amount of existing debt you have compared to your income. If you have lots of debt, it can indicate that you’re at a higher risk of not being able to pay your mortgage, so lenders may charge you a higher interest rate to make up for some of that risk. Focus on paying off debts and working to increase your income.

If you’re ready to buy a home, take time to consider how much mortgage you can comfortably afford and get pre-approved so you’re prepared to make an offer when the right property comes along.

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Throughout 2025, the Federal Reserve has kept interest rates steady after cutting them by a full percentage point in 2024. But signs are emerging that change may be on the horizon.

Inflation appears to be cooling, the job market is showing signs of softening, and at the August Jackson Hole, Wyoming, conference, Fed Chair Jerome Powell indicated that rate cuts could be on the table in upcoming meetings.

So why does this matter?

The Fed's goal is to keep the economy balanced — not too hot, not too cold. Think of it like Goldilocks' porridge: just right. The key tool it uses is the fed funds rate, which influences how much banks charge each other for overnight loans.

Kiplinger's Adviser Intel, formerly known as Building Wealth, is a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

This rate affects a wide range of borrowing costs, from credit cards to mortgages, but it primarily targets short-term interest rates.

Longer-term rates, like those on five- or 10-year loans, are shaped by more than just Fed policy. They reflect expectations about future short-term rates, inflation and market demand.

So, a rate cut doesn't automatically mean lower long-term borrowing costs.

Given that it looks highly likely that the Fed will lower rates in the near future, it's worth considering who would benefit from lower rates, who is hurt by them, and what to do if rates are going down.

Who benefits from lower rates?

Theoretically, anyone who is looking to borrow money benefits from lower rates, but due to the nature of the yield curve (the interest rate for different lengths of borrowing), not all borrowers benefit equally.

The type of debt that is most directly affected is variable rate debt with rapid resets. Things that tend to fall into this category are home equity lines of credit (HELOCs) and credit cards on the consumer side and floating-rate loans the corporate side.

Adjustable-rate mortgages also benefit from lower rates, but after the financial crisis, their use plummeted and are fairly uncommon today.

While it is always nice to get a break when a 27.5% credit card interest rate moves to a 26.5% rate, assuming the Fed eventually implements a cut of 1 percentage point, that probably won't help many people.

Arguably, the same is true for things like home equity lines, which tend to carry higher interest than mortgages.

More affordable housing via lower rates is often cited as a reason rates need to be cut now, and home sales are at a nadir in this high-rate environment.

There are a few issues with this argument, however. Most people finance their homes with 30-year mortgages, which are more closely tied to the 10-year Treasury rate, not the fed funds rate.

As markets expected higher inflation in the future, longer-term rates actually rose last year despite Fed cuts. That same phenomenon is happening now. In other words, rate cuts may actually hurt those looking to buy a home.

If mortgage rates do drop, we could see increased demand and further home price increases, offsetting the benefit.

Unfortunately, the real solution to more affordable housing is an increased supply of homes, complemented by lower rates and lower building costs.

For those looking to refinance, lower rates would clearly help, and an increasing number of homeowners are paying high rates. The general rule of thumb is to refinance when you can save 1 percentage point or more on your mortgage rate, which may be a way off for many.

Similarly, lower rates will make car buying cheaper, and the rising number of auto delinquencies shows that this relief is needed.

Who could feel the downside of lower rates?

A surprising fact about America is that we are a net saving population. You frequently see headlines lamenting the low average savings rate of Americans (which is a sad truth), but that belies the point that we do save.

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Importantly, many older and retired people are significant savers, and much of this money ends up in investments tied to interest rates. This means that lowering interest rates actually lowers the net income of the population.

Investors living comfortably by buying CDs and Treasuries will see a drop in their disposable income. The same is true for many corporations that have large balance sheets invested in bonds.

What should you do?

Now is a great time to assess any outstanding debt and monitor when it makes sense to refinance, especially if you have a mortgage rate above 7%. As rates decline, it can become more attractive to borrow an equity line and pay off any higher interest debt, such as credit cards, as well.

More important, perhaps, is thinking about locking in good interest rates now rather than waiting. Review cash positions in your bank accounts and make sure anything above a six-month cushion is generating good interest in CDs or other high-yielding investments.

If you have significant balances parked in high-yield savings, now is a great time to buy things like Treasuries to lock in rates.

Of particular note, for those in high-tax states, municipal bonds are trading at a historical discount and offer an opportunity to get tax-free income at very compelling rates.

As the environment changes, you should actively manage your exposure to interest rates to better position yourself for what may come next.

Bradley Thompson offers securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors, LLC, a SEC-registered investment advisor, and offers annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of California, LLC in CA; Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc., in PR). Equitable Advisors and Equitable Network are affiliates and do not own or operate New Canaan Group. PPG-8363243.1 (Exp 9/29)

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Buying a million-dollar home on a $250,000 salary might sound like a reasonable goal. With a six-figure income, many assume they can comfortably manage the mortgage.

But the reality looks different once you add in taxes, insurance and other costs.

As mortgage interest rates edge lower, buyers might feel encouraged to shop for bigger or more expensive homes. Before you stretch your budget, it’s worth running the numbers to see what a $1 million home really costs each month and in the long term.

From steep closing costs to jumbo loan requirements, the expenses quickly add up. Here’s a closer look at what it takes to afford a million-dollar home on a $250,000 salary.

Crunching the numbers on a $1 million home

Let’s take a look at the average costs of buying a $1 million home. If you make a 20% down payment of $200,000, you’ll have an $800,000 mortgage. The current interest rate for a 30-year fixed mortgage is 6.35%, according to Freddie Mac.

Assuming you have strong credit and are a low-risk borrower who gets that 6.35% interest rate, your monthly mortgage payment, including interest, would be $4,978.

That mortgage payment excludes additional expenses such as property taxes and homeowner’s insurance, both of which will vary depending on where you live.

For example, Hawaii has the lowest property tax in 2025, with a rate of just 0.32%, but rates can be 2% or higher. For this example, let’s use Oxford County, Maine’s 1.192% tax rate, which is about in the middle of tax rates in the United States.

With a 1.192% tax rate, you'd pay $11,920 each year in property taxes on your $1 million home, which comes out to $993.34 per month. If your home’s assessed value increases in the future, or if your state or county tax rate increases, your taxes will rise, too.

You’ll also need to budget for insurance. Insurance.com estimates that the national cost of homeowners insurance for a million-dollar home is $7,412 per year, but many factors will affect your insurance premiums, including your home’s location, its age and even your history of making claims. The coverage you choose will also impact your rates.

Using these sample figures, if you wrapped your taxes and insurance into the mortgage, your monthly mortgage payment would be $6,558.

You’ll face additional costs when you close on your home, too. Closing costs for buyers can range from 2% to 5% of your home’s purchase price, according to Zillow, so you could pay up to $50,000.

Additionally, thanks to a real estate commission settlement, sellers might choose not to cover your agent’s fee, so you might be responsible for paying your real estate agent a commission of approximately 3% of your home’s sale price, or about $30,000.

Let's sum it up:

• Down payment: $200,000
• Closing costs: Approximately $50,000
• Real estate agent's fee: Potentially $30,000
• Annual property taxes: $11,920
• Annual homeowner's insurance: $7,412
• Monthly mortgage excluding taxes and insurance: $4,947
• Monthly mortgage including property taxes and insurance: $6,558

Debt-to-income and lenders’ rules

Lenders want to see that you’re financially stable and a low risk to issue you a mortgage and to give you a lower interest rate. In addition to considering factors such as your income, lenders review your debt-to-income ratio, which compares your recurring monthly debt payments to your monthly income.

According to Wells Fargo, mortgage lenders often prefer a debt-to-income ratio below 35% or 36%. If you’re making $250,000 per year and are bringing home $13,500 after taxes and retirement contributions, your existing debts can’t be higher than $4,860 per month.

For example, your car payments, student loans and credit card debts can’t add up to more than $4,860 per month.

Your debt-to-income ratio also affects your credit score, which can impact the mortgage rate you qualify for. A lower debt-to-income ratio can help to increase your credit score. Mortgage lenders see a higher credit score as indicative that you’re a lower-risk borrower, so you’ll be more likely to get a lower interest rate on your mortgage.

Jumbo loans and additional costs

Depending on the size of your down payment, you might need to take out a jumbo loan to buy your home. Jumbo loans are required for single-family mortgages of more than $806,500, which is the current loan-servicing limit set by Fannie Mae and Freddie Mac.

Jumbo loans often have higher interest rates and stricter underwriting rules than a traditional mortgage, but they're available as fixed-rate and adjustable-rate loans.

Since jumbo loans are riskier for lenders, you’ll usually need a higher credit score to qualify for them. According to Capital Bank MD, you’ll usually need a credit score of at least 680 for a $1 million loan. You’ll need a debt-to-income ratio under 43% to qualify, and lenders also like to see that you have significant cash savings to ensure you can make your mortgage payments.

Explore and compare some of today's best mortgage offers with the tool below, powered by Bankrate:

Variations by market: Expensive vs affordable metros

Your home’s location not only affects your property tax and insurance rates, but it also affects overall home affordability. Certain areas simply cost more to live in than others. Metropolitan areas with strong economies, such as New York City, San Francisco and Boston have higher costs of living.

To buy a house in one of these more expensive markets, you’ll need to budget more for expenses such as food, utilities and transportation.

If you’re willing to move to a more rural area, like West Virginia, Oklahoma or Mississippi, your costs of living will be lower. You can save on everything from home repair costs to taxes, and chances are, you’ll be able to get more house for your money, too.

Finding your comfort zone with mortgage costs

Dave Ramsey recommends homebuyers follow the 25% rule, in which your monthly house-related expenses, such as your mortgage, insurance and property taxes, add up to no more than 25% of your monthly take-home pay. This rule can help ensure you’re able to comfortably afford your mortgage.

In the above example, you'd take home $13,500 per month, and your mortgage payments, including taxes and insurance, would be $6,558. That’s nearly half your take-home income, indicating that in this situation, you can’t afford a million-dollar home on a $250,000-per-year income.

There are ways to change that, though. Saving up a larger down payment will lower your mortgage payments, and you might be able to afford a home with a lower mortgage.

You might also consider moving to an area where taxes and insurance are cheaper to keep costs down.

Ultimately, shopping for a more affordable home might be the best solution so that you can comfortably afford your mortgage.

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When buying a home, securing the lowest interest rate available means you won’t have to pay more than necessary on top of your principal balance. But interest rates change constantly — sometimes multiple times a day.

These changes could mean the rate you secure today may not be the lowest rate on the market before you close on your new home.

Before signing any paperwork with a lender, whether you're getting preapproved or finalizing your loan, it's important to understand how interest rates work. Knowing the difference between locking in an interest rate and letting it float can help you make a more informed decision and avoid paying more than necessary over the life of your mortgage.

What does it mean to lock in an interest rate?

Mortgage interest rates can change often, so what you see today isn’t necessarily what you will pay by the time you close on your home.

When applying for a home loan preapproval, some lenders allow you to either lock in your interest rate or let it float.

Locking in an interest rate means securing a rate from the time you complete your preapproval application through closing, as long as you meet certain conditions from your mortgage lender. These might include closing within a set time frame, such as 30 or 60 days, and ensuring the home's appraised value remains consistent.

Pros and cons of locking in an interest rate

Locking in your rate can offer stability, but it may also limit your flexibility if market conditions change. Here are some key advantages and potential drawbacks to consider.

Pros

• Get the lowest interest rate available right now.
• Some lenders lock your rate for free.
• You can estimate your monthly payments to find home listings in your price range.

Cons

• There’s a chance interest rates could drop before you close on your home and you don’t get the lowest interest rate available anymore.
• Terms could change if you don’t meet borrower obligations, like closing before the deadline or your credit score changes.
• Unable to buy points to lower the interest rate if it is locked.

Curious about today's rates? Explore and compare some of today's best mortgage options with the tool below, powered by Bankrate:

What is a floating interest rate?

Rather than locking in an interest rate, you can let it float. Floating an interest rate means you get the lowest rate available at closing time, even if it’s different from what you saw during the preapproval process.

Pros

• Your estimated interest rate could drop by the time closing comes around.
• Allows you to buy mortgage points to lower the rate - pay to reduce the interest rate through discount points in exchange for upfront lump-sum cash.
• You aren’t tied to the rate lock deadline when home shopping.

Cons

• You could end up with a higher interest rate than your original quote.
• A higher interest rate at closing means you could pay more per month and over the life of your loan.
• Higher monthly expenses could cut into other financial necessities, including other bills or emergency savings.

When should you lock in an interest rate vs. letting it float?

Locking in an interest rate is a safe and secure way of keeping your rate at an expected level when buying a home. But there might be some instances where you decide to get a floating interest rate instead.

You should lock in an interest rate if:

• You’ve been following mortgage rates and they’ve been trending upward.
• You have the lowest interest rate available.
• You expect to close on a home within the set time frame.
• You don’t plan on making any big purchases before buying a home that would change the rate.

You should float an interest rate if:

• The trend shows mortgage rates are dropping and you expect to get a lower rate by the time closing comes around.
• You aren’t sure if you’ll close on a home within the set time frame.
• Your credit score might change, impacting the interest rate you got during the preapproval process.
• You could get a lower interest rate by buying mortgage points.

When you’re unsure if a floating interest rate is right for you

If you’re uncertain whether to float your interest rate, talk to your lender or mortgage broker about your options. They can help you evaluate your financial goals and determine what makes the most sense for your situation.

If a floating rate could benefit you, they should explain why. If a rate lock is the better choice, make sure you understand the reasoning. In some cases you might qualify for a float-down option, which lets you take advantage of a lower rate if it drops before closing.

If you’re unsure about the deal you’re getting or want to explore other options, don’t hesitate to consult with other mortgage professionals. Buying a home is one of the biggest financial decisions you’ll make and it can be stressful. Surround yourself with a team that supports your goals.

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Buying a home has so many moving parts that it can feel like it takes forever to finish. One part of that process includes mortgage underwriting.

A mortgage underwriter is the person who approves — or denies — your loan application. This is one of the most important people in the process, and it could take days or even weeks to finish.

If you’re beginning the home-buying process or simply planning for the future, let’s explore the role of a mortgage underwriter and why their work matters for your approval.

What is a mortgage underwriter?

A mortgage underwriter assesses your home loan application, checking your financial history to see if you’re a good candidate to whom to lend.

The underwriter thoroughly reviews your credit history, financial documents, bank accounts, investments and anything related to your money, taking a deep dive into your background to see if your finances align with home loan eligibility.

Each mortgage lender has different requirements, so underwriters must ensure each applicant fits the eligibility standards before approving (or rejecting) a home loan.

What does a mortgage underwriter do?

A mortgage underwriter checks every facet of your finances, with a few primary focus points.

1. Income

One of the most important evaluations is made on how much you earn, how often you earn it and how long you’ve worked for your current employer. A mortgage underwriter verifies your employment to make sure you earn exactly what you stated in your application. You might need to submit a W-2, pay stubs, or other employment statements to show your earnings.

Mortgage underwriters thoroughly review bank accounts for the last few months or years, depending on your situation. For self-employed folks or those who own their own businesses, you might have to submit extra paperwork to show your income.

How much you make, together with your current debt levels, makes up a pivotal part of your mortgage application. This also highlights your debt-to-income ratio (DTI), which is the percentage of income you have once all your monthly bills have been paid.

Debt includes monthly home payments (such as a mortgage or rent), outstanding credit card balances and other loans, such as auto, personal, student loans, child support, alimony and more. It also includes basic costs such as food and utilities.

You can find your DTI by adding up your monthly payments and dividing them by your monthly income. Multiply that figure by 100 to get your DTI percentage.

Every lender has different DTI requirements, but generally, a good DTI is 35% or lower. Keep in mind that you might still get approved for a mortgage with a higher DTI, depending on your lender.

