What can employers do to make sure their financial benefits attract and serve a truly diverse workforce?
It’s a question that has become increasingly relevant since the Covid-19 pandemic shed a harsh light on the pervasive economic inequalities embedded in society and the workplace. While there have been gains in the average wealth of all demographic groups since 2019, the racial wealth gap remains stubbornly wide.
According to Federal Reserve data from the second quarter of 2023, Black families had about $986,000 less wealth, on average, compared with white families, while Hispanic families had about $992,000 less wealth, on average, than white families. Put more starkly: Black and Hispanic families had 24 cents for every $1 of white family wealth.
Even when they attend and graduate from college, minorities still face an uphill financial climb. According to the Education Data Initiative, Black college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, black students owe an average of 188% more than white students borrowed.
And while women have increased their presence in higher-paying jobs traditionally dominated by men, the gender pay gap hasn’t gone away: On average, women are paid 83.7 percent as much as men, which amounts to a difference of $10,000 per year. The gaps are even larger for many women of color, according to the U.S. Department of Labor.
Given these realities, it’s important that diversity, equity, and inclusion (DE&I) programs and financial wellness initiatives are effectively combined to help address the problems of economic inequality throughout every segment of your workforce.
By helping underrepresented employees turn wages into long-term wealth, companies can play a pivotal role in driving financial success that impacts future generations and results in systemic change.
Where Do Financial Wellness and Diversity, Equity, and Inclusion Intersect?
These days, many employers of all sizes have a DE&I strategy or program in place to increase inclusion and remove bias and discrimination in the workplace. Financial wellness benefits are also growing in popularity as a way to attract, retain, and add value to employees.
While companies may actively promote both financial wellness and DE&I, they often overlook the potential synergy between the two. Understanding how these two human resource pillars work together can help amplify the relevance, effectiveness, and success of both programs throughout your workforce.
Traditionally, financial well-being programs have focused on long-term savings and investing for retirement. But it’s becoming increasingly apparent that this approach doesn’t meet all the needs of an increasingly diverse workforce.
Depending on the individual, financial success can come in many forms, not just having enough for retirement. Success might also include paying off debt, saving for emergencies, or buying a first home. Understanding your workforce and its diverse needs — as well as understanding the importance of a broad-based definition of financial well-being — helps put you at the nexus of your DE&I and financial wellness goals.
Recommended: How to Support Your Low-Wage Workforce
Can Financial Well-Being Initiatives Enhance Diversity, Equity, and Inclusion in Your Workforce?
The answer is an overwhelming yes — as long as your financial well-being programs are designed to be customizable for employees on different financial footings with a range of financial goals and stresses. Here are some steps you can take to integrate your financial well-being and DE&I programs.
Ensure Fair Pay for All Employees
This may seem like a basic concept, but it still needs plenty of attention. Doing everything you can to close the race and gender pay gaps in your organization shows your commitment to both DE&I and financial well-being — and to making them work together.
Recommended: How Employers Can Help Close the Racial Wealth Gap
Embrace Flexible Financial Contribution Programs
Personalized, relevant financial benefits can help you meet your employees where they are in terms of financial challenges and goals. When you offer a range of financial well-being benefits, you give employees the power to choose the financial programs that can help them the most.
The pandemic highlighted for many people the need for short-term, goal-oriented savings as well as long-term investing. Programs that can resonate strongly with today’s diverse workforce and its many needs include: emergency savings accounts; student loan repayment programs, including 401(k) matches for employees paying off student loans; budget counseling, and debt management tools. Established college tuition reimbursement and retirement savings programs are also vital parts of a holistic financial wellness program.
Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?
Get Creative
Don’t be afraid to think out of the box when it comes to expanding financial well-being programs so that you can include all employees. Many employers are reimagining traditional approaches to leaves and paid time off — for example, allowing employees to transfer unused PTO balances into accounts like emergency savings or 529 tuition savings plans.
Creativity is also important when it comes to education efforts. Simply offering new programs is not enough. Education efforts should be accessible, interactive, and customized so that each employee can find the information they need and act on it.
SoFi at Work has noticed that some employers are adopting a “learning journey” approach that allows workers to choose their own paths depending on where they are on their journey towards their individual financial goals and aspirations.