2. Credit

Your credit is another major component of the underwriting check. A mortgage underwriter will pull your credit report to see how you handle borrowing money.

A long history of on-time payments shows mortgage underwriters that you’re responsible with money and would likely repay your mortgage if given a home loan. This shows up in your credit score, such as the commonly used FICO score.

Underwriters look at the good and the bad. For example, they could check to see if you’ve had any recent bankruptcies or carry a large credit card balance. If you have a history of irresponsible credit, a mortgage underwriter might deem you too risky to approve a loan.

3. Property and assets

Assets aren’t just the cars or homes you own; they include bank and investment accounts, retirement funds and more. A lender will order a third-party property appraisal on the home you want to buy.

Appraisals tell lenders the market value of your potential home, which plays a part in your approval, helping inform lenders whether you can afford your future home repayments based on how much it's worth.

You might get approved for an amount that’s less than the home's appraised value. If that’s the case, you might have to pay the (potentially hefty) difference out of pocket.

How long does a mortgage underwriter take to evaluate applications?

There’s no standard time on how long mortgage underwriting should take. For some lenders, it could take a few days, while others might take upwards of a few weeks to complete underwriting. Some use an automated process that includes software or AI, which expedites the process.

This might work for some applicants, especially those with a straightforward income, employment and debt history.

However, if you have irregular income, recently changed jobs or have recent marks against your credit report, you might have a better chance of approval with a manual underwriting process.

Either way, avoid falling behind during the underwriting check by keeping all your paperwork in order and at the ready. It could take you awhile to pull financial documents from the last two years, so if you can gather those ahead of time, you could help the underwriting process go faster.

Tips for navigating mortgage underwriting successfully

Overall, underwriting is one of the most time-consuming steps in the mortgage process.

To keep things moving smoothly, avoid making large purchases that could lower your credit score and affect your application. Have your financial documents organized and ready, and try not to get discouraged by the waiting game.

Patience and consistent communication with your lender and agent will help ensure they have everything needed to guide you through the process.

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Question:

I bought a house when mortgage rates were 6.5%. If rates fall to 6.25% or 6.0%, would refinancing make sense and actually save me money?

Answer:

With mortgage rates stubbornly elevated in recent years, many homeowners are watching the market for the right moment to refinance. But securing a lower rate is only part of the equation. You'll also want to calculate how much you'd actually save, how long it would take to break even on closing costs, and whether refinancing makes sense for your financial goals.

A bank study found that most borrowers with a 30-year mortgage would need about a 0.75% rate drop to see meaningful savings and break even in under three years.

Homeowners with 15-year mortgages, however, could benefit from a smaller decrease — even a 0.50% drop could add up to more than $1,500 in savings over three years. In other words, the type of mortgage you hold plays a big role in whether refinancing is worthwhile.

How refinancing can save — or cost — you money

Refinancing lowers your monthly payment by replacing your existing mortgage with one at a lower interest rate. That part is simple. But the catch is that you’ll need to pay closing costs which are often thousands of dollars upfront. These can include lender fees, appraisal costs, title insurance and more.

That’s where the mortgage refinance break-even point comes in. This is the point in time when the money you save on lower monthly payments finally offsets what you paid in closing costs. If you sell your home or move before you hit that break-even point, you may end up losing money even with a lower interest rate.

The half-point drop dilemma

Spring and summer are peak seasons for home updates, with many homeowners taking on renovations, repairs or outdoor projects. For those who have built up equity, refinancing or tapping that equity can seem like a timely way to fund those improvements.

But even as rates shift, the math behind refinancing is not always as straightforward as it appears. Small changes in rates can lower monthly payments, but the savings may be more modest than expected, especially once closing costs are factored in.

To put that into perspective, here’s how a typical mortgage might be affected by a modest rate change.

On a $400,000 loan, a half-point decrease from 6.5% to 6.0% can reduce your monthly payment, but the difference may not be significant enough to justify refinancing on its own.

Refinance break-even example (based on a $400,000 home value)

The takeaway? A quarter-point drop won’t cut it and even a half-point drop barely gets you across the break-even line in a reasonable timeframe.

The magic 0.75-point threshold

For most homeowners, refinancing becomes worthwhile once mortgage rates drop at least 0.75 percentage points. At that level, you reach break-even in under three years, which is often the time horizon financial experts recommend.

And if you can capture a full 1-point reduction, the payoff is clear: you'd break even in under two years and see more than $5,000 in net savings within three years. That's why many experts call the 0.75-point reduction the "sweet spot" for refinancing.

Quickly explore and compare some of today's best refinance offers with the tool below, powered by Bankrate:

Why location changes the math

Your state and your loan size can dramatically change how quickly refinancing pays off.

• In states with higher home prices, like California, New Jersey, or Washington, D.C., the larger loan amounts mean that even small drops in interest rates add up to significant monthly savings. That shortens the break-even timeline.
• In states with lower average home values, such as Michigan, Indiana, or Ohio, the savings are smaller because loan balances are smaller. That makes the break-even point stretch out longer, sometimes beyond three years, unless rates fall by a full percentage point.

This is why two families with the exact same rate drop could see very different results depending on where they live and the size of their mortgage.

How to know when it's a smart time to refinance

Here are a few scenarios where you might want to consider refinancing your mortgage:

• You can drop your rate by 0.75% or more: This is the most common signal that refinancing makes sense. If you’re moving from 6.5% to 5.75%, your monthly savings could be enough to justify the upfront costs in a relatively short period of time.
• You want a shorter loan term: Refinancing doesn't have to mean starting over on a 30-year loan. Many borrowers refinance into 15- or 20-year loans to pay off their homes faster and save on interest, even if their monthly payment stays roughly the same. This strategy works well if your income has increased or if you’re focused on debt-free living.
• You're dropping private mortgage insurance (PMI): If your home value has risen enough for you to have 20% equity, refinancing may help eliminate PMI, which can save you an additional $100 to $200/month.
• You're consolidating debt at a lower rate: Some homeowners choose a cash-out refinance to pay off high-interest credit cards or personal loans. This can lower your overall monthly payments and interest costs, but it also resets your mortgage clock, so be careful not to turn short-term debt into long-term debt unless it fits your financial goals.

Common mistakes to avoid

Refinancing your mortgage can be a smart financial move, but it’s easy to get caught up in the excitement of a lower interest rate and overlook the bigger picture.

By being aware of and avoiding these common mistakes, you can avoid wasting money on a refinance that doesn’t actually benefit you or help improve your financial situation.

• Only chasing the rate without considering costs: Refinancing for a 0.25% rate drop sounds good in theory, but it might cost you thousands upfront and take years to break even. Always calculate your total savings, not just your new monthly payment.
• Resetting the clock on your loan: Refinancing into a new 30-year term could lower your monthly payment, but it also extends your loan and increases your lifetime interest cost. Ask lenders if you can refinance into a custom term that matches how many years you have left (e.g., a 22-year or 18-year loan).
• Ignoring your credit score: Your credit score still plays a major role in the rate you'll get. If your credit has dropped since your original loan, you might not qualify for the best rates. Review your credit and address any issues before applying to refinance.

Run the numbers before you refinance

Refinancing isn't one-size-fits-all. While it's tempting to jump at a slightly lower rate, you need to weigh the upfront costs, how long you plan to stay in the home and how much you’ll truly save each month.

Before making a move, run the numbers through a refinance calculator and compare offers from multiple lenders. If the math shows you'll break even in three years or less, refinancing could be a smart way to save thousands over the long run.

If not, it may be better to wait for that magic 0.75-point rate drop. Or, focus on paying down your current loan faster.

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It’s not up to us to determine a home’s worth — that’s what a licensed appraiser does. A home appraisal is an independent evaluation that provides an unbiased estimate of a property’s fair market value. Conducted by a neutral third party, an appraisal is required for most real estate transactions that involve a mortgage.

And since the majority of buyers rely on financing, appraisals are a standard part of the homebuying process. According to the National Association of Realtors (NAR), about 81% of primary residence purchases involve a mortgage, along with 43% of vacation home purchases.

With so many transactions depending on lender approval, appraisals play a critical role in keeping the process moving. So what is a home appraisal, and how does it work?

What is a home appraisal?

A home appraisal is a professional estimate of a property’s value conducted by a licensed appraiser. It’s a key step in nearly every real estate transaction and serves an important purpose for buyers, sellers and lenders alike.

For sellers, the appraisal provides a realistic picture of what their home could sell for in the current market. For buyers, it helps confirm whether the price they’ve agreed to pay matches the home’s true worth.

Mortgage lenders typically require an appraisal before approving a loan. By verifying the home’s value, mortgage lenders ensure the property is adequate collateral for the amount being borrowed. This protects the bank from lending more than the home is worth and gives buyers peace of mind that they aren’t overpaying.

How do home appraisals work?

The mortgage lender orders the appraisal, while the borrower is typically responsible for paying the fee. The cost depends on the appraiser, the property’s size and complexity and the location, but most appraisals fall in the $325 to $1,000 range.

At its core, the purpose of an appraisal is to determine a home’s true market value. The negotiated price between a buyer and seller reflects what the seller hopes the property is worth — but that doesn’t always match reality.

An appraisal helps bridge that gap with an independent estimate backed by data and professional evaluation. In most cases, the buyer’s mortgage lender initiates the process to ensure the home is worth enough to serve as collateral for the loan.

Lenders may also use alternatives like virtual or "desktop" appraisals, particularly for refinances or when a homeowner is applying for a home equity loan or line of credit (HELOC).

These methods are legitimate and commonly used. For purchase transactions however, a full in-person appraisal remains the standard because it captures both the property’s condition and local market trends.

How a home appraisal differs from a home inspection

Although home appraisals and home inspections often occur around the same time during a real estate transaction, they serve very different purposes.

A home appraisal estimates a property's market value. Lenders typically require an appraisal before approving a mortgage to ensure the home's value supports the loan amount. For buyers and sellers, the appraisal helps determine whether the purchase price is reasonable.

A home inspection, on the other hand, evaluates the property's physical condition. During an inspection, a professional examines major components of the home, including the roof, foundation, electrical system, plumbing, HVAC system, doors, windows and appliances. The goal is to identify existing problems and potential repairs.

While an appraisal focuses on what a home is worth, an inspection focuses on its condition. Home inspections are usually optional but strongly recommended because they can uncover costly issues before a buyer finalizes the purchase.

Both steps provide valuable information during the homebuying process, but each serves a distinct purpose: an appraisal protects the lender's investment, while an inspection helps buyers make an informed decision.

What happens during a home appraisal?

Once a lender requests an appraisal, a property appraiser will make an appointment to visit the home.

During the visit, their basic check will include:

• Evaluating the home’s condition, size and layout.
• Reviewing both inside and outside the home.
• Looking at other key features in and around the home.

The appraisal could take as little as 30 minutes or as long as a few hours. Each appraiser is different and obviously no two properties are the same, so you can expect some variation.

The appraiser will then compare the home to similar properties in the area, especially those recently sold. These comparisons or “comps,” help appraisers determine the home's fair market value. To figure this out, an appraiser can browse recent sales data, multiple listing services (MLS) and county records.

The appraiser gathers all of this information and puts it into a report, which is later provided to the lender. Borrowers can request a copy and can review it before closing day. If there are issues with the final appraisal, the prospective buyer is allowed to ask the agent about them before the sale closes.

What does the final value mean?

The final appraised value gives both seller and buyer a solid idea of a home’s worth. If you're a buyer and the appraisal is lower than your pre-approved loan amount, you’ll know you can afford your home payments. If the amount is higher, you'll need to make some adjustments.

If the final appraised amount is lower than the negotiated price between you and the seller, you can adjust the contract to the new price, as long as there is an appraisal contingency in place. But if you don’t have this contingency, you might end up paying more for a home than it’s worth.

Keep in mind that the appraiser works on behalf of the lender, not the buyer or seller. This means the appraisal should be an unbiased evaluation of the home and shouldn’t favor either side of the negotiation table.

A home appraisal is a key step in most real estate transactions, ensuring a property’s value is supported by data and professional judgment.

For buyers, sellers and lenders alike, it provides an unbiased safeguard in the process. Understanding how appraisals work — and what they can and cannot do — helps set realistic expectations and keeps your transaction on track.

Use the tool below, powered by Bankrate, to compare some of today's top mortgage offers:

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When you’re buying a home, one of the biggest financial decisions you’ll make is figuring out how much mortgage you can truly afford.

Mortgage affordability is about how much you can borrow and repay without straining your budget, and the 28% rule offers a simple guideline to help ensure your mortgage stays within reach.

But given the climbing real estate prices and high interest rates in today's housing market, is the 28% rule still relevant?

What is the 28% rule?

The 28% rule is a common mortgage guideline used to gauge affordability. It offers a straightforward way to set a housing budget and avoid becoming overwhelmed by payments that outpace your income.

The rule comes from lending data showing that borrowers who keep housing costs at or below 28% of their gross income are more likely to stay on track with their mortgages.

Under the 28% rule, your monthly mortgage payment — including principal, interest, taxes and insurance — should'nt exceed 28% of your gross monthly income, which is your income before taxes or other deductions.

For example, if you earn $8,000 a month, your total housing costs should be no more than $2,240.

Does the 28% rule still work?

In today’s housing market, rising costs make the 28% rule harder to follow.

In the second quarter of 2025, the median U.S. home price was $410,800, up from $317,100 in the same quarter of 2020, according to the Federal Reserve Bank of St. Louis. Mortgage rates are elevated, too — the average 30-year fixed rate stood at 6.58% as of August 21, 2025.

Homeowners' insurance has also climbed as property values rise and natural disasters become more frequent. The Hartford reports the average premium now costs $2,397 per year, or about $200 per month.

All these factors can push housing expenses beyond 28% of gross income, but aiming to stay near that threshold is still wise. Over time, property taxes and insurance are likely to increase, and if your mortgage already exceeds the 28% mark, keeping up with future costs could become difficult — especially if your income doesn’t rise at the same pace.

What to consider when deciding how much mortgage you can afford

The 28% rule might feel restrictive when shopping for a home, but several factors can improve affordability. Your credit score directly affects your mortgage rate, so building strong credit — by paying bills on time and keeping balances low — can help you secure better terms.

A larger down payment also makes a difference. Putting more down reduces your loan balance, lowers interest costs over time and strengthens your offer in a competitive market.

It also pays to shop around for homeowners' insurance. Premiums vary widely by company, so compare quotes while making sure coverage limits and deductibles fit your needs. Choosing a higher deductible can lower your monthly cost, but be sure you have that amount set aside in savings if you ever need to file a claim.

Why the 28% rule still matters when buying a home

Buying a home you can truly afford isn’t easy, but the 28% rule offers a safeguard against taking on more than your budget can handle.

Overspending on a mortgage can create years of financial strain and leave little room for unexpected repairs or other expenses. As you plan your purchase, keeping the 28% rule in mind can help ensure your home is a source of stability — not stress.

Quickly compare some of today's best home insurance rates with the tool below, powered by Bankrate:

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Most Americans rely on mortgages to buy a home because the typical house still costs far more than what the average worker earns in a year. According to Redfin, the current U.S. median home sale price is $429,708, a figure that remains out of reach for many households without financing.

Meanwhile, recent data from the Bureau of Labor Statistics show that median weekly earnings for full-time wage and salary workers hover near $1,200, which translates to around $62,000 a year — a far cry from what it takes to buy even an average-price home in cash.

When people think of the "ultra-rich," they often imagine homes bought outright, with suitcases of cash exchanged at closing. But the reality is more nuanced. We explore why even some of the wealthiest buyers — from tech founders to entertainers — sometimes choose mortgages over all-cash purchases.

Why wealthy buyers take out mortgages

These independently wealthy household names have borrowed to purchase or refinance a home within the past 15 years:

• In 2018, Elon Musk took out more than $60 million in mortgages across multiple properties, despite having a fortune greater than $23 billion.
• In 2017, Beyoncé and Jay-Z took out a $53 million mortgage on an $88 million mansion, while having a net worth of more than $1.5 billion.
• In 2012, Mark Zuckerberg refinanced his home even though his net worth exceeded $15 billion.