Recommended: Are Your Benefits Helping Women — Especially Moms — Achieve Financial Wellness?
Choose Credible Partners for a Sustainable Program
To provide this extra support and guidance across a broad spectrum of financial needs, you’ll need to choose credible partners that can provide expertise, platforms, and cost-effective services in specific areas. Good partners can help you launch personalized and sustainable programs that are accessible in the short-term, but also build the foundation for your department’s long-term goals.
The Takeaway
Employers can play a key role in ensuring that all employees have the same opportunities for financial success and control of their own financial futures. Democratizing financial well-being can not only create a more diverse and inclusive workplace, but ultimately a more equitable future for all of us.
SoFi at Work can help. We provide the benefits platforms and education resources that can enhance financial wellness throughout your workforce.
Photo credit: iStock/pixdeluxe
Products available from SoFi on the Dashboard may vary depending on your employer preferences.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
When it comes to their kids, many of your employees may be willing to put their retirement on the line.
As HR pros focus on workforce planning, understanding the burden that college costs impose on most employees is a key component for successful financial wellness programs.
Paying for college is a daunting challenge, and even financially savvy parents can become overwhelmed and confused by the college financing process. That’s where employer-sponsored education efforts can help. Employers who understand the following common college financing traps can better plan programs to alleviate the stress of paying for college and improve financial wellness overall.
Trap One: Prioritizing Their Children’s Education Over Their Own Retirement
By now, it’s become a financial wellness mantra: Parents should prioritize their retirement savings before saving for or paying for a child’s college education. After all, the thinking goes, students can borrow for education costs, but parents can’t borrow money to pay for retirement. And if parents don’t properly prepare for retirement, their children may end up supporting them in their later years, jeopardizing their future finances.
But with ever-rising tuition costs and the increasing burden of student debt, it may be harder for your employees to follow that tried-and-true advice. The cost of college has more than doubled over the past four decades — and student loan borrowing has risen along with it. Americans collectively owe more than 1.7 trillion in student loan debt, according to the Federal Reserve .
Trying to ease the burden on their children, your employees may be raiding their future. Among people aged 25 to 80 who are saving for both retirement and future college expenses, 58% say they are delaying retirement, and 41% say they have withdrawn money from their own retirement funds to pay for a child’s (or other relative’s) tuition, according to a July 2023 survey by the Society of Actuaries .
When an employee delays retirement to catch up on missed retirement savings or pay off education loans, it can be costly to an organization. What’s more, if paying for college forces an employee to work longer than they want to, the result may be a less productive, less engaged worker.
Recommended: SoFi Survey: The Future of Financial Well-Being at Work
Trap Two: Mismanaging PLUS loans
Parent Loans for Undergraduate Students (PLUS loans) are underwritten by the federal government and allow families to borrow without the same credit checks and other limits imposed on other types of lending. Because these loans are in a parent’s name, your employees may naturally gravitate to them as a way to help their children avoid debt.
But there are drawbacks. Unlike federal student loans, there are no limits on the amount parents can borrow as long as it doesn’t exceed education costs. To qualify for a PLUS loan, parents need only pass a check for an “adverse event” such as a recent bankruptcy filing or foreclosure. There is no consideration of the borrower’s ability to repay the loan. Given the often astronomical costs of attending a four-year college, your employees may quickly find they have taken on more debt than they can comfortably handle.
In addition, PLUS loan interest rates, set by the government each year, are usually significantly higher than student-held federal loans (8.05% for 2023-2024 versus 5.50%) and sometimes higher than some private college loans.
If parents default or consolidate their PLUS loans, or if they receive a forbearance or a deferment, the interest that continues to accrue is capitalized. That means that principal and payments can become even more unaffordable for employees. In addition, if the loans go into default, the government can garnish wages, Social Security checks, and tax refunds.
Recommended: Preparing for College Resource Guide for Parents
Trap Three: Avoiding College Financing at All Costs
Another common mistake lurks on the opposite side of the spectrum. In an effort to avoid college debt of any kind, parents who have some, but not enough, college savings may decide to forego saving for retirement, dip into retirement savings, or use home equity to pay tuition bills as they come.
Withdrawing 401(k) savings can result in significant penalties, taxes, and, importantly, lost principal and earnings. Cash-out home refinancing can lead to higher and perhaps unaffordable mortgage payments. Even putting retirement savings on hold when the year’s tuition is due can translate into large gaps in savings goals, depending on the number and ages of children attending college.
These are all understandable mistakes. As we saw above, an overreliance on debt to pay college bills can seriously jeopardize financial well-being. But so, too, can dismissing the strategic use of financial aid and loans to finance college costs.
For instance, your employees may neglect filling out the Free Application for Federal Student Aid (FAFSA), figuring that they earn too much to qualify for federal financial aid. According to Sallie Mae’s How America Pays for College 2023 report, 71% of families filed the FAFSA for the 2022-2023 academic year, down from 86% in 2016-2017.
These parents may not realize that without the FAFSA, the student will not be awarded federal subsidized and unsubsidized loans, which can be attractive for their low rates and, in the case of subsidized loan, help from the government in paying interest.
More importantly, many schools require students to submit a FAFSA to be eligible for merit-based scholarships and grants, even though these funds are awarded according to the student’s academic record and other achievements, not financial need. Merit-based aid does not have to be repaid and is usually awarded to undergraduates for the full four years.
While too much debt is never smart, a prudent and affordable mix of well-structured student debt can help parents avoid sacrificing retirement savings, home equity, and other long-term savings to pay for college now.
Employer-sponsored college financing education and one-on-one college counseling can help ensure parents understand the complexities of financial aid and student borrowing so they can balance long-term and current financial needs and goals.
The Takeaway
Employers who help parents avoid these common college financing traps may help alleviate what is fast becoming one of the largest sources of financial stress in your workforce.
SoFi at Work can help with student loan repayment platforms, extensive education efforts, plus a lending suite of student, graduate student, MBA, and parent loans. For organizations that are looking to help their employees get ahead on their education financing goals, SoFi at Work also offers a 529 College Savings Program, which can be integrated into any payroll system.
Photo credit: iStock/Orbon Alija
Products available from SoFi on the Dashboard may vary depending on your employer preferences.
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
If you’re like most people embarking on a home-buying journey, one of your first steps will be finding a mortgage lender. There’s a lot to consider when it comes to choosing the right one — everything from interest rates, loan types and fees to service and experience.
When comparing lenders, it’s worth taking your time and choosing carefully. Purchasing a home is a big step, and you want a knowledgeable lending partner by your side as you weigh your financing options and navigate the paperwork involved. A good mortgage lender is a valuable resource and can make the home-buying process easier and less stressful. Let’s take a look at the steps you can take to find the right lender fit for you.
How to Find a Mortgage Lender
There are several types of lenders you can look to for securing your home loan, with the most popular being direct lenders and mortgage brokers.
Direct lenders. Banks, credit unions and mortgage companies are considered direct lenders and handle the entire mortgage process from origination to closing.
Mortgage brokers. Mortgage brokers work independently with a variety of loan originators, including direct lenders, to help clients find a mortgage that fits their needs.
Which type of mortgage lender you choose depends on your personal preference, the type of loan you’re looking for and your financial situation. There are many factors to consider when comparing your options. While interest rates are certainly a big one, there are other things to think about, such as fees, loan products, the process and the lender’s experience and reputation.
Here are some tips for choosing the right lender and how to best set yourself up for mortgage success.
Starting the Loan Certification Process
When choosing a lender, look for one that offers a written letter or certification you can provide to sellers to let them know you are qualified. This gives you a clear picture of your buying power and can help you make a stronger offer on a home. When you work with a lender that provides this, you’re doing much of the legwork involved in obtaining a mortgage contract without actually finalizing it.
Choosing Pennymac as your lender gives you access to our unique BuyerReady Certification process. This certification gets you even closer to your new home by confirming precisely how much of a mortgage you will qualify for.
While a BuyerReady Certification does not guarantee a closing, it is a conditional approval based on the information you provide us through the formal loan process. You’ll have peace of mind knowing your borrowing limit and be able to show realtors and sellers that you’re serious about purchasing. To receive a Pennymac BuyerReady Certification, you’ll submit a mortgage application and financial documents, which a Pennymac Loan Expert will review.