While they could have used cash to complete these real estate transactions, they chose to keep their money in the bank (or invested in other assets).

When borrowing makes sense, even for the rich

There are several reasons you might want to take out a mortgage even if paying for a home in cash is an option, including:

• Your money earns a higher interest rate than your home loan charges. The average 30-year fixed mortgage interest rate is 6.11%. The average annual return of the S&P 500 index from 1928 to 2024 is 8%.
• You have a lot of valuable assets, but they're not liquid. People who own real estate or businesses can be very wealthy, but they can't tap into that nest egg without selling some assets, which they might not want to do. Elon Musk falls into this category.
• You want to keep the cash available for other purposes. Money in the bank gives you options. You can invest, pay for once-in-a-lifetime opportunities or handle emergencies without incurring debt (unless that's your choice).
• You want to take advantage of the tax breaks. If you itemize your deductions, you can write off the mortgage interest you pay on your income taxes. You'll also have more money available to invest in tax-advantaged accounts, like a 401(k), individual retirement account (IRA) or health savings account (HSA), further reducing your tax liability.
• You appreciate the flexibility your home loan offers. If interest rates drop, you can refinance your mortgage to save money. You can also pay off your house early if desired.

People who borrow strategically understand that there's a difference between good debt and bad debt. Good debt helps you purchase an appreciating asset, such as a home or an education linked to a profitable career.

Bad debt finances a depreciating asset (or no asset), such as a car or a vacation, and often carries a high interest rate.

Working with a financial adviser or wealth planner can help buyers understand how real estate fits into their broader financial plan. Instead of viewing a mortgage as a necessity, strategic borrowers might use financing to preserve cash reserves, keep investment portfolios working, or maintain flexibility for future opportunities.

A financial professional can help weigh borrowing costs against potential investment returns, tax considerations and long-term wealth goals.

How to buy a house without a mortgage

While there's nothing wrong with responsibly leveraging debt, there's also nothing wrong with wanting to avoid it altogether. Even though you likely don't have a nine-figure net worth, there might be some ways you can buy a home with cash, such as:

• Delaying your home purchase. If you have time on your side, consider consistently stashing money in a high-yield savings account (HYSA) or brokerage account, allowing it to grow over the years. Once you have sufficient funds, withdraw the necessary amount to buy your dream property.
• Asking for help. Your family might be willing to chip in toward your house fund. You might also receive an inheritance that covers some or all the purchase price.
• Borrowing from yourself. You may be able to borrow up to 50% of your 401(k) balance to put toward your home purchase. However, those funds will miss the benefit of compound interest until they're repaid. Additionally, failing to repay the loan can result in financial penalties and tax implications.

Buying a home is rarely a one-size-fits-all financial decision. For some buyers, paying cash offers peace of mind and eliminates monthly debt obligations. For others, using a mortgage can preserve liquidity, support investment growth and create long-term financial flexibility.

The right approach depends on your income stability, investment strategy, risk tolerance and long-term goals. Whether you choose to pay cash or borrow strategically, the most important factor is making sure your housing decision supports your overall financial plan, not just your desire to own a home.

Curious about today's rates? Use the tool below to explore and compare some of today's top mortgage offers:

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There’s no one-size-fits-all formula when it comes to getting approved for a mortgage. Whether it's for your first home or your dream cabin getaway, each lender sets its own eligibility criteria, interest rates and loan options, which means the right lender for one borrower might not be the best fit for another.

As a homebuyer, it’s important to understand your financial situation and loan preferences early on. This will help you find a lender that aligns with your needs, increasing your chances of approval and favorable rates.

To help you navigate the process, we'll go over five steps to choosing the right mortgage lender and

Where mortgage interest rates and policy stand now

Last year, the Federal Reserve cut interest rates three times. While mortgage rates don’t move in step with the federal funds rate, they often trend in the same direction over time, and that’s starting to show up in borrowing costs.

The average 30-year fixed mortgage rate is 6.11%, and the average 15-year fixed rate is around 5.50%, according to Freddie Mac. That’s a noticeable improvement from a year ago, when the average 30-year rate was closer to 7.04%.

Even modest rate shifts can affect how much you qualify to borrow and which lenders offer the best terms. Comparing interest rates, lender fees and loan types side by side can help you lock in the best rate before the next policy move.

1. Figure out your home loan preferences

Your first step in homebuying is figuring out what you can afford. Your monthly mortgage payment will include principal and interest amounts, taxes and insurance. Once you have an idea of what you can afford, think about your mortgage type, as this will impact your payments:

• A 15-year loan vs. a 30-year loan: Most people opt for a 30-year mortgage loan since it means smaller monthly payments over a 30-year repayment term. But if you want to pay off your loan sooner and pay less in interest over the life of your loan, look into a 15-year loan.
• Fixed interest vs. adjustable rate: A fixed interest rate stays the same for the life of the loan, giving you predictable monthly payments. An adjustable-rate mortgage (ARM), on the other hand, typically starts with a lower introductory rate. After a set period, however, the rate adjusts based on market conditions, which means your payments could go up or down. Over time, you might end up paying more than someone with a fixed-rate mortgage.
• Conventional vs. FHA/VA/USDA loans: Conventional loans are the most popular type of loan. They aren’t backed by any government agency, and most banks, credit unions and online lenders offer them. FHA, VA and USDA loans are government-backed mortgages based on specific needs. For instance, if you’re a veteran, you could qualify for a VA loan.

Your preferences and financial situation play a big role in narrowing down the right mortgage lenders. For example, if you're looking for a government-backed loan like an FHA or USDA mortgage, you'll want to focus on lenders who specialize in or are approved to offer those specific programs. These options may not be available through lenders that primarily deal with conventional loans.

Understanding what type of loan you qualify for — and what fits your needs — can help you avoid wasting time on lenders that aren’t a good match.

2. Check your eligibility

Once you’ve eliminated mortgage lenders that don’t fit within your preferences, you can start to review the ones that do. Many banks, credit unions and online lenders offer pre-qualification tools to help you see if you’re likely to qualify for a mortgage.

Pre-qualification is different from preapproval — it doesn’t require a hard credit check and won’t affect your credit score. Instead, you enter basic information such as your estimated credit score, income and assets to get a sense of your eligibility.

Checking your eligibility helps determine which lenders are more likely to give you a mortgage based on your creditworthiness, income and where you want to buy a home. You’ll narrow your list even further by getting rid of lenders that may have eligibility requirements you don’t meet.

Try to explore different lenders beyond large financial institutions. You might be able to find offers at local credit unions, regional banks or online mortgage companies. You might be eligible for offers at places you may not have considered.

Take a look at what your current bank offers. Some have deals for existing customers with other accounts. You may qualify for special savings.

3. Compare lenders

Once you’ve narrowed down your list of potential lenders, it’s time to compare the ones most likely to approve your mortgage. Compare lenders based on interest rates, preferred loan terms, down payment requirements and any extra fees. Those fees could include underwriting, loan origination fees and closing costs.

As you shop around, consider getting preapproved by multiple lenders. While each preapproval involves a hard credit inquiry, credit bureaus recognize that you're rate shopping for a mortgage.

If these inquiries occur within a short window — typically 14 to 45 days — they’re grouped as a single inquiry for scoring purposes. This allows you to explore your options without significantly harming your credit score.

4. Review preapprovals and choose a lender

After receiving a few preapprovals, review which lender offers the highest loan amount. Keep in mind, you’re not obligated to spend up to that limit — but having a higher preapproval can give you more flexibility as you explore different homes and price ranges.

It’s also worth evaluating each lender’s communication style and how they’re compensated. Some lenders work as mortgage brokers, meaning they help match you with a loan and may earn a commission at closing.

Ask each lender if they have any special offers or conditions to lower the overall cost. Find out how much potential monthly payments will be for each lender, including your principal mortgage payment, interest, insurance, taxes, and any other costs — that way, you know what to expect before committing.

Many lenders offer a rate lock option, so it’s important to confirm the details with each one. A rate lock lets you secure the current interest rate for a set period — typically 30 or 60 days — while your loan is finalized. This protects you from potential rate increases between the time you’re approved and the day you close on your home.

5. Complete your loan application

Once you’ve chosen a lender and received your preapproval letter, you’ll be ready to start touring homes. After finding the right property, you’ll complete a formal loan application. This step is similar to preapproval, but it initiates the full underwriting process for your actual mortgage.

This is the loan you’ll carry through the life of your home purchase. If you’ve locked in your interest rate, your monthly payments should align with the estimates you received during preapproval, giving you a clear idea of what to expect financially.

The right lender can help you secure competitive rates and make the homebuying process smoother and less stressful. Take your time, ask questions and don’t be afraid to explore multiple options before committing.

Use the tool below, powered by Bankrate, to explore and compare some of today's top mortgage offers:

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If you're planning to buy a home, refinance your mortgage or simply wondering whether borrowing costs will come down, you'll likely hear a lot about the Federal Reserve. While the Fed doesn't set mortgage rates directly, its decisions can influence the broader interest rate environment and shape what lenders charge borrowers.

That's why investors, lenders and homebuyers closely watch each Federal Open Market Committee (FOMC) meeting. When policymakers discuss whether to raise, lower or hold interest rates, they're responding to economic conditions such as inflation, employment and consumer spending. Those decisions can ripple through the financial system and affect everything from savings accounts to credit cards and mortgages.

Understanding the relationship between the Federal Reserve and mortgage rates can help you make sense of where the housing market could be headed. Here's what homebuyers should know about how Fed policy influences mortgage rates and what it could mean for your next home purchase.

How the Federal Reserve affects mortgage rates

The Fed doesn't set mortgage rates or other consumer lending rates directly. However, when the central bank changes its benchmark interest rate, lenders and financial institutions often adjust their own rates in response.

For example, if the Fed raises interest rates, you might see a boost in your high-yield savings account's annual percentage yield (APY), meaning you'll earn more money on your savings. But it also means that if you need to take out a loan — such as a mortgage or auto loan — your interest rate could be higher than someone who borrowed earlier.

A drop in interest rates typically signals that the Fed wants to encourage consumer spending. The less you pay in interest, the more likely you are to borrow and spend. Lower interest rates indicate to potential buyers that, with strong credit, you could secure a better mortgage rate than someone who purchased a home when rates were higher.

However, one thing to know is that the 10-year Treasury yield has more influence on mortgage rates than the Fed's benchmark rate, which is why a Fed rate cut might not immediately lead to corresponding drops in offered mortgage rates. Even so, both play a role in shaping lender decisions to raise or lower interest rates.

Use the tool below, powered by Bankrate, to explore some of today's top mortgage offers:

Mortgage rate trends in 2026: What homebuyers should know

After briefly dipping below 6% in February — the first time mortgage rates had reached that level in years — the average rate for a 30-year fixed-rate mortgage climbed back to 6.52% by June, according to Freddie Mac. The average rate for a 15-year mortgage was 5.84%.

Mortgage rates generally trended lower throughout 2025. According to the Federal Reserve Bank of St. Louis, the average 30-year fixed mortgage fell from 6.91% in January to 6.15% in December, reaching its lowest point since September 2024.

While rates remain below their 2025 peak, they've moved higher in recent months and remain well above the historic lows seen during the pandemic. For today's homebuyers, borrowing costs are still roughly double the sub-3% mortgage rates available in 2020 and 2021.

Affordability remains a challenge for many prospective homebuyers. According to the Federal Reserve Bank of St. Louis, the median home sale price was $403,200 in the first quarter of 2026, up from $317,100 in the second quarter of 2020 — an increase of nearly $100,000 in five years.

Home prices reached a record high of $442,600 in the fourth quarter of 2022 and have fluctuated since. Even though prices have come down from that peak, many buyers continue to face elevated home values and higher borrowing costs.

Even as home prices have increased and interest rates have edged upward, the federal minimum wage remains $7.25 an hour — the rate it's been since 2009. While incomes have stagnated, the cost of living has risen, making it harder for would-be buyers to save for a home.

What happens to mortgages if the Fed raises rates?

If interest rates rise, buying a home becomes more expensive. Higher borrowing costs can also slow demand, causing homes to spend more time on the market before finding a buyer. As of the latest data from the Federal Reserve Bank of St. Louis, the median home spent 52 days on the market before selling.

Higher interest rates mean home affordability could decline, and homebuyers are less likely to refinance their current mortgages. Home prices might drop, which is good news for potential buyers but bad news for sellers looking to maximize profits.

However, a drop in home prices doesn't necessarily mean lower monthly payments. For example, consider a $417,000 home with a 10% down payment and a 6.8% interest rate.

Now compare that with a $407,000 home with the same 10% down payment but a higher interest rate of 7.8%. Despite the lower purchase price, the higher interest rate leads to a larger monthly mortgage payment — $2,971 compared with $2,788.

What happens to the housing market if the Fed holds or cuts rates?

If the Fed holds rates steady, mortgage costs are likely to remain where they are, keeping both buyers and sellers in a "wait and see" mode. If the Fed cuts rates, borrowing becomes cheaper.

That can encourage more homeowners to refinance or list their properties, and it often draws more buyers into the market. Increased demand can, in turn, push home prices higher.

Still, many prospective buyers track the Fed closely and might delay making an offer if they believe rates are about to drop. A widely anticipated rate cut can temporarily cool sales activity as shoppers wait for more favorable financing terms.

How homebuyers can prepare for the Fed's next move

Whether you're buying your first home, considering a refinance or simply watching the market, understanding how Federal Reserve policy affects interest rates can help you make informed financial decisions.

While mortgage rates remain elevated compared with pandemic-era lows, they’re still shifting in response to broader economic conditions. Keeping an eye on upcoming Fed meetings and economic indicators could give you a clearer picture of when the right time to act might be.

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During the COVID-19 pandemic in 2020, many individuals were stuck at home, countless people lost their jobs and financial situations for many were strained, to say the least.

Mortgage lenders often suggested forbearance, temporarily pausing or reducing mortgage payments because of financial hardship, to help individuals keep their homes while facing financial crisis.

Now, a Wells Fargo settlement related to COVID-19 mortgage forbearance has been finalized, and affected customers are starting to receive checks as part of the resolution.

The reason behind the Wells Fargo class-action lawsuit

Though Wells Fargo was one of many banks to suggest forbearance, plaintiffs in the Wells Fargo class-action lawsuit alleged that the bank provided forbearances to clients who hadn’t explicitly asked for one.

According to ClassAction.org, Wells Fargo automatically placed mortgages into forbearance without providing affected borrowers any advance notice.

Forbearance can have an effect on your credit score and your ability to get approved for other credit, like credit cards or loans. If a lender reports your forbearance to credit agencies, your credit score could decrease.

That lower credit score could cause other lenders to deny your application for credit. If a lender does approve your application, they might issue you a higher interest rate because your lower credit makes you a higher-risk borrower.

Repaying a mortgage can become more challenging after forbearance, too. When the forbearance period is over, you’ll be responsible for making up the missed payments. Your mortgage payments can increase to make up for those missed payments, or you might need to make extra mortgage payments at the end of your term, extending the length of your mortgage.

Some Wells Fargo customers reportedly only inquired about forbearance, such as by clicking on an informational link or by having a phone conversation with a customer service representative.

When their accounts were placed in forbearance without their knowledge, some customers’ credit scores were allegedly lowered, and some were allegedly denied applications for credit, prompting the class-action lawsuit.

What the Wells Fargo settlement means for customers

According to Top Class Actions, Wells Fargo hasn’t admitted to any wrongdoing but agreed to a settlement. The court approved the $185 million settlement in December 2024, and the settlement became effective on February 15, 2025.

Class-action beneficiaries are individuals with a Wells Fargo-serviced mortgage that was placed into COVID-19 mortgage forbearance without informed consent. Those accounts were placed into forbearance between March 1, 2020 and December 31, 2021.

The first $69 million of the settlement will be equally and automatically distributed amongst all of the class-action lawsuit members, according to ClassAction.org. The lawsuit treats co-borrowers as a single class member, meaning co-borrowers will receive a single automatic payout. However, each co-borrower will also get an additional $83.33.

Members who experienced damages because of the forbearance, including increased borrowing costs and delayed refinancing, had the option to file a claim form to receive additional compensation. The deadline to file the claim form was January 10, 2025.

When will Wells Fargo class-action lawsuit beneficiaries receive checks

All members of the Wells Fargo class-action lawsuit are set to automatically receive checks. Checks for automatic and co-borrower payments started going out in March. Supplemental claims for those who reported damages are currently being processed.

The checks are being sent in a plain envelope, so if you were part of the lawsuit, be sure to open all of your mail.

Additional Wells Fargo class-action lawsuits

The COVID-19 mortgage-forbearance lawsuit isn’t the only class-action lawsuit that’s involved Wells Fargo. The company has been involved in numerous class-action lawsuits and has been ordered to pay fees for mismanagement:

• 2024: A new class-action lawsuit accused Wells Fargo of underpaying customers interest rates while the company earned hundreds of millions of dollars on customers’ cash because of rising interest rates.
• 2022: Wells Fargo paid $3.7 million for mismanagement of accounts, including incorrectly charging fees and interest, charging surprise overdraft fees, wrongfully foreclosing on homes and illegally repossessing vehicles.
• 2020: Wells Fargo agreed to a $3 billion payment to resolve political and civil liabilities from practices of pressuring employees to meet unrealistic sales goals. To meet those goals, employees provided customers with accounts under false pretenses or without consent.
• 2018: Wells Fargo settled lawsuits for charging excessive mortgage fees and for charging customers for car insurance they didn’t need.

No matter which mortgage lender or bank you use, it’s a good idea to monitor your accounts for any unauthorized activity. Carefully track any fees that you pay, and look for changes in recurring payments, like your mortgage payment.

When you open an account, read your policy overview thoroughly and ask any questions you have about the terms. Be sure to also read any notices you receive about changes to account policies.

The news can also be a good source of information about what you need to know about your mortgage and banking companies. Consider setting up Google alerts to ensure you see any relevant news about your bank or lender.

If you suspect that you have been harmed by a financial product or service, you can also contact the Consumer Financial Protection Bureau for help.

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Many components contribute to the cost of your home. Along with price, the interest rate on your mortgage is an important consideration.

Currently, mortgage rates are rising, driven by geopolitical tensions, inflation and other factors. The average rate on a 30-year mortgage is 6.36%, according to Freddie Mac.

Following its May meeting, the Federal Reserve held rates steady, a move that is likely to keep borrowing costs elevated in the near term. While the Federal Reserve’s decisions can influence savings accounts and short-term lending rates, mortgage rates tend to follow the 10-year Treasury yield more closely.

What's the 10-year Treasury yield?

The 10-year Treasury yield is the government's borrowing cost for a decade. As such, the Treasury rate influences everything from corporate bonds to mortgage rates.

You can see the correlation between mortgage rates and the 10-year Treasury bond in the chart below:

Why are mortgage rates tied to the 10-year Treasury yield? Since mortgages last longer than shorter-term lending options tied to the federal funds rate, they require a benchmark, where the duration reflects the average mortgage.

This is why the 10-year Treasury yield comes in, because it lasts about as long as the average homeowner has a mortgage.

If you're in the market for a mortgage, use the tool below, powered by Bankrate, to compare some of today's top mortgage rates:

How does the Treasury yield impact mortgage rates?

Recently, the 10-year Treasury yield increased to 4.591, its highest level in 15 months. And when this yield rises, so can borrowing costs, specifically with mortgage interest rates.

With this in mind, who influences the Treasury yield? It's investors' expectations on short-term interest rates. When investors buy mortgage-backed securities, they're pledging money for a longer term than, say, a one-year Treasury bill since they're investing in a package of mortgage loans.

As such, elevated risk comes with longer-term investments.

It's why investors want a term premium to ensure they're earning a return on their investments. This premium influences the interest rate you'll pay on mortgages.

They use the following economic factors to guide their expectations:

• Monetary policies: When the Federal Reserve sets the federal funds rate, it's a benchmark for short-term rates. While it doesn't directly impact mortgage rates lenders assess, it can give investors an idea of future monetary policy, which they can use to influence investing decisions. And if investors lose confidence in the Fed, they might require higher returns, which could raise mortgage rates.
• Economic growth: When the economy does well, investors seek more promising opportunities such as equities. Meanwhile, when there's economic uncertainty, as there is now, with more tariffs being implemented, slower job growth and the war in Iran driving up everyday costs, investors look for safer investments, which Treasury bonds offer.
• Inflation: When inflation becomes higher, investors seek higher interest rates. The latest CPI report showed the Consumer Price Index rose 3.8% in the past year, indicating that the costs of everyday goods, particularly energy and gas prices, are driving prices higher.

What's the mortgage spread?

On top of this, there's a mortgage spread. It's the difference between your mortgage rate and the 10-year Treasury yield. Traditionally, it's been from 0.71 points to 1.4 points, according to Fannie Mae.

The spread consists of two parts: The primary-secondary spread and the secondary spread. The primary-secondary spread factors in mortgage origination fees, other lender costs and profits.

Meanwhile, the secondary mortgage spread is the difference between the mortgage-backed security (MBS), which investors purchase, and the 10-year Treasury rate.

The secondary spread covers some risks investors might face. To illustrate, an increased risk of prepayment can cause the spread to rise as investors won't maximize returns if the mortgage ends prematurely.

This can happen when homeowners shop around and find a lower interest rate; they might be inclined to take advantage of it through refinancing.

Why the 10-year Treasury yield matters for your mortgage rate

The 10-year Treasury yield plays a major role in determining mortgage rates, so when it rises, as it has recently, borrowing often becomes more expensive.

If you're considering buying or refinancing, keep an eye on the Treasury yield, but also compare lenders to find the best deal for your specific situation.

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Whether it’s a cozy cabin in the mountains, a beachfront condo or a lakeside retreat, owning a second property gives families the freedom to escape the hustle and bustle of everyday life and create lasting memories in a space that’s all their own.

Approximately 6.5 million homes in the U.S. serve as second homes, accounting for 4.6% of the total housing stock, according to the National Association of Home Builders (NAHB). They’re often used for vacations, weekend getaways or future retirement, and some owners rent them out to generate passive income.

Whether you're a pre-retiree looking for a quiet retreat, a frequent traveler wanting a home base in a favorite destination or someone hoping to build home equity through a vacation home, there are plenty of benefits to owning a second property. However, before you start browsing listings or planning your next vacation, it's important to understand the full financial picture.

From larger down payments to ongoing maintenance and insurance, the cost of owning a second home can be higher than many buyers expect. Take a look at the most common costs associated with second homes so you can make an informed decision before taking the plunge.

Second home loans often require a larger down payment

Primary residences have fewer qualification restrictions compared to owning a second home. For primary homes, you can qualify for some mortgages with as little as no down payment or upfront costs. For second homes, you’ll need to prove financial security, and that might come with a larger down payment.

Repeat buyers tend to put down significantly more than first-time buyers, according to the National Association of Realtors (NAR). The average down payment for first-time buyers was 9% in 2024, while repeat buyers put down an average of 23%. In fact, about one-third of repeat buyers skipped financing altogether and purchased their second homes with all cash.

This trend reflects both the financial resources often required to own a second home and the importance of having equity or liquidity to support the purchase.

Be prepared to manage two mortgage payments

In addition to your current mortgage, buying a second home means taking on another monthly mortgage payment if you're not purchasing with all cash. This can be a significant financial commitment, especially if you’re still paying off your primary residence.

Housing costs accounted for nearly one-third of total monthly expenses in 2023, according to the Bureau of Labor Statistics. These costs can vary widely depending on factors like income level, household size and location. If your second home is in an area with a high cost-of-living, your monthly expenses may be even higher due to increased property taxes, insurance rates and utility costs.

Unless you’re planning to pay cash for the second property or have already paid off your primary home, you’ll need to budget carefully to ensure you can comfortably handle two mortgage payments at once. Lenders will also evaluate your debt-to-income ratio to determine whether you can realistically afford another loan, so having a strong financial profile is essential.

Factor in higher homeowners insurance costs

Before you can close on a second home, most mortgage lenders will require you to have homeowners insurance in place. Even if you only use the property occasionally, you’ll need to maintain coverage year-round to protect your investment.

Insurance premiums vary based on several factors, including the home’s location, condition and how you plan to use it. For example, if your second home is located in a high-risk area — such as a coastal region prone to hurricanes or an area vulnerable to earthquakes — you may need additional coverage like earthquake or flood insurance. These aren’t typically included in standard homeowners' policies and can significantly increase your annual insurance costs.

How you use the home also matters. If you plan to rent out your vacation property, a standard homeowners policy may not offer sufficient protection. In that case, you’ll likely need landlord insurance or a short-term rental policy, both of which come with higher premiums but offer more comprehensive coverage for tenants and rental-related risks.

Not sure what type of coverage you need? Explore home insurance options using the tool below:

Understand the tax implications of a second home

No matter how often you use your vacation home, you’ll still be responsible for paying property taxes. In some cases, you may also owe income taxes depending on how you use the home throughout the year.

If your second home is strictly for personal use, you can typically deduct mortgage interest, just like with a primary residence under current IRS rules. However, if you plan to rent out your vacation home, the tax situation becomes more complex.

The IRS uses a specific formula based on how many days the property is rented versus how many days you use it personally. This can affect whether your home is considered a rental property or a personal residence for tax purposes — and what deductions you qualify for.

In addition to federal taxes, state and local property taxes will apply. Some states or municipalities offer tax breaks or exemptions, particularly for homes used as primary residences or part-time retirement dwellings, but these often don’t extend to second homes.

It's a good idea to consult a tax professional or a financial adviser to understand how your vacation home will impact your tax liability and which deductions or benefits might apply.

The cost of utilities and upkeep for a second home

Whether you’re regularly in it or not, you’ll need to maintain your vacation home. The amount you pay varies depending on the home’s purpose, but other costs include:

• Utilities like water, sewage, electricity and gas
• Homeowners Association (HOA) fees
• Repairs and replacements
• Lawn care
• Pool maintenance, if applicable
• Home furnishings and appliances
• Property management and household cleaning services, if applicable

For those who plan on renting out their vacation homes, you might need to pay for other services, like a property manager or someone who stays near your second home to help run it while you’re away.

For instance, you may not want to hire a cleaning service if you visit your vacation home regularly and can manage those tasks on your own. But you may want to hire a service if you’re renting out the home when you’re not using it to maintain it.

The bottom line

Owning a second home can be a great investment for retirees, pre-retirees or anyone who wants a personal getaway without the hassle of booking lodging for every trip. It offers convenience, comfort and the potential for long-term value.

However, vacation homes come with added responsibilities — both financial and practical. Beyond the purchase price, you’ll need to budget for ongoing expenses like insurance, taxes, and utilities, as well as upkeep and maintenance, even when you're not there. From hiring property managers to handling repairs, owning a second home requires time, planning, and resources. Before making the leap, consider all aspects of ownership to ensure it fits your lifestyle, budget, and long-term goals.

Use the tool below to compare some of today’s best mortgage rates and see if a second home is in your future:

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In some ways, now is a challenging time to take the plunge and buy your dream home. Many homeowners who locked in ultra-low mortgage rates a few years ago continue to stay put — limiting the supply of homes for sale — and it remains to be seen how the new presidential administration’s policy decisions will affect the housing market.

But the general consensus among some of the country’s most respected housing economists is this: If you need to buy, then buy. And if you do decide to buy, make an informed decision.

“Trying to time the housing market is a fool’s errand,” says Joel Berner, a senior economist at Realtor.com. “The right time to move is the right time to move for you, as long as you can find a place that meets your budget and fulfills your needs.”

Some people have no choice but to move. Perhaps they have a new job and are relocating to a new city. Maybe they have a new baby and need more space, or they got divorced and need less.

Others opt to move to improve their lifestyle — to be closer to work, for example, or to have a backyard for the kids to play in.

In early February, Nhu Vien Nguyen and her fiancé, Brian Timko, were on track to close on the purchase of a two-bedroom, two-bath condominium in Cambridge, Mass., after “watching and waiting” for months for a unit to hit the market in a building they love.

The commute is just 15 minutes to Timko’s job, and even though the couple are paying $845,000 for the unit and will be responsible for a monthly condo association fee of $693 in addition to their mortgage payment, the numbers work in their favor.

Nguyen says she previously paid $3,900 a month in rent, plus a $110 pet fee for her dog, Kevin. Now, the couple’s mortgage payment and association fee total $5,079, saving Nguyen $1,470 a month on her $2,540 share of the monthly expenses.

“We weren’t so concerned about interest rates because we can always refinance,” says Nguyen, 40, an insurance-industry client advocate. “But the inventory in that building in Cambridge is limited, and two-bedroom units don’t open up frequently.”

Housing market fundamentals

Supply and demand are the primary drivers of the housing market. When supply — the inventory of homes available for sale — is down, prices tend to go up. Conversely, when there is a glut of inventory on the market, buyers have many choices, and sales prices often drop as sellers compete.

Other factors that play into the outlook include the state of the job market, consumer sentiment, fiscal policy, interest rates and inflation.

While most economists agree that the U.S. economy is strong, the housing market faces headwinds. Some buyers are hesitant to commit to a long-term mortgage when rates are hovering around the 7% mark, so they’re postponing a purchase in the hope that rates will drop later this year or next year. That reduces the demand for homes.

Those who either purchased or refinanced during the peak of the COVID-19 pandemic — back in 2020, when mortgage rates averaged 3.11%, or 2021, when they were 2.96%, according to LendingTree — are reluctant to sell and give up their low rates.

According to Redfin, homeowners are staying in their homes nearly twice as long as they did in 2005, a trend that’s driven largely by older adults planning to age in place.

And according to a Redfin survey released in January 2025, more than one-third of U.S. homeowners said they will never sell their home — further evidence of the constraints on the inventory of existing homes available for sale, and a factor that is likely to increase home prices further. Realtor.com forecasts that home sale prices will increase by 3.7% this year.

Despite the challenges, some positive signs are emerging. A Realtor.com monthly housing report released in January showed a promising change in seller activity, as the number of newly listed homes increased 37.5% month over month.

And Morgan Franklin, a real estate agent with Coldwell Banker Realty in Boston, says that the buyers he represents are now putting in offers after being on the fence for months.

“All of a sudden, people are starting to pull the trigger,” he says. “I think it’s because they are learning that they can’t wait for interest rates to come down.”

Realtor.com forecasts that the inventory of available homes for sale will grow both for existing homes (with an expected growth rate of 11.7%) and for newly built homes (expected to increase 13.8%) in 2025.

That would help create the first balanced market in nine years, meaning that neither buyers nor sellers would have a competitive advantage, according to Realtor.com.

Of course, all real estate is local, so expect to see differences depending on where you live. Limited inventory in a particular market may keep prices high, with buyers vying for available properties. A glut of new homes for sale could have the opposite effect.

Mortgage rates outlook

Mortgage rates are a key factor that drive demand for housing. If buyers perceive rates to be too high, they’ll stay on the sidelines. But mortgage rates may never return to the levels buyers enjoyed in 2020 and 2021, experts say.

“There is a lot of uncertainty in the debt markets right now, driven mostly by the potential for higher inflation from tariffs and tax cuts that could significantly increase the nation’s debt,” says Ken Johnson, a housing economist and the Christie Kirkland Walker chair of real estate at the University of Mississippi School of Business Administration.

“That uncertainty should result in a bumpy road for mortgage rates in the next six months to a year, so my advice to home buyers is this: If you see a rate that you are happy with, you might want to lock it in now.”