Here are some of the benefits of having a BuyerReady Certification:
Shows sellers, realtors and lenders that you’re a serious homebuyer
Helps inform your decision-making in terms of how much you can spend on a home and the types of financing you’ll be able to qualify for
Gives you a competitive advantage over homebuyers who don’t have it
Important Mortgage Considerations
Whether you begin your hunt for the perfect lender and loan by visiting your local bank, searching online or surveying your family and friends, here are some key factors you’ll want to consider.
Interest Rates
Interest rates are among the most important factors to consider when comparing lenders. Your interest rate will determine how much you have to pay for your home loan, so take time to do the math when examining your options. Even a seemingly small difference between rates, such as an additional .5%, can add up to a considerable increase in your monthly payment. Over a 30-year term, you could be paying tens of thousands of dollars more in interest.
While interest rates aren’t the only factor to look at when choosing a lender, they are a significant one. Select a lender that offers a range of competitive rates and terms and will quickly lock in a rate when you find the one that works best for your budget.
Down Payment and Mortgage Insurance
Most, but not all, home loans will require a down payment. A home down payment is money paid upfront for the home at closing and is a percentage of the home’s purchase price.
A conventional fixed-rate mortgage may require a down payment of as little as 3%. A Federal Housing Administration (FHA) mortgage has a minimum down payment of 3.5%, while the U.S. Department of Veterans Affairs offers loans with 0% down.
When comparing mortgage lenders, be sure to inquire about which loans they offer, especially if you’re interested in a non-conventional loan, such as a FHA or VA loan.
Keep Mortgage Insurance in Mind
While there is flexibility in how much of a down payment you make, if you have a conventional loan and do not put at least 20% down, you’ll have to pay for private mortgage insurance (PMI). This is a policy that protects your lender if you fall behind on your payments or end up in foreclosure. It is paid monthly on top of your regular mortgage payment.
Lenders partner with certain PMI providers and may use different calculations to determine your PMI premium. If you anticipate that you’ll be paying PMI, be sure to factor those premium charges into your cost comparisons. Conventional mortgage insurance can be priced quite aggressively, especially if the borrower has a solid credit score. It’s a great option for those who want to keep cash in the bank for investing and/or reserves.
If you opt for an FHA loan, mortgage insurance — similar to PMI — is always required at first. How much and how long you’ll have to pay the extra monthly premium depends on the amount of your down payment. VA loans do not require any type of mortgage insurance but may have other mandatory fees.
Fees
When comparing lenders, you’ll want to specifically evaluate rates, as well as origination fees and discount points, which can vary depending on who you choose. The homebuyer usually pays the fees, although sometimes a seller will agree to a concession and pay for some. Don’t be afraid to negotiate any closing costs. See if the lender you’re considering will work with you to reduce some fees or make other favorable compromises.
Prepare for Meeting with a Loan Officer
Once you find a prospective lender, you’ll meet with a loan officer or expert in person, through email or over the phone to discuss your mortgage options. Your loan officer will help determine your short and long-term goals with your home purchase and offer options to tailor your loan to your current financial situation. This meeting will provide a foundation for your loan officer to match you with a home loan that meets your needs.
Being prepared will help you make the most of your meeting and facilitate the mortgage process. Before meeting with your loan officer, here are some things you can do.
Improve Your Credit Score
Your credit score is a major factor in determining what kind of loans you may qualify for and your interest rate. A lender will want to be confident that you’ll be able to repay your loan. Your credit score is based on the data in your credit report and is a numerical rating based on your credit history. It takes the following into account:
Your bill-paying history
Total amount of current unpaid secured and unsecured debt
Your open loan accounts
How long you have had your loan accounts open
Credit account limits
Collections, charge-offs and any derogatory debt
Typically, the higher your credit score, the more loan options you will have. A lower credit score can mean that mortgage choices may be limited to non-conventional loans with broader qualification requirements.
The following are three steps you can take to help boost your credit score:
Check your credit report. Request free credit reports from each major credit bureau (Equifax, TransUnion and Experian) and review them for accuracy.
Pay bills on time. Late payments for credit cards and personal or auto loans can negatively impact your credit score. Making consistent on-time payments is one of the most influential credit score factors. If this is an area of concern, consider setting up automatic payments and commit to paying at least the minimum amount due each month.