Depending on which new policies the Trump administration implements — tax cuts, blanket tariffs or mass deportations — mortgages may trend well above 7% later in 2025, according to a LendingTree outlook.

Sam Khater, chief economist for Freddie Mac, notes that mortgage rates have averaged between 6% and 7.5% for most of the past two years. He predicts that the average rate for a 30-year, fixed-rate mortgage will drift down closer to 6.5% by the end of 2025.

“That’s predicated on slower economic growth,” he says. “We expect inflation to moderate some, but not much. So I think there is some room for rates to come down, but I don’t think they’re going to drop to the low sixes — at least not this year.”

While potential buyers may balk at a rate of 7%, rates have been much higher in the past. Fixed rates on 30-year mortgages peaked at more than 18% in the 1980s, and over the past 45 years, they’ve averaged 7.48%, according to Freddie Mac.

So a 7% rate is on par with the historical average since 1980.

Use the tool below, from Bankrate, to explore and compare interest rates:

Paying for your house

The best move you can make to keep your home purchase affordable is to save up as much as possible for a down payment. That will reduce the amount you have to finance, as well as your monthly housing expense.

Thanks to the economy’s strength and the rapid rise in home values since the end of the Great Recession in 2009 — the median sales price of a home increased from $222,900 in the first quarter of 2010 to $419,200 in the fourth quarter of 2024, according to the Federal Reserve Bank of St. Louis — many existing homeowners are sitting on a substantial amount of home equity that will be freed when they sell their current homes.

These funds can be applied to the down payment on their next home. According to Intercontinental Exchange (ICE), a technology and data provider, at the end of the third quarter of 2024, the average homeowner with a mortgage had $319,000 of equity.

If you need a mortgage, get quotes from different lenders. According to a Freddie Mac analysis, buyers can potentially save $600 to $1,200 annually by applying for mortgages from multiple lenders.

Laine Edathikunnel, 35, a communications manager at a construction company in Kansas City, and her husband, Tom, are searching for a home in the $500,000 to $600,000 range.

After renting in New York City for many years, the couple — who now have a 3-year-old son and 1-year-old daughter — relocated to Kansas City, where Laine grew up.

Although they were initially preapproved for a mortgage that would allow them to buy a much pricier home, Laine became concerned when she realized how an interest rate of about 7% would affect their monthly mortgage payment.

The couple are now looking at smaller and older homes than they did at first to keep their monthly housing expense at a more comfortable level.

“We don’t need a 4,000-square-foot home, which was the size we could get with our initial price point,” Laine says. “Just going from a 1,500-square-foot apartment to a 2,200-square-foot home will still feel like a huge upgrade to us.”

The National Association of Realtors just ranked Kansas City among its top 10 hot spots for the 2025 housing market, so the Edathikunnels are aware they’re trying to buy in a highly competitive market.

“I don’t want to delay,” Laine says. “We can always refinance, so I think it’s not worth renting for one more year to wait for the interest rates to change.”

Tips for buyers and sellers

Buyers should purchase a home when the time is right for them — if they find a home they love at a price they can afford. Don’t overextend your budget, which can put you at risk if you lose your job or have some other change in your financial status.

Before you start shopping for a home, get preapproved for a mortgage so you know how much you can afford.

Berner, the Realtor.com economist, advises buyers to evaluate the climate risks associated with a property as well. When you look up a home on Realtor.com, you can see data on the risk of flooding, fires, high temperatures and more.

If you find that a home is in an area prone to flooding or wildfires, think twice about owning it. Plus, in certain parts of the country, it may be too expensive or even impossible to secure homeowners insurance because of high environmental risks.

Those interested in buying a newly constructed home will find that many builders are offering buyers incentives, such as mortgage-rate buydowns or free options or upgrades.

“New homes also feature modern materials and systems, requiring less maintenance,” says Odeta Kushi, deputy chief economist for First American Financial Corp. “Buyers can customize their homes, and new homes often come with warranties and modern amenities.”

A January 2025 report from Realtor.com states that list prices for newly built homes in the fourth quarter of 2024 were down year over year, while new-construction inventory levels continued to improve, making new homes an attractive option, particularly in markets where the inventory of existing homes for sale is low.

But new homes, which incorporate building products such as lumber from Canada and gypsum (used for drywall) from Mexico, are likely to get more expensive if the U.S. imposes tariffs on imports from those countries for a prolonged period.

And if mass deportations take place, that would reduce the number of construction workers available to build homes. So if you’re planning to buy a new home, it might be prudent to sign a contract and lock in a price sooner rather than later.

If you own a home and are thinking about selling it, the advice is similar to that for buyers: If you have to sell — say, because of a change in your job or family situation — then sell.

If the sale is discretionary, however, give it some thought. Find out what your house is worth and consider the expenses that come with selling, including commissions paid to real estate agents, any capital gains taxes due on the proceeds, closing costs and moving expenses. You might just find that it makes more financial sense to stay than to move.

“Do some investigative work,” says Maria O’Dell, a real estate agent with Real Broker in Overland Park, Kan. “Can you envision yourself aging in the home? Consider tapping some of your equity and remodeling your house so you can stay there long term.”

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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There’s a lot of talk about debt and whether it is good or bad. As a general rule, when discussing money matters or, really, anything in life, whenever superlatives are used, something is probably missing from the conversation. The reality is debt is just a tool that allows you to use other people’s money for your benefit (or detriment).

This article is intended to clarify when it may make sense to take on debt and when it may make sense to avoid debt. In addition, I hope to offer some clarity on two types of debt that seem to be in the news a lot: mortgages and student loans. My intention is to teach the underlying principles of debt so you can make healthier personal financial decisions.

What is good debt?

Good debt, in my opinion, is any debt that is used to acquire an asset that is expected to appreciate in value. In other words, you appreciate debt that is associated with something that appreciates in value (e.g., your home).

Second, to qualify as good debt, it must have a reasonable interest rate. As a rule of thumb, I like to think that a reasonable rate would be anything around 1.5 times the current 10-year Treasury yield or less.

Lastly, good debt does not compromise your overall quality of life. That means you can afford to make payments comfortably. It is important to live within our emotional and economic limits. That means your debt does not stress you out.

What is bad debt?

Bad debt, in my opinion, is any debt used to acquire a depreciating asset. Bad debt can also be any debt that has a high interest rate (think credit card debt). Once you take on bad debt, it becomes challenging to pay off.

Bad debt can overwhelm your budget or spending plan while preventing you from being able to save for the future. Too much of a good thing, even if it may look like “good debt,” can be bad. If you have bad debt, pay it off as fast as you can. Consider cutting back on dining out, going on vacation or taking on any other non-essential expenses so you can free yourself from the influence bad debt has over you.

Find a system that can help you pay it off as fast as possible. If you want an app that can help you get rid of bad debt while gaining a better understanding of how to manage your cash flow, I’d recommend Cash Flow & Capital. It was designed to help people develop a healthier relationship with money.

Sometimes, it can be difficult to determine if taking on debt is a good thing or a bad thing. Here are a few examples that may be able to help you understand where the line is.

Mortgage debt

Real estate can be a wonderful investment. Whether you are looking to buy a home for yourself or to rent to tenants, there’s a good chance you don’t have sufficient cash for the purchase. That’s where mortgages come in.

You need a place to live. That means you are either paying rent or paying a mortgage. Let’s say you have enough of a down payment, but the mortgage payment would still be more than your rent payment. Is it still worth it?

The basic question is, “Can you afford the payments?” If the payment fits in nicely with your overall spending plan, then all is well. If your payment causes you to tighten the belt, then it might not be a good idea.

Over time, you’ll be able to pay down the debt while the home appreciates in value. If you can pay down the mortgage more aggressively during the first few years, it can help you pay off your mortgage significantly faster than had you made the minimum payments.

All things considered, a mortgage often falls under the “good debt” category, especially when you consider rent as the alternative. Also, the home equity you build can be used to buy your next home. Lastly, if you pay off your home before you retire, then you don’t need to be worried about that expense in retirement.

Student loan debt

Another type of debt that I believe could be considered either good debt or bad debt is student debt. Let me explain.

According to the National Center for Education Statistics, a 25- to 34-year-old who works full time and has a high school diploma is expected to make up to $41,800 per year. If that same person were to go to college with the intention of getting, say, an engineering degree, their income potential would increase to $76,000 out of college. As these individuals gain experience, they may be able to increase their income to $130,000 or more.

In this situation, the individual is the asset, or investment, that can appreciate in value. Because their new skill helps them become more valuable in the workplace, they increase their overall earning potential. As mentioned earlier, you appreciate debt that is associated with something that appreciates in value, even if that is you.

Let’s run another example. Let’s say someone wants to go to school to become a teacher. Student debt may make sense if you can get a job where the state pays off your loan for you. Make sure you understand the options available to you and the probability of getting hired. When you take on debt, you take on risk. It is possible not to get hired in the field you desire.

Lastly, let’s discuss a situation where student debt would be considered bad debt. If you wanted to go to school and get a degree in something that may not give you in-demand skills for the workplace, your expected income may only be slightly higher than if you had gone straight into the workforce with a high school diploma.

This may sound harsh, but the reality is some degrees may not give you sufficient or relevant skills to increase your earning potential once you graduate to rationalize the risk or financial burden of student loan debt. In this situation, it would be better to go through school slowly while working at the same time. That way, you can pay as you go without taking on the burden of student debt.

Student debt should also be considered bad debt when the debt is so high that it can’t be paid off in a reasonable amount of time. Even if you are going to school for a skill that is in demand, you can still take on too much student debt.

In my opinion, students should consider student debt as the last resource to help them get through college or trade school. Consider paying for your education by applying for scholarships while working part time or full time. You can also help lower your education costs by first getting an associate degree at a community college before getting a bachelor’s degree or higher at another college.

Conclusion

There are many other forms of debt, good and bad. However, in the end, it is important to understand that debt is nothing more than a tool. When you take on debt, you take on risk. That risk must be rationalized by associating itself with an asset that has a high probability of appreciating in value. All debt should be limited so that it does not overwhelm your personal cash flow and overall quality of life.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Retirees settling into their golden years may be considering the idea of a new home. Most often, a new home means taking on a new mortgage in retirement. Why buy a new home after retiring? Reasons include downsizing, moving to a more agreeable climate, or being closer to the grandkids.

Yet just like any other homebuyer, retirees face formidable issues like high mortgage rates, elevated home prices, and associated costs on insurance, maintenance, and possibly homeowner association fees.

The average U.S. mortgage rate stands at 6.93% in January, while median home prices are expected to rise to $410,700 in 2025, according to the National Association of Realtors (NAR). A separate NAR report showed that over one-third of U.S. homebuyers last year were pre-retirement or retirement age, spanning 59 to 99, and the majority of them used some form of financing.

The high cost of buying a home is particularly problematic for U.S. retirees living on a fixed income but hoping to secure a good mortgage loan to get the job done.

“Many of the homebuying issues retirees face are similar to younger (people), like higher interest rates, which can limit the size of the mortgage or the size of the home being purchased,” said Melissa Shaw, Wealth Management Advisor at TIAA in Palo Alto, Cal.

However, retirees face a few additional issues when trying to qualify for a mortgage.

“Many retirees are on fixed incomes, often without the ability to earn additional income,” Shaw noted.

That means older buyers need to be fully aware of what they can and can’t afford and the associated expenses of owning a home, such as maintenance, repairs, and insurance.

“You’d hate to purchase a home and not be able to afford basic necessities or the things that make retirement enjoyable, like travel, spending time with family and personal hobbies,” Shaw added.

High interest rates projected for the rest of the year can also stall a retiree’s mortgage experience.

“High rates alone pose a problem for retirees hoping to buy,” said Adam Hamilton, CEO at REI Hub in Richmond, Va. He noted that many retirees weren't planning for the current state of the economy and might find the cost of buying to be too high relative to their budgets.

"If they still really want to buy, being flexible with location might help," Hamilton said, "and making sure to shop around for the best lender is crucial.”

Is it hard to get a mortgage in retirement?

The good news is that with due diligence and a carefully crafted financial plan, retirees can get the mortgage they need for a new home in 2025.

Can you use retirement income to qualify for a mortgage?

Like with any home purchase, more income and less debt are ideal. Yet that goal can be a unique issue for older homebuyers.

"For retirees, one of the biggest issues they face is income verification, especially if they rely on a fixed income like Social Security or a pension,” said Christy Bunce, President at New American Funding in Irvine, Cal.

“However, if they have significant assets, that could help them qualify for a home loan," she said. "Their debt-to-income ratio is also important as it shows how much they’d have left over to pay their mortgage."

In addition to any income from work, income sources lenders focus on include: Social Security benefits, spousal benefits, disability payments, pension or annuity payments, interest and dividend payments on investments, a 401(k) or IRA.

What steps should you take before applying for a mortgage in retirement?

Given that their best earning years are likely behind them, retirees should ensure their finances are in order before applying for a mortgage. Telling the right financial story goes a long way in getting a mortgage for older homebuyers.

“This includes getting a copy of your credit report to make sure it's accurate and to maximize that credit score, as it impacts interest rates,” said Matthew Locke, National Mortgage Sales Manager at UMB Bank.

“We also recommend paying down revolving debts and fully understanding what payment they can comfortably afford," Locke said. "Additionally, speak to a trusted mortgage professional to fully understand the cost to close a home deal and the monthly payment obligation going forward.”

Just like other homebuyers, retirees need to consider whether the home they are buying is to be used as their primary residence or a vacation home, and therefore how that impacts their mortgage rate, taxes and any expenses for the home.

Retirees should be treated precisely the same as any other consumer looking for a mortgage: “Just like anyone else, credit history, FICO Scores, income sources and the ability to repay the loan matter most.”

TIAA's Shaw advises crossing these items off your mortgage to-do list before applying.

• Ensure you have enough income to pay for the mortgage, associated home expenses, and any emergency or incidental issues not covered by insurance.
• Research the homeowner’s insurance options in your potential location and evaluate the likelihood of those costs increasing.
• Gather two years of income, bank, and investment/retirement account statements (your lender may require documents for a more extended period). “Make sure to review your most recent credit report, too,” Shaw advised.
• Use online mortgage tools to estimate the costs associated with the home purchase so that you know exactly what you can afford.
• Discuss the options for generating additional income from your investment or retirement accounts with your financial advisor. “Many of my clients set up monthly systematic withdrawals from their retirement accounts to meet the income requirements for a mortgage,” Shaw said.
• Consider using professionals like a mortgage broker and financial advisor to help you navigate the landscape.

Avoid these mistakes when applying for a mortgage in retirement

The biggest mistake Shaw sees from retired clients is taking on a larger mortgage than they can afford or not factoring in additional housing-related expenses.

“For example, I had a client who retired and moved from a coastal area to a more inland area in California,” she said. “Although it’s only a few hours away, the difference in the weather is significant. The client didn’t anticipate that he and his family would need to use their air conditioning or pool as often, leading to a sizeable increase in energy and cleaning costs.”

Those often-unexpected additional expenses lead to increased withdrawals from the client’s retirement account.

“My client didn’t have any other income source or the ability to return to the workforce,” Shaw noted. “This meant tightening the budget on some of the other non-essential expenses. Retirees should always ensure a buffer in their budget for unexpected increases in the cost of basics, like utilities, insurance, and home maintenance.”

Bottom line

Retirees will increase their odds of getting a good mortgage by presenting lenders with a clear picture showing they’re solid loan candidates.

“Your best move is to show lenders you have stable finances by using assets to bolster income,” said Matt Schwartz, co-founder at VA Loan Network in Dallas, Texas. Also, focus on your credit scores or don’t make any significant financial withdrawals before applying.”

Additionally, retirees should be patient about finding the right house in the neighborhood that meets their financial guidelines.

“Don’t be impatient about moving too quickly,” Locke advises. “Also, avoid buying too much house and using too many assets to purchase the house."

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Owning a vacation home can be an enticing prospect.

When you shift from tourist to homeowner in a location you love, it’s easier to visit whenever you wish, and the home provides a getaway to create happy memories with family and friends. Plus, because you can store supplies and other belongings at your vacation home, you may not have to bring much along with you when you stay there.

But owning a second home is a big responsibility that requires careful planning. Here’s what to evaluate as you decide whether it’s the right choice for you — and how to get financing if you move forward with a purchase.

Are you ready to buy a vacation home?

According to a 2024 study from LendingTree, an online loan marketplace, most owners of vacation homes plan to use their home as many as seven times per year.

Tally up an estimate of how much time you anticipate spending at your vacation home, and consider how many stays would make the purchase worthwhile for you. You may want to rent it out while you’re not there to help cover the costs of owning it (read on for more on rentals).

If you’ve been to the area where you’re thinking of buying a home only for short periods as a vacationer, visit it during the times of the year you expect to be there as a homeowner.

You may find that some of the dining options, entertainment venues or other amenities you enjoy are not available during off-peak times, or that it’s more crowded than you prefer during the most popular seasons. Talk to locals about living in the area.

Gauge the expenses. When it comes to determining your financial readiness, account for not just the home purchase but also the ongoing and ancillary expenses. “Oftentimes when we talk to clients, they’re thinking primarily about the mortgage and not necessarily all those ancillary fees,” says Matt Vernon, head of consumer lending for Bank of America. (More on getting a mortgage below.)

Consider the cost of travel between your primary residence and the second home, and try to get an idea of how much you may spend on maintenance. Vacation homes — especially those in coastal areas — tend to require a fair amount of upkeep.

So it’s wise to maintain a dedicated emergency fund for unexpected repairs. A common guideline is to set aside an amount equal to 1% to 2% of your property’s value. And prepare for some the initial costs, such as for movers and expenses to furnish and decorate the home.

Evaluate insurance needs. Whether you use your vacation home regularly or sparingly, you’ll need to have a homeowners insurance policy for it. Coverage is often more costly than for a primary home because vacation homes tend to sit empty for longer periods, putting them at higher risk for claims. Also, you may pay more if your second home is far from emergency services or otherwise difficult for first responders to access (if reaching it requires driving up a windy, steep, narrow or unpaved mountain road, for instance).

It’s important to be aware of climate risk as natural disasters grow more intense. You can get a sense of the risk in areas where you’re thinking of buying a vacation home with the Federal Emergency Management Agency’s Natural Risk Index If your home is in an area with a high risk of flooding and you have a federally backed mortgage, you’re required to have flood insurance. The average cost of a flood insurance policy through the National Flood Insurance Program is about $1,000 per year. However, the cost can vary widely.

Plus, in many coastal states, homeowners insurance policies include separate deductibles for hurricane damage or any damage resulting from wind or hail. Typically, these deductibles are a percentage of the home’s insured value — often about 1% to 5%, although they may run as high as 10%.

Curious about home insurance rates? Use the tool below to compare some of today's top offers, powered by Bankrate:

Get a handle on taxes. Familiarize yourself with property taxes in the area where you’re thinking of buying a home, as well as any proposed legislation involving property tax. If you itemize on your tax return, you can deduct property taxes on your vacation home, but the total amount of state and local taxes you can deduct on both your primary and vacation home is capped at $10,000. Depending on the location, your primary residence may account for most or all of the amount of property taxes you can deduct.

If you decide to take out a mortgage, you can deduct interest on up to $750,000 of debt secured by your primary and vacation homes. (If you purchased your homes before December 16, 2017, you can deduct the interest on up to $1 million of debt).

Financing a vacation home

The overall decline in mortgage rates recently has been a welcome shift for buyers who want to finance a home purchase. But keep in mind that mortgage rates on a second home run slightly higher than they do for primary homes because from the lender’s perspective, the additional financial burden is a higher risk.

Generally, the same types of mortgages are available for a second home as for a primary residence. You can get a fixed-term loan, such as a 15- or 30-year mortgage, and an adjustable-rate mortgage may be an option as well.

As with getting a mortgage for a primary home, your financial qualifications have the most direct impact on how favorable your interest rate will be. Lenders consider factors including your credit score, debt-to-income ratio and down payment, and the standards are usually more rigorous than with a primary-home purchase.

The lender will likely ask you to make a larger down payment than it would if you were financing a primary residence. For example, Chase Bank requires a down payment of at least 10% for a second home, while a primary home may require a down payment as low as 3%.

“We want to make sure that the additional financial pressure is being met,” says Max Koziol, national purchase director for Chase Bank. Bank of America generally likes to see 30% or more for a second home’s down payment, says Vernon. “Inherently, the risk is higher with a second home, so lenders will take that into account.”

Most lenders require a credit score of 680 or more, and an ideal debt-to-income ratio is typically below 30%. Lenders want to see stable income, too. “We need to see that the borrower has the ability to repay not only their primary loan, but also that of the second home,” says Vernon.

You might consider waiting until your primary home mortgage is either paid off or has a low amount remaining to help ensure that you can comfortably afford the second home.

An online mortgage calculator can help you estimate your monthly payment, including costs for homeowners insurance and property taxes. Try Bankrate’s calculator.

You can also compare some of today's top mortgage offers with the tool below, powered by Bankrate:

Tapping equity on your first home. If you’ve paid off a substantial portion of the mortgage on your primary home, taking out a home equity line of credit (HELOC) or home equity loan may be a solid strategy to raise cash for your second-home purchase.

“That’s one other option that we see homeowners use, especially those who have very large equity positions in their primary residence and are buying a small house on the coast, for example,” says Vernon.

HELOCs and home equity loans are usually available at relatively low interest rates because they are secured by your home — but they can also put your primary home at risk if you don’t keep up with payments. If you have a good credit score (usually 740 or above), that will help you qualify for the lowest rates.

HELOCs allow homeowners to borrow from their home equity during the draw period, which typically lasts for up to 10 years. If you owe money on the HELOC at the end of the draw period, you enter a repayment period — typically up to 20 years — during which you pay principal and interest at prevailing rates.

By the time the repayment period starts, homeowners with a significant balance and sufficient equity may choose to refinance their mortgage and add the home equity debt to the new mortgage. Or, if the timing works out, you could sell your primary residence before the start of the repayment period, use the proceeds to pay the balance, and retire in your second home.

Alternatively, some people use a cash-out refinance on their primary home to help fund a second-home purchase, says Koziol. If mortgage rates fall further, refinancing may make sense, depending on your mortgage’s current interest rate.

Renting out your vacation home

You might be considering renting out your vacation home during times that it would otherwise be vacant, as it can bring in welcome income to offset ownership costs. But before you offer it up to renters, make sure that you won’t run afoul of the locality’s rules. Some homeowners or condo associations disallow short-term rentals, and some may prohibit renters from using facilities such as the pool or gym.

You should also estimate additional expenses you may incur with a rental. If you hire a property manager, you may pay the manager anywhere from 10% to 20% of the property’s monthly income.

In addition, maintenance costs could go up if renters cause extra wear and tear on your home, and you’ll likely need to hire a service to clean the home between rentals.

Tax implications. You can rent out your vacation home for up to 14 days a year without paying income tax on the money. The exception applies no matter how much you charge. The IRS provision allowing individuals to exclude short-term temporary income is known as the “Masters Rule” because residents of Augusta, Ga., successfully lobbied for the exemption back in the 1970s so they could rent out their homes during the annual Augusta National Golf Club Masters tournament.

If you rent out your vacation home for more than 14 days in a calendar year, you’ll have to report the income to the IRS and pay tax on it; this income is typically reported on Schedule E of Form 1040.

On the bright side, you can deduct a portion of your vacation home’s expenses, such as the cost of mortgage interest, insurance, repairs, maintenance and utilities, as well as additional costs that come with renting, such as for house cleaning, new décor and updates, and property management.

You’ll need to divide the total expenses by the number of days the home is rented compared with the days it is occupied for personal use. For example, if renters occupy the house for 50 days while your family is there for 150, renters account for 25% of the total days the home was used, so you’ll be allowed to deduct 25% of expenses.

And here’s another wrinkle: If you spend more than 14 days a year at your vacation home, or more than 10% of the number of days the home is rented, the IRS considers the home a personal residence. In that case, you can only deduct expenses up to the amount of rental income you’ve received, and you can’t deduct losses.

Personal days include days you or a family member is using the house (even if the family member pays rent), along with days you’ve donated use of the house — in a charity auction, for example — or rented it for less than the going rate for your area.

Keep detailed records of both rental and personal use, including receipts for the expenses you incur and a calendar of the days the home is rented out. This will both help you provide accurate information as you prepare your tax return and substantiate your claims if you’re audited.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Anyone buying or refinancing a home wonders: how will the election affect mortgage rates? It's been a tough road for prospective buyers, especially in cities where prices remain discouragingly high. And for those who bought recently at over 7% mortgage rate, relief would be, well, a relief.

Happily, the answer is yes: the 2024 election will impact mortgage rates, though not immediately. That’s because mortgage rates are influenced more by macroeconomic factors than political factors. According to Chad Breeden, owner and founder of Sentry Real Estate, when the administration shifts, new economic policies can either boost or reduce market confidence and influence interest rates. 

“What matters most is how the markets react to economic policies post-election.” shares Dutch Mendenhall, Founder of RADD Companies and author of "Money Shackles: The Breakout Guide to Alternative Investing."

How will the election affect mortgage rates

Economic factors influencing mortgage rates include monetary policy, government spending and fiscal policy, economic growth and employment. Economic policies can also influence Federal Reserve decisions; if economic priorities change, there could be increases or delays in interest rate adjustments. While the Federal Reserve does not directly control mortgage rates, its actions do influence rates indirectly, and variable-rate mortgages and adjustable-rate mortgages typically see rates decline after a Fed interest rate cut.

At the latest Fed meeting in September, the federal funds rate was cut for the first time in four years. Following this decision, mortgage rates continued declining and reached the lowest level in two years. As of September 26, the average 30-year mortgage rate was 6.08%, down 1.23% from the year before, according to Freddie Mac. You can use our tool below to compare purchase and refinance rates today.

According to Breeden, “mortgage rates could stabilize or slightly decrease” if Harris becomes president, due to her policies aimed at improving affordability for middle- and lower-income Americans. On the other hand, if Donald Trump wins, “mortgage rates may rise due to his plans to extend tax cuts and increase tariffs, both of which could drive inflation higher and lead to the Federal Reserve keeping interest rates elevated,” he shares.

Mortgage rates during election year

There’s a common misbelief that elections negatively impact the housing market, but there’s little evidence to prove this theory. When you compare historical data, you’ll find that there’s not enough of a change to suggest that the presidential election has a significant impact on mortgage rates, reports the company Chris Doering Mortgage. 

Dan Hnatkovskyy, CEO and co-founder of NEWHOMESMATE, also shares with Kiplinger that “while the presidential election may create some short-term uncertainty in the mortgage market, its direct impact on rates will likely be limited. There was no clear pattern of rates consistently rising or falling in past election years due to elections alone.” 

The bottom line

If you're waiting for election results to buy a home, you should probably focus more on other macroeconomic factors. For example, potential interest rate cuts (if any more are in store) at the next Fed meeting and whether inflation continues to cool will likely have more of an impact on mortgage rates than the election. 

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After hovering in the high 6% and 7% range for much of 2023 and 2024, mortgage rates are finally starting to drop. Steadily declining over the last several weeks, rates are now sitting at the lowest level they’ve been since February 2023. And because refinancing your mortgage rate to be just 1% lower can significantly reduce your monthly payment, this drop in rates has led to a surge in refinance applications. But other homeowners are looking to save even more by waiting for rates to fall further.

As of September 19, 2024, 30-year fixed-rate mortgages averaged 6.09%, down from 6.20% the week prior, according to Freddie Mac. A year ago at this time, rates averaged 7.19%. This big drop in rates was preceded by the Fed’s first interest rate cut in four years. And while the Federal Reserve does not directly control mortgage rates, its actions do influence rates indirectly. 

That’s because mortgage rates are influenced not only by the Fed’s actions but by the 10-year Treasury yield, inflation, job growth and a shrinking or growing economy. However, variable-rate mortgages and adjustable-rate mortgages typically see rates decline after a Fed interest rate cut.

Here’s a closer look at how much you could save depending on how much your mortgage rate falls.

Here's how much you could save as mortgage rates fall

The following shows how much you’d be able to save by opting for a lower 30-year mortgage rate, based on a home with a sale price of $350,000 with a 20% down payment.

Loan 1: 

• Interest rate: 6.09%
• Monthly payment: $2,266
• Total interest: $330,584
• Total amount to be paid: $610,584

Loan 2:

• Interest rate: 5.84%
• Monthly payment: 2,221
• Total interest: $314,276
• Total amount to be paid: $594,276

Loan 3:

• Interest rate: 5.59%
• Monthly payment: $2,176
• Total interest: $298,163
• Total amount to be paid: $578,163

Loan 4: 

• Interest rate: 5.09%
• Monthly payment: $2,088
• Total interest: $266,548
• Total amount paid: $546,548

Loan 5: 

• Interest rate: 4.59%
• Monthly payment: $2,003
• Total interest: $235,781
• Total amount paid: $515,781

Another thing to consider when looking for the lowest mortgage rate available is your credit score. Boosting your credit score could save you hundreds, or even thousands, of dollars on your home mortgage. For example, according to MyFICO, if you had a loan with a principal amount of 350,000, you could save an extra $1,996 by boosting your score from a range of 620-639 to a range of 760-850.

Bottom line

Many experts believe that the magic number to bring sidelined buyers into the housing market is 6%. And rates are almost there. However, a significant surge in buyers could cause home prices to skyrocket, so that’s one factor to consider when holding out for lower rates.

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High mortgage rates and home prices this decade continue to make the housing market difficult for first-time buyers. But for those who have the financial wherewithal, buying that first home can be a key part of the foundation for a solid financial future. Usually, a home is an appreciating asset that can grow significantly in value the more years you own it.

The fundamental question is: How can you make sure you can afford your first home — and not get in over your head? While the typical age for a first-time home buyer in the U.S. has risen to 36 — a clear reflection of the housing affordability problem for young adults in particular — some people still get into homeownership before they are on consistently sound financial footing. They may technically have the funds for a down payment and the recurring costs, but barely. Then emergency costs or other unpleasant surprises like job loss come up, and they feel squeezed.

Making the decision to buy your first house is indeed a significant one, a potentially pivotal life decision. It is often intertwined with factors such as career stability, a sense of being rooted in a desirable location, disposable income and considerations of starting (or expanding) a family. Typically, a plan to stay in the home for a minimum of three (preferably five or more) years is considered practical.

There isn’t a one-size-fits-all age for first-time homeownership. In fact, as the new average age for first-time buyers shows, it behooves many people to be patient and wait until the time — and the price — is right for them. That’s not to say younger homeowners wouldn’t benefit from purchasing earlier. After all, money spent on rent is gone forever. However, before anyone — regardless of age — seriously considers buying their first home, it’s imperative they don’t overextend themselves. To make sure they can afford it, they need to check the following boxes to show they have a strong financial foundation.

1. Have you saved enough money?

There are numerous upfront and other costs to consider when saving to buy a home:

• Down payment. A first-time home buyer needs to have saved enough money for at least a 20% down payment, which allows you to avoid paying for private mortgage insurance. With today’s higher interest rates, down payments of 30% would be optimal. The difference between a 20% down payment at a 3.5% interest rate a few years ago vs a 20% down payment at a 6% interest rate today is massive. If you want to have a lower monthly mortgage payment, you’re going to have to put more money down.
• Closing costs. These usually range from 2% to 6% of the loan amount and go toward finalizing your mortgage. Closing costs can sometimes be negotiated by asking the seller to pay a portion of them.
• Savings for moving and move-in expenses. Moving costs alone can run over $2,000 for a local move and can be much higher for a long-distance move. While the cost of preparing a new home to your liking (painting, flooring/carpeting, furniture, etc.) can vary widely, a general rule of thumb suggests budgeting at least 10% to 20% of the home’s purchase price.
• Maintaining an emergency fund. It is vital to maintain an emergency fund equal to six to 12 months’ worth of your expenses. Even though you may be confident in your employment situation, even the best-laid plans sometimes go awry.