Reduce credit utilization ratio (CUR). Demonstrate responsible credit management by lowering your credit card balances as much as possible. Try to keep your credit utilization ratio below 30%, which indicates that you are using a smaller portion of your available credit. Calculate your CUR as follows: Credit Utilization Ratio = (Total Outstanding Balances on Credit Accounts/Available Credit/Total Credit Limit on Accounts) x 100.
Organize Your Finances and Documents
To prepare for your loan officer meeting, determine how much money you have for a down payment, as this will be important when evaluating your loan options and monthly payments. You will also be required to submit numerous financial documents, including:
Photo ID
Pay stubs
Tax returns and W-2s and/or 1099s
Bank statements
All the paperwork may not be necessary during your initial meeting. Still, a jumpstart on document-gathering can help streamline the mortgage application process when your loan officer is ready to review them.
Understand Which Loan Is Right for You
While your lender will look at your complete financial picture before presenting — and explaining — your mortgage options, it is a good idea to have a basic understanding of the choices available. The following are the most common types of home purchase loans:
Each type of loan has its benefits and qualification requirements. When comparing home loans, you’ll want to think about:
How long you intend to stay in the loan
Your down payment and credit score
Your income stability
How much you intend to borrow
How long you plan to stay in and/or own the home
Your future plans, e.g., will you need more space for children or aging parents?
Your budget
Assess Your Budget
After you apply for your mortgage, you’ll go through the underwriting process, whereby all your financial documents will be examined and verified. Because the loan officer will ultimately determine how much you can borrow based on your budget, it’s crucial to provide them with the most accurate information upfront during the application process. Providing inaccurate information before going into processing can impact your qualification on the back end. Taking these steps before your loan officer meeting may help improve your chances that you’ll receive a loan approval:
Review your debt-to-income ratio (DTI) with a licensed loan officer. Your DTI is determined by how much recurring monthly debt you have compared to your monthly gross income. Look at your credit card and loan payments. Having less of your monthly income allocated to debt is a positive indicator of being able to qualify for a loan.
Establish how much you can put down on a home. The higher your down payment, the less you’ll have to borrow.
Determine how much you can afford to pay every month. Your new home expenses are not limited to your mortgage. Consider other costs such as:
Closing costs
Insurance
Property taxes
Potentially higher utility expenses
Any applicable mortgage insurance
Homeowners association fees
You’ll also want to think about how your new mortgage will affect your long-term savings goals, such as saving for retirement or your child’s education.
Questions to Ask the Loan Officer
Whether you’re a first-time homebuyer or a seasoned homeowner, the mortgage process may seem a bit overwhelming. Meeting with a licensed loan officer is an opportunity to get your questions answered so you can better understand the process, the loans available and the fees involved.
The following questions are a starting point for gathering information from your loan officer:
What types of home loans do you offer? Which do you think would best fit my needs?
What are the loan rates, terms and eligibility requirements?
What is the required minimum down payment amount for the different loan options?
Will my loan require mortgage insurance?
Is there a prepayment penalty if I want to pay off my loan early?
Do you offer a letter, certification, pre-approval or something similar I can provide sellers to validate my qualifications?
What will my closing costs be?
Can I lock in my interest rate?
Who will be my primary contact? Will it be you or someone else once the loan moves to underwriting?
Can I buy discount mortgage points? How long will it take to recoup them?
These are fees paid at closing that can help you lower your monthly mortgage payment.
How long is the mortgage process? When can I expect to close?
Will the loan closing take place in person or online?
Take your time to ask all the questions you need. A mortgage is a significant financial commitment, and you want to be confident that you’re making the most informed decision. If your loan officer is impatient or reluctant to answer your questions, that may be a sign that they’re not the right lender for you. A loan officer should be a borrower’s advocate and take the time to educate them throughout the process.
Interest Rate Lock
Mortgage rates constantly fluctuate, so asking for an interest rate lock is a smart idea if you find a good rate. An interest rate lock, also known as a locked-in rate, is a guarantee from a lender to give you a set interest rate when you apply for a mortgage. It protects borrowers against potential interest rate increases during the mortgage underwriting process.
Rates can generally be locked for an option of 30, 45, 60 or even 90 days. They are usually locked after the loan application has been reviewed and before underwriting. Lenders have different policies regarding rate locks, including fees, so inquire about policies when comparing lenders.
How Long Is the Process?