2. Can you afford the monthly mortgage payments?

You need to do the math regarding your mortgage affordability in terms of how the monthly payments fit in or don’t. It’s crucial that you determine your comfort level or if, in fact, a comfort level exists given your annual income and monthly bills.

• The salary rule. If you’re single or the only one in the family who works, your mortgage shouldn’t be more than three times your annual salary. So if you make $70,000 a year, a $210,000 mortgage would be the maximum you should take on if following this formula. If your partner makes $50,000 to go with your $70,000 for a combined income of $120,000, then $360,000 would be your high-end loan amount.
• Drill down on your monthly budget. As another general rule, your monthly mortgage payment shouldn’t be more than 25% to 28% of your gross monthly income. Therefore, it’s essential to take a close, honest look at how you spend monthly, including for your bills, other expenses, necessities and luxuries. A lender will tell you the maximum mortgage you can afford, but somewhere beneath that max is your comfort level — or not. It depends on how a mortgage payment of a certain amount will affect your total monthly budget, including your disposable income and ability to save for retirement. If there isn’t sufficient room in that new budget for all those things, plus emergencies, then you better think twice about buying your first home until you’re really ready.

3. Is your credit good enough?

An excellent credit rating and no other significant debt are paramount for first-time home buyers. Your credit score goes a long way toward determining your mortgage qualifications and the interest rate you’re offered.

• Check your scores on Equifax, TransUnion and Experian. You can get free copies of your credit reports and dispute errors that might be hurting your score.
• Avoid opening new credit accounts. When applying for mortgages, opening new accounts could lower the overall average age of your credit accounts and hurt your score.
• Practice discipline and slash credit card debt. If your credit score is so-so — say, average or slightly above — having a plan to get rid of most or all of your debt and raise your score is essential for getting more favorable terms from a lender.
• Pay your bills on time. It’s never too early to improve your payment history. After all, showing a long history of paying your bills on time has the single biggest positive impact upon your credit score.

Those are some of the key steps toward building a solid foundation to comfortably afford your first house. Once you’ve checked those boxes, you’ll have a clearer idea of the price and long-term commitment that makes sense for you while making a solid investment for your and your family’s future. Given all of the above, regardless of whether you are 25 or 45, having your financial and lifestyle ducks in a row prior to picking out the new door knocker is key.

Dan Dunkin contributed to this article.

The appearances in Kiplinger were obtained through a public relations program. The columnist received assistance from a public relations firm in preparing this piece for submission to Kiplinger.com. Kiplinger was not compensated in any way.

Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Bleakley Financial Group, a registered investment advisor. Amwell Ridge Wealth Management conducts advisory business under a “doing business as” (d/b/a) name; however, Bleakley Financial does not hold itself as conducting advisory business through Amwell Ridge Wealth Management. Bleakley Financial Group and Amwell Ridge Wealth Management are separate entities from LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing includes risks, including fluctuating prices and loss of principal. No strategy assures success or protects against loss. Past performance is no guarantee of future results. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Asset allocation does not ensure a profit or protect against a loss.

LPL Financial, Amwell Ridge Wealth Management, Bleakley Financial Group, and Kiplinger are not affiliated.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Deciding whether to refinance your mortgage can be a lot like playing golf. When the conditions are right and you’ve studied the course, you have a better chance at hitting a hole in one. With the Federal Reserve cutting rates for the third time at its December meeting, homeowners with higher-rate loans may finally have an opening to score some savings.

Refinancing can help you lower your monthly payment and reshape your loan to fit your current goals, whether that means switching from an adjustable-rate to a fixed-rate mortgage for more stability or shortening your term to pay off your home faster.

Before you rush to refinance, take a closer look at the full picture. Even if today’s lower rates make refinancing sound appealing, it isn’t free. Closing costs, fees and the time it takes to break even all play a role in determining whether a refinance saves you money. Understanding these expenses, and how they fit into your long-term plans, is key to deciding if refinancing is the right move for you.

The cost of refinancing your mortgage

When you refinance your mortgage, you’re getting a brand-new mortgage with a lower interest rate, possibly a different loan term and potentially from a different lender. This new mortgage pays off your original loan.

Refinance closing costs are fees and expenses related to replacing your existing mortgage balance with a new one. They typically include many of the same fees you paid when you first closed on your home loan.

National average closing costs for a single-family home refinance were $6,800 without taxes or recording fees, according to ClosingCorp (now part of Core Logic.) The fees typically add up to between 2% and 5% of the loan amount.

Here are eight types of closing costs you can expect when you refinance your mortgage:

• Application fee: $75 – $300
• Origination and/or underwriting: 1% – 1.5% of loan principal
• Attorney/settlement fee: $400 – $1,000
• Recording fee: $25 – $250 depending on location
• Appraisal fee: $300 – $500 depending on location
• Credit check fee: $35 – $75
• Title services: $300 – $2,500
• Survey fee: $150 – $400

You might be able to reduce your refinance closing costs by increasing your credit score, reducing your overall debt load and shopping around for the best lender. If you work with the same title insurance company you can ask for a discounted reissue rate.

Use the tool below to compare some of today's top mortgage refinance offers, powered by Bankrate:

Impact of refinancing for a lower rate

Whether or not it makes sense to refinance your mortgage is primarily based on whether the upfront costs of refinancing and the time period you intend to occupy the home work together to lower your monthly costs and make refinancing cost-effective. It’s usually worth it to refinance if you could lower your current rate by one percent.

This is calculated by adding up all refinancing closing costs and figuring out how many years it will take you to make up those costs with the savings from your new mortgage payment compared to your previous one. Refinancing makes more sense if you plan to stay in your home longer than the break-even point. Otherwise, you could potentially lose money.

You can calculate your own potential savings by using Kiplinger's Mortgage Refinance Calculator and determine which rate will help you get to your break-even number.

Let's take a look at two examples of the impact of lower rates on monthly payments. Our scenarios include a loan balance of $400,000, a mortgage rate of 6.5% and refinancing costs of 2%.

As the table below demonstrates, a mortgage rate decrease of 1% versus 0.5% results in widely different break-even times, thanks to number crunching assistance from The Mortgage Report.

Refinancing for a 0.25% lower rate is not generally recommended but could be worth it if you can refinance to consolidate high-interest debts, have a jumbo loan with significantly higher interest rates or are switching from an adjustable-rate mortgage to a fixed-rate mortgage.

Refinancing options before the break-even point

Remember that “breaking even” with your closing costs isn’t the only way to determine if a refinance is worth it. A homeowner who plans to move or refinance again before the break-even point might opt for either a no-closing-cost refinance or rolling closing costs into the refinance loan.

No-closing-cost refinancing typically means the mortgage lender covers part or all of your closing costs, and you pay a slightly higher interest rate in exchange. If you’re still saving enough when compared to your existing mortgage loan, this strategy can still pay off. This can be a beneficial situation for borrowers who plan to keep their new loan for only a few years.

You can also roll the closing costs into the refinance loan. If you're cash poor and going to keep the loan for more than a few years, rolling closing costs into the loan amount may be more affordable than a no-closing-cost loan with a higher interest rate.

Making the decision to refinance

When deciding to refinance, look closely at all of the numbers and how they impact your monthly costs. You also need to consider costs over the life of the loan or the time period you intend to live in the home if you plan on selling in the near term. Because if your new interest rate isn’t low enough, you might actually pay more interest in the long run because you pay it for a longer time.

Evaluating the impact of your credit score on how much your new loan will cost can also help you determine the right time to refinance. When you can’t qualify for an interest rate that’s lower than your current loan’s rate, consider improving your credit score before applying.

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Deciding where to put your hard-earned money is often a complicated decision. That’s especially true if you’re considering paying off your mortgage early. While owning a home outright is a common aspiration, it may be more beneficial to invest extra cash in the markets instead.  

There are several factors to consider when deciding whether to pay off your mortgage or invest the difference, including your personal financial values, time horizon, taxes, risk tolerance and the potential impact on savings.

An Ameriprise financial advisor can help you determine if paying off your mortgage is a smart move considering your overall financial goals.

When Is It Better to Pay Off Your Mortgage Early?

• If you want to save on interest: By paying off your mortgage in advance, you can save thousands of dollars in interest. This can be especially impactful if you are in the early years of your loan, when most of your monthly payment goes towards interest rather than principal.
• If you don’t mind losing the tax benefit: Paying off your mortgage means you can no longer take a tax deduction on your mortgage interest, which can help reduce your taxable income.
• If you want to free up cash — or reduce essential expenses: For most, a mortgage payment is among their most significant monthly bills. And eliminating this payment makes it possible to live on substantially less income or save more toward other priorities. That can be particularly helpful if you are close to retirement or are exploring ways to reduce living expenses.
• If the interest rate on your mortgage is high: If your mortgage rate is significantly higher than the interest you could receive on a low-risk investment, it may be worth paying off your mortgage, or consider refinancing.
• If you put a premium on peace of mind: Owning your own home outright can be liberating, and it’s hard to put a price on the security you may feel as a result. For some, that sense of freedom is worth far more than any potential returns they could earn if they had invested it instead.
• If you are debt-adverse: Even though debt — when used smartly — can be a wealth-building tool, some individuals just don’t like the risk and liability that comes with it. If being debt-free is among your financial goals, then paying off your mortgage is a logical step to achieve that.

Advice Spotlight

If you’re near retirement, consider the pros and cons of paying off your mortgage. Having a paid-for home in retirement is a priority for many retirees because it allows them to reduce their overall monthly living expenses.

Learn more: Effective debt management: Tips and strategies

When Is It Better to Invest Instead?

• If you haven’t saved enough for retirement or put a premium on investing: If you’re not maxing out contributions to your 401(k), IRA or other retirement accounts (or making larger catch-up contributions if you’re eligible), it’s generally advisable to do so before considering paying off your mortgage. After all, while you can take a loan for a mortgage, you cannot take a loan out to fund your retirement.
• If you have a low-cost mortgage: Did you refinance or secure a mortgage when interest rates were historically low? If so, any money you put into investments is likely to outpace whatever you might save in interest by paying off your mortgage.
• If you only plan to own your home for the short term: If you don’t see yourself living in your home for years to come, it may make sense to only make the minimal mortgage payments to insulate yourself from the possibility of a housing market downturn. Home values don’t always go up.
• If you have a higher tolerance for risk: While history is on the side of long-term investors, it’s important to remember that investing returns, of course, are not guaranteed. Markets are cyclical and periods of drawdowns are inevitable, when investing over a long time horizon.
• If you want more liquidity: Assets like stocks and bonds are far more liquid than home equity. If access to cash is a priority for you, then it may be better to invest rather than pay off your mortgage. In general, it’s much more challenging to tap into the equity in your home, compared to investments in a portfolio.

Advice Spotlight

Before you consider paying down your mortgage, address other high-interest debt and build an adequate cash reserve. That way, in the event of an unexpected expense or financial hardship, you won’t be forced to borrow money at high-interest rates or liquidate investments at a loss.

Crunching the Numbers: Pay Off Mortgage or Invest?

The return on paying off your mortgage early is the amount of money that would have been paid in interest. What you don’t know is the return you would have gotten on the money if you invested it instead.

Here’s one scenario:

Learn more: Strategies to help pay off debt faster

How You Can Pay Off Your Mortgage Faster While Still Investing

If you don’t have the funds or the desire to pay off your mortgage entirely but want to pay it down faster, there are several options to consider:

• Pay biweekly instead of monthly: This involves making half your monthly mortgage payment every two weeks instead of paying it in full once a month. By doing so, you’ll reduce the principal on your mortgage by the equivalent of an extra monthly payment every year. Over time, you may save tens of thousands of dollars in interest payments and reduce the time to pay off your mortgage by years. Not all mortgage companies allow biweekly payments, while others sometimes charge fees to do so, so talk to your lender if you’re considering this option.
• Make a regular “overpayment” to your mortgage: Tacking on an additional payment — such as $100 or $200, for example — to your monthly mortgage payment can be a manageable and routine way to pay down your loan faster. This strategy can be advantageous if you can make the additional payments at the very beginning of your loan because your savings on interest will be compounded over time.
• Make occasional lump-sum payments, when you can: Similar to the strategy above, this approach can save a significant amount of interest and shorten the life of the loan — without sacrificing your other savings or investment goals. As you have cash available — whether that be from a bonus or tax refund — you can funnel that money toward the principal balance on your mortgage.
• Refinance your loan: Refinancing a mortgage is a popular option when interest rates are low since it can reduce monthly payments and the interest paid over the life of the loan. But even when interest rates are higher, you can use refinancing to shorten the term of your loan and pay off your home quicker. Doing so, however will increase your monthly payments, and your new loan could also have a higher interest rate than your previous one. Either way, ensure a higher mortgage payment fits your monthly budget before deciding.

Use the Ameriprise Financial, Inc. mortgage refinance calculator to see how refinancing your mortgage could affect your monthly payments.

We Can Help You Evaluate Your Options

Talk to an Ameriprise financial advisor for help weighing the pros and cons of paying off your mortgage early based on your priorities and financial goals.

Questions to Ask an Ameriprise Financial Advisor During Your Initial Complimentary Consultation

• If I’m planning to retire soon, how can I balance my investing goals with paying down my mortgage faster?
• What factors should I consider to pay off my mortgage on an accelerated timeline?
• Should I prioritize investing overpaying off my mortgage, given my financial goals and time horizon?

When you’re ready to reach out to an Ameriprise financial advisor for a complimentary initial consultation, consider bringing these questions to your meeting.

Find an advisor

This information is being provided only as a general source of information and is not a solicitation to buy or sell any securities, accounts or strategies mentioned.  The information is not intended to be used as the primary basis for investment decisions, nor should it be construed as a recommendation or advice designed to meet the particular needs of an individual investor. Please consult with your financial advisor regarding your specific financial situation. Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation. The initial consultation provides an overview of financial planning concepts.  You will not receive written analysis and/or recommendations. Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC. Third party companies mentioned are not affiliated with Ameriprise Financial, Inc. This content was provided by Ameriprise Financial, Inc. Kiplinger is not affiliated with and does not endorse the company or products mentioned above.© 2024 Ameriprise Financial, Inc. All rights reserved.

If you’re thinking about buying a home or refinancing your mortgage, it pays to know how mortgages are affected by the federal funds rate. This past Wednesday, at its September meeting, the Federal Open Market Committee (FOMC) cut the federal funds rate 50 basis points or half a percentage point — more than expected.  

The Federal Reserve or “the Fed,” is the central bank of the U.S. Its job is to manage the supply of money and the cost of credit so that the U.S. economy can prosper. It also sets the federal funds rate, which is the interest rate that banks charge each other for short-term loans. The fed fund rate also directly affects what consumers pay when they borrow money. 

The Fed also influences mortgage rates, but doesn't set them. Instead, mortgage rates are affected by things like inflation, job growth, a shrinking or growing economy and more. The Federal Reserve's monetary policy is also a factor. 

The Federal Open Market Committee (FOMC) said at its July 2024 meeting that although inflation eased over the past year, it still remains somewhat elevated. In response, the Federal Reserve kept the federal funds rate unchanged in a range of 5.25% to 5.50%, a 23-year high. 

But on Wednesday the Fed opted to cut rates for the first time in four years. The language in its statement changed from the July meeting to reflect that it is concerned about slower job growth amid easing inflation. 

The rate set on Wednesday now stands at about 4.9%, but some economists think another rate cut may come before the end of the year. Even so, housing prices remain high, partly due to continued low inventory in many markets. 