The mortgage loan timeline, consisting of a BuyerReady Certification, applying for the loan and underwriting, varies from 30 to 60 days or longer. Some factors that hinder the mortgage process include:
When borrowers do not have all their documents in order or provide inaccurate or incomplete information
When borrowers have more complex situations, such as credit issues
When lenders experience delays obtaining verifications, such as your credit history from the credit bureaus, rental records from a landlord or employment information
Stricter regulations that require lenders to accommodate more compliance checks
While some delays may be beyond your control, here are a few tips that could help expedite the loan process:
Gather as many financial documents as possible before applying for the loan
Do not omit any required information
Respond promptly to your lender’s questions or documentation requests
Stay in frequent communication with your lender and address any issues quickly
Try to avoid making any major financial changes during this time, such as changing jobs or taking on significant new debt
Get a List of All Paperwork Needed
Submitting documents is a requisite part of the home loan application and approval process. All lenders require certain documents to verify your financial and personal information to assess your creditworthiness and ability to repay your loan. The documentation will give your lender insight into your financial situation, income, assets and liabilities. While you should check with your lender to see what specific documentation they will need, at a minimum, lenders will typically ask for:
Employment verification, including pay stubs
Social Security, pension or retirement income, if retired
Evidence of any other forms of income, such as child support
Tax returns for the past two years
Bank statements for your checking and savings accounts
Statements for other assets like your investment and retirement accounts
Student loan details
Information on any debt you have, such as auto or student loans
Gift letter, if family members are contributing funds toward the down payment
Rental payment history, if applicable
There’s a lot that goes into choosing the right lender. But finding one that offers a loan that aligns with your financial goals and provides a positive borrowing experience is essential. With some due diligence, you’ll find a reputable lender to guide and support you through the mortgage process as you make the move toward your next home.
As a top national mortgage lender, Pennymac has loan experts who specialize in purchase loans to help homebuyers through the mortgage process and ensure a seamless home-buying experience. Plus, they can help you get BuyerReady Certified so you’ll know how exactly much money you can borrow and be more confident when looking for a home. Interested to learn more about what Pennymac can do for you? Get a custom instant rate quote today.
Contrary to popular belief, starting an investment portfolio doesn’t require a large sum of money. In fact, with just $500 or less, you can easily kickstart your investment journey in the stock market.
12 Best Ways to Invest $500
If you’re looking for other ways to invest, but don’t have much cash, here are twelve of the best ways to invest $500 or less.
1. Micro-Investing
With micro-investing, even those with limited disposable income can join the game, starting with as little as $5. Ideal for college students or novice investors, there are a multitude of micro-investing apps available, many requiring an initial investment of $500 or less.
These user-friendly platforms offer a simple way to dip your toes into the investment world. Check out these five top micro-investing apps to start your journey today.
Robinhood
If you’re a beginner investor, Robinhood is an excellent choice. Unlike many other platforms, Robinhood has no minimum balance requirement and doesn’t charge any fees for trading.
It is also very easy to use the app. Additionally, Robinhood stands out among micro-investing platforms, offering the ability to trade in a wide range of assets, including full stocks, mutual funds, options, and cryptocurrencies.
To find out more, read our comprehensive review of Robinhood.
Stash
Stash accommodates the needs of a diverse range of investors. Upon signing up, you’ll take a quick survey to assess your risk tolerance, allowing you to determine the amount and frequency of your investments.
With Stash, you also have the power to select the industries and companies you want to invest in. For example, if you’re passionate about sustainability, you can easily choose to invest only in eco-friendly organizations.
Acorns
Investing made simple and affordable – that’s what Acorns offers. Signing up is a breeze, with no minimum balance required, and the low monthly fee of just $1
Once you’ve joined, simply connect your Acorns account to your credit or debit card. Every time you make a purchase, the app will round up the amount to the nearest dollar and automatically invest that change once it reaches $5.
Betterment
For those who want to be hands-on with their micro-investing, Betterment may be the answer. The platform takes care of the investing for you, while also giving you the option to work with a financial advisor and have a say in your investment portfolio.
Signing up is easy, with no minimum balance required for its basic plan. However, it’s important to note that Betterment charges a 0.25% monthly fee on your investments.