The Federal Reserve and mortgage rates

While you can’t predict when some unexpected event will shock the market, it’s easier to make an educated guess about future mortgage rates by looking at the Fed’s current monetary policy. In a perfect world, the Fed would like to maintain an inflation rate of around 2%. However, inflation has been much higher than that for some time.

Variable rate mortgages, such as home equity lines of credit HELOCs) and adjustable-rate mortgages (ARMs) typically see rates decline after a Fed interest rate cut. According to Freddie Mac, the average ARM rate in the first quarter of March 2024 fluctuated from 2.73% to 3.12%. The HELOC rate hovered right around 4.3% to 4.4%, mostly flat.

Key points to consider:

• The Federal Reserve sets the federal funds rate, which in turn influences other interest rates, such as mortgages
• Mortgage lenders consider many different factors when determining the interest rates they charge.
• Although mortgage rates have started to decline, it will be a slow process. It’s unlikely we’ll see average rates dip below 6% for some time.

What this means for homebuyers 

If you have been considering buying a home but couldn’t swallow mortgage rates that rose to 8% this year, (a mortgage of under 3% was possible just a few years ago) a Fed rate cut may help you make a decision by helping to lower your mortgage payments over time. 

The difference between an 8% mortgage and a 3% mortgage on the same 30-year $400,000 loan is nearly $1,000 a month. That said, you should manage your expectations. It’s doubtful we’ll see 3% mortgage rates that were available during the pandemic anytime soon.

In addition to simply lowering your monthly payments, lower rates might convince more homeowners to sell. However, it may also mean more competition for the same home. Plus, the increased demand and the lack of inventory could drive up home prices and possibly offset the benefits of lower rates.

The impact of a rate cut on fixed mortgage rates

Because the 10-year Treasury bond rate influences fixed-rate mortgage rates and not the federal funds rate, homeowners who currently have a fixed-rate mortgage won't see their interest rate change regardless of moves by the Fed. However, borrowers applying for a fixed rate loan can lock in the new rate for the life of their loan, unless they refinance. 

The impact of a rate cut on adjustable rate mortgages

The Fed’s rate cuts are more closely related to adjustable rate mortgages and HELOCs. That’s because the rate on an adjustable rate mortgage adjusts about every six months, so if the Fed keeps cutting rates, your monthly payment could gradually go down. On the flip side, your monthly payment could gradually increase if interest rates also increase. 

Factors that affect mortgage rates

Mortgage rates are affected by many different factors, such as supply and demand, inflation and the jobs market. Personal factors like your credit score, borrowed amount and employment also play a part.

Economic factors:

• Inflation. When inflation is high mortgage rates tend to be high, although that’s not always the case. But because inflation often leads to consumers buying less, lenders make up for the loss by setting higher interest rates. 
• Supply and demand. When the demand for homes is low, lenders tend to lower interest rates to attract borrowers. Conversely, when demand is high, lenders raise interest rates because they only have so much capital to lend in the form of mortgages. 
• Job data. When the jobs market remains favorable and inflation holds above the 2% target, the Fed doesn’t have as much incentive to cut rates
• Fed policy. Although the Fed does not set mortgage rates, when it adjusts the federal funds rate, it does affect mortgage rates and what banks need to charge consumers to remain profitable.

The Bottom Line

Mortgage rates are now at their lowest level since February 2023, but housing prices remain high, likely due to low inventory not meeting demand in most markets. As of September 18, 2024, the average 30-year-fixed mortgage APR is 5.98%, down from 6.35% just a week earlier. 

Although mortgage rates and the federal funds rate usually take the same path, rates are largely tied to the Fed’s actions, expectations about inflation and how investors react. Other home loans, such as home equity lines of credit and adjustable-rate mortgages are expected to adjust, as they typically do, within two billing cycles after a change in the Fed’s rates.

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When shopping for a new home, it's wise to invest as much time in exploring mortgage options as you do in finding the right property. A 15-year mortgage, which is often overlooked by first-time buyers, can significantly impact your long-term financial outcomes and nest egg.

Personal finance typically evolves from a lower income in your 20s to higher earnings later in your career. In your 20s, saving can seem impossible due to responsibilities like marriage, children or student loans. This challenge often continues into your 30s and 40s with new expenses such as college tuition or elder care. Many people experience a wake-up call around age 50, realizing they should have started saving earlier.

One way young homebuyers can break this cycle is by choosing a 15-year mortgage over a 30-year term. Though monthly payments are higher, this option accelerates loan repayment and results in significant long-term savings. A 15-year mortgage can set you on the path to financial independence at a younger age while also freeing up funds for reinvestment in assets like stocks, bonds or additional real estate.

Here are some pros and cons of a 15-year mortgage to consider:

Advantages:

• Long-term savings
• Faster accumulation of home equity
• Mortgage-free 15 years sooner

Disadvantages:

• Larger monthly payments
• Potentially tougher qualification requirements
• Less flexibility for other goals

When determining how much mortgage payment you can afford, consider the 28/36 rule. This guideline suggests spending no more than 28% of your gross monthly income on home-related costs and no more than 36% on total debts, including mortgage, credit cards and other loans. For example, if you earn $5,500 a month and have $500 in existing debt payments, your monthly mortgage payment should not exceed $1,480.

Additionally, be prepared for emergencies by keeping three months' worth of payments — including your mortgage and other debts — in reserve.

What to know about a 15-year fixed-rate mortgage

Typically, 15-year fixed-rate mortgages offer lower interest rates than 30-year loans. To illustrate potential lifetime savings, consider this hypothetical comparison from Rocket Mortgage: On a $300,000 home with a 20% down payment ($60,000) and a 6% interest rate (the same for both loans), the monthly payment for a 30-year mortgage is $1,439, while a 15-year mortgage costs $2,025. Despite the $500 higher monthly payment, a 15-year mortgage saves over $153,000 in total loan costs and eliminates mortgage debt 15 years sooner.

Most homebuyers can qualify for a 15-year mortgage, depending on their financial situation and lender criteria. Those with stable income and a solid financial foundation are more likely to secure this loan.

Opting for a 15-year mortgage can be a strategic choice for those who can manage the higher payments and seek substantial long-term financial benefits. Evaluate your financial situation carefully and consult a mortgage expert to determine if this option aligns with your goals.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Mortgage rates have come down from the 23-year highs that have frustrated the housing market, and are now sitting at the lowest level since February 2023. Rates had already started to come down ahead of last week's Federal Reserve decision to cut interest rates for the first time since 2020, and are poised to fall further in the months ahead. Lower mortgage rates over time should help recharge the housing market.

As rates continue to fall there will likely be a surge in home sales and refinance applications, as homeowners become “unlocked” from their current rates and are less hesitant to sell their homes or remortgage at a lower rate. However, some experts believe that many homeowners will hold off on refinancing or selling until mortgage rates reach a “magic number.”

What is that magic number? And when it's reached, which areas of the country are likely to benefit the most? A recent study from Realtor.com identified the areas in which easing mortgage rates will “unlock” the housing market the most.

The latest Fed meeting

The Federal Reserve cut interest rates at its latest policy-setting meeting on September 17-18, bringing the federal funds rate, a key overnight bank lending rate that influences all kinds of borrowing costs, down by 50 basis points to a range of 4.75% to 5%. More rate cuts are expected throughout the rest of this year and into 2025.

And while the federal funds rate doesn't directly impact mortgage rates, Fed cuts on short-term rates "will boost banks’ lending margins and should bring some extra reduction in mortgage rates, too," according to Kiplinger's Interest Rates Outlook.

Realtor.com economists predict that by the end of the year, mortgage rates will drop to 6.3%. That 6.3% figure gets close to the so-called "magic number." Here's a look at the metro areas most likely to benefit.

Top 10 metro areas where most mortgages are unlocked by lower rates

To determine the areas where the greatest number of mortgages would be unlocked by lower rates, Realtor.com used the Realtor.com public records database and Optimal Blue to analyze the number of home sales in each area since 2020 when mortgage rates averaged over 6.5%, expressed as a share of the metro’s total number of owner-occupied housing units, according to the U.S. Census Bureau. Here’s what they found.

1. Naples, FL
Share of mortgages above 6.5%: 15.2%
Median list price in July: $770,000

2. St. Louis, MO
Share of mortgages above 6.5%: 13.9%
Median list price in July: $313,900

3. Myrtle Beach, SC
Share of mortgages above 6.5%: 13.4%
Median list price in July: $339,900

4. Cape Coral, FL
Share of mortgages above 6.5%: 12.4%
Median list price in July: $449,950

5. Miami, FL
Share of mortgages above 6.5%: 12.4%
Median list price in July: $449,950

6. Albuquerque, NM
Share of mortgages above 6.5%: 11.6%
Median list price in July: $419,000

7. Kansas City, MO
Share of mortgages above 6.5%: 11%
Median list price in July: $410,000

8. Fort Wayne, IN
Share of mortgages above 6.5%: 10.5%
Median list price in July: $319,900

9. Oklahoma City, OK
Share of mortgages above 6.5%: 10.4%
Median list price in July: $325,903

10. New Haven, CT
Share of mortgages above 6.5%: 10.3%
Median list price in July: $424,925

"Inventory climbed annually in July in each of these markets, which may have spurred recent sales, despite still-high mortgage rates,” says Realtor.com senior data analyst Hannah Jones. “This means that buyers in these markets stand to enjoy ample home options even today, and can take advantage of falling rates.”

According to Realtor.com, Naples, Cape Coral, Fort Myers and Myrtle Beach have recently experienced a surge in population growth, which could also account for such a large share of mortgages with rates exceeding 6.5%.

Use our tool below, powered by Bankrate, to compare mortgage rates today.

The magic number for mortgage rates

Many experts believe that the magic number to bring sidelined buyers into the housing market is 6%. When mortgage rates drop below 6%, there will be a surge in home buyers — stirring up demand, and driving up home prices.

Earlier this year, Shark Tank investor and self-made real estate millionaire, Barbara Corcoran, told Fox Business that if rates go down just another percentage point, "everyone will come out and buy." However, she believes that this will cause prices to skyrocket. "I wouldn't be surprised if real estate went up by another 8 or 10% if interest rates come down," says Corcoran.

Home prices are already going up, increasing year over year by 4.9% in May 2024 compared with May 2023, according to CoreLogic. Realtor.com's economic research team expects list prices to rise 4.6% by the end of this year.

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The concept that retirees should pay off their mortgage stems from a combination of historical economic conditions, cultural values surrounding homeownership and debt, and financial planning principles aimed at ensuring security and peace of mind in retirement. This idea has been passed down through generations, although individual circumstances today may lead to different approaches.

Nearly 40% of retirees, for instance, have a mortgage. And the average mortgage balance is over $100,000, which translates to average annual mortgage payments of $10,000 that will last at least 12 years or more.

That doesn’t mean retirement plans are doomed to fail if they include a mortgage. Rather, we think that in designing your plan for retirement, you ought to consider the equity in your home, and then decide whether a mortgage, either existing or new, belongs in your plan.

No differences between mortgages for Millennials and Boomers

The market for cars, clothes and restaurants is different for the Millennial generation vs Baby Boomers.

However, that’s not the case for mortgages. It’s the same product whether you are age 30 or 60. Why should that be the case for a financial vehicle when at age 30 you’re concerned about mortality and paying off the mortgage if you pass away early but at 60 you’re concerned about longevity and making mortgage payments into your 80s and beyond?

Let’s work through an example for a Boomer.

A Boomer with a mortgage

Mary, the 70-year-old cousin of Sally, the consumer we often refer to as our sample investor, is also 70 and has a $150,000 mortgage (against a home worth $1 million) and mortgage payments of nearly $13,000 a year for the next 15 years until the mortgage is paid off. She’s generating $100,000 in income from her retirement savings and $25,000 in Social Security benefits, but that $13,000 mortgage payment represents more than 10% of her income. Compounding this issue is her desire to age in place like 75% of aspiring and current retirees.

Her options regarding her mortgage

Like lots of retirees, she’s always considering her options when it comes to housing and finances. Here are the options she’s considering:

• Continue as is and cut back spending other than on the mortgage. But unless absolutely necessary, she wants to be able to spend at her budgeted amount, which includes trips to see the grandkids and other small luxuries.
• Sell the house and downsize. She’s moved a few times in her life and hated it. Plus, she loves the house she’s in, along with the neighborhood.
• Pay off the mortgage by taking $150,000 from retirement savings. That would remove the $13,000 in yearly mortgage payments, but also reduce her annual income from savings by $7,500 to $9,000 in her Go2Income plan. Is the net gain, and the reduction in savings and liquidity, worth it?
• Replace her existing forward mortgage with a home equity conversion mortgage (HECM). Also known as a reverse mortgage, a HECM would eliminate her monthly mortgage payments, but over time see her legacy fall.
• Refinance her forward mortgage with HomeEquity2Income (H2I). Under H2I, she generates more income and does a better job of maintaining her legacy.

Her choice

The approach we’ll focus on here is to refinance a forward mortgage as part of an H2I plan. There are a couple of steps involved, but if you follow the HomeEquity2Income plan I’ve written about recently, including in my article Transform Your Retirement Plan With This Powerful Combo, you will see that the reasons a Boomer might order an H2I-Refi plan include:

• Eliminating mortgage payments for the term of the current mortgage
• Generating additional current and lifetime cash flow
• Creating additional liquidity for unplanned expenses
• Delivering a reasonable amount of legacy from the value of a home

Mary originally liked the idea of continuing her mortgage payments to eliminate the mortgage at 85 and leave the house unencumbered at her passing. That plan is OK and fits the conventional wisdom about paying off the mortgage.

Mary is one, however, who could use additional cash flow from eliminating mortgage payments — and then some — to maintain her home and have funds to pay for caregivers she might bring into the house.

High-level results from H2I

To prepare, she read my most recent H2I article, How 'Home-Based Planning' Can Address Long-Term Care Costs, but learned that for her to fund those costs, she must refinance the current mortgage. ( A recent poll conducted by University of Michigan’s Institute for Healthcare Policy and Innovation found that long-term health care costs top the list of concerns of older Americans.)

This refinancing requirement means that the $150,000 mortgage balance is paid out of the line of credit set up under the HECM component of H2I. This leaves a smaller line of credit than if there were no loan. (Paying part of the mortgage off with savings and the balance with a HECM line of credit is another option.)

While there are lots of assumptions that could be tested, the bottom-line results under H2I for her three primary objectives were:

• Current cash flow changed with (a) the elimination of outflow of $13,000 per year for the term of the mortgage and (b) the addition of H2I inflow of $15,000 (and growing) per year for life. That means an extra $28,000 in cash flow over the next 15 years and thereafter $20,500 annually for life. That addition of combined cash flow can be spent on her budget, providing gifts to kids and grandkids or growing her savings and legacy.
• Liquidity from moving from the existing mortgage to an H2I plan jumped from $0 to over $300,000 at 90 — not counting the potential reinvestment of the additional cash flow.
• Her legacy at 95 would be $1.3 million for H2I, and substantially more if she reinvests the additional cash flow.

Year-by-year results from H2I

The adjustments a retired mortgage holder can make with H2I, and the different applications of income, are clear in the charts below. H2I provides for more cash and liquidity and can still result in a meaningful legacy.

Cash flow

H2I, which combines HECM with a deferred income annuity called a QLAC, allows Mary to end her mortgage payments and to generate additional income for life.

Liquidity

The HECM component also provides a line of credit even after paying off the forward mortgage that can help pay for home improvements, health care costs or unplanned expenses.

Legacy

Finally, when the QLAC payments start at age 85, Mary will be able to pay interest on the line of credit, which enables her to leave a substantial legacy to her heirs.

Like most investors, Mary has a number of objectives. H2I gives her options to create the best plan to meet her personal goals.

Even for the dedicated DIY retirement planner, we don’t expect you to dig into H2I alone. Order your own Go2Income plan to learn about how to use the equity in your residence to create more retirement income and a new source of liquidity as you prepare for long-term health care and other needs.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.