2. Exchange-Traded Funds (ETFs), Mutual Funds, or Index Funds
For those looking to invest $500, exchange-traded funds (ETFs), mutual funds, and index funds are all great options. ETFs offer a basket of securities that can be exchanged on the market, just like a stock. You can find plenty of online brokers that offer a wide selection of commission-free ETFs.
Mutual funds are managed by a professional broker and aim to beat a given stock market index, while index funds are designed to match the index and grow from there.
All three types of investments have low expense ratios, low fees and commissions, and offer broad, diversified exposure to the stock market.
See also: ETFs vs. Mutual Funds: What’s the Difference?
3. Buy Bitcoin
For some, investing in cryptocurrency may be too risky and volatile for their taste. However, Bitcoin has had an average growth of over 100% per year for the past 12 years! In fact, if you had invested $500 in Bitcoin five years ago, you’d have approximately $90,000 today.
If you’re interested in getting into crypto, Coinbase is a great place to start. They’ll give you $10 in free Bitcoin when you buy or sell $100 or more in crypto. Coinbase also offers ways for you to earn up to $32 worth of crypto for free.
See also: 5 Best Ways to Buy Bitcoin With a Bank Account
4. Open a Roth IRA
It’s never too late to start planning for retirement, and a Roth IRA might be the way to go. With this retirement savings plan, you contribute after-tax money to an investment account, which you can then withdraw tax-free when you reach retirement age.
However, there are a few things to keep in mind before opening a Roth IRA. An individual retirement account (IRA) is meant for long-term savings and withdrawing the money before you turn 59 and a half may result in penalties. If you anticipate needing to access the funds sooner, consider exploring alternative options.
5. Start an Online Business
If you’re looking for an unconventional way to invest your money, why not try starting an online business? Traditional brick-and-mortar businesses require a lot of capital to get up and running, but the same cannot be said for an online business.
You won’t need office space, a warehouse, or expensive equipment. In all likelihood, you won’t need to invest $500. It will cost much less than that. Here are some popular online business ideas:
Starting and monetizing a blog
Selling things on eBay or Craig’s List
Selling services like freelancing writing, editing, or graphic design
Opening an e-commerce store
Buying items and flipping them for profit
6. Use Robo-Advisors
Investing your money with a robo-advisor might be a smart choice. A robo-advisor is a user-friendly online investment platform that creates a tailored and diversified portfolio for you based on your answers to a questionnaire.
Although robo-advisors have limited services compared to working with a financial advisor and do not offer personalized advice, they have low fees and make investing with as little as $500 in the stock market accessible. Additionally, robo-advisors offer multiple investment options, including:
Roth IRAs
Traditional IRAs
Solo 401(k)s
Taxable accounts
7. Open a High-Interest Savings Account
If you’re still exploring your options and not ready to invest yet, consider opening a high-yield savings account. The best high-interest savings accounts currently pay about 3% to 5% in interest.
While the returns may not match the potential gains of the stock market, having a savings account serves as a solid backup plan and provides peace of mind for the future. Don’t let your funds go to waste – take advantage of this secure and profitable opportunity.
8. Open a High-Yield CD
A high-yield certificate of deposit (CD) is a low-risk investment option that offers a higher rate of return compared to traditional savings accounts. CDs work by allowing you to deposit a fixed amount of money for a set period of time, typically ranging from a few months to several years. In exchange for this commitment, the financial institution offering the CD agrees to pay you a higher rate of interest compared to traditional savings accounts.
Opening a high-yield CD with $500 or less is a straightforward process that can be done through a bank or credit union. You simply choose the term length and deposit amount that works best for you, and the institution takes care of the rest. As your money grows over time, you’ll earn a higher return on your investment compared to traditional savings accounts.
Just remember that CDs typically have early withdrawal penalties. So, make sure you’re comfortable with the term length and the amount you’re depositing before opening an account.
9. Invest in Real Estate Crowdfunding
Investing in real estate is not limited to traditional methods, even with just $500. A prime example is real estate crowdfunding via platforms like Fundrise.
Fundrise provides investment opportunities in both commercial and residential properties with a minimum investment of just $10. This eliminates the requirement for a large capital investment, making real estate investment accessible to a wider range of individuals.
Check out our in-depth Fundrise review.
10. Pay Down Your Debt
Reducing debt is a sound investment for securing your future, particularly concerning high-interest credit card debt. The Federal Reserve reveals that the average credit card interest rate can be as much as 15% or higher, with a low credit score only driving the APR to even more astronomical heights.
Think about it, if your APR is at its highest, you may be shelling out hundreds of dollars each month just in interest charges. But by focusing your efforts on paying down your debt, you stand to save yourself not just money, but countless headaches in the coming year. With the possibility of freeing up thousands of dollars, it’s an investment worth making.
11. Try Peer-to-Peer (P2P) Lending
Peer-to-peer lending offers a unique twist on conventional lending methods. Rather than seeking loans from traditional banks, borrowers turn to platforms such as Prosper, connecting with investors like yourself.
By participating in P2P lending, you have the opportunity to generate a steady monthly income by lending funds to individuals or businesses. The added bonus? The money you earn is deposited directly into your account, providing a convenient and hands-off approach to investing.
12. Invest in Your Financial Education
Investing in your financial literacy may be the most valuable investment you’ll ever make. For a nominal fee of just $5 to $15, you can access top-notch personal finance books or audiobooks that can transform your financial future.
Take “Rich Dad Poor Dad” for example, available on Amazon for as low as $6.82 for the Kindle edition or $11.36 for the paperback. And if audiobooks are more your style, a month of Audible membership costs only $14.95.
You can expand your knowledge on real estate investing, stock investment strategies, and fundamental money management skills to help you get out of debt and attain financial independence.
And if reading isn’t your preferred method of learning, there are plenty of affordable online courses available. With so many options, it’s remarkable how much financial education you can gain for less than $500.
Frequently Asked Questions
What is the best way to invest $500?
The best way to invest $500 depends entirely on your personal financial status and objectives. If you’re just starting out investing, consider investing in a low-cost and diversified mutual fund or ETF. These investment vehicles offer the advantage of spreading your funds across a range of stocks and bonds, mitigating the risk associated with any single investment.
Other options to ponder include setting up a Roth IRA or investing in a high-yield savings account. The choice that works best for you ultimately hinges on your risk appetite, investment timeline, and financial aspirations.
Is it possible to invest $500 in stocks?
Absolutely! With just $500, you can venture into the world of stock investing. Micro-investing apps provide the opportunity for you to invest in individual stocks or opt for an ETF that follows a particular index.
It’s crucial to conduct thorough research and seek the guidance of a financial advisor to determine the best investment strategy that aligns with your unique circumstances.
Is it worth investing $500 in a robo-advisor?
Investing your $500 via a robo-advisor can be a wise decision. These digital platforms leverage algorithms to manage your investments, offering a more passive investment strategy.
Furthermore, robo-advisors tend to be more economical than human financial advisors, making them a fantastic choice for individuals seeking to initiate their investment journey.
What are the risks of investing $500?
Starting your investment journey with just $500 can be a smart move. However, it’s important to keep in mind the inherent dangers that come with investing.
Remember, no investment is entirely risk-free and there’s always a chance of losing your funds. To ensure you make an informed decision, conduct thorough research and consult a financial expert who can guide you towards the best option suited for you.
Bottom Line
We hope that this article has demonstrated to you that investing can be simple and accessible, even with a limited budget. You can start investing immediately with a modest amount of funds. If you’re not quite ready to invest, consider paying off high-interest credit card debt, increasing your income, and establishing an emergency fund.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
There are many ways to manage your money, but there is always one key piece that you need no matter how much or little you earn. The best way to get ahead in life and work when it comes down to personal finances:
Planning.
Yes, a little bit of planning will make sure your bills are paid.
If you are looking to save money and make more, then this article is for you.
We have broken down five effective bill calendar strategies that can help boost your finances. With each strategy comes an eye-opening fact about how to make paying bills easier.
Use these tactics in order to get ahead of the game and be one step closer to financial freedom.x
The term “bill calendar” may seem like a jargon-y thing stuck in the past, but it’s actually an effective way to keep track of your finances and budget.
That being said, not all bill calendars are created equal. Make sure you choose one that meets your needs or is most suitable for what you’re looking for so you can get the maximum benefit from this tool!
What is a Bill Pay Calendar?
A bill pay calendar is a financial tool that enables an individual to manage, track, and forecast bills.
It is useful for those who have multiple bills each month or need to plan ahead for upcoming expenses.
This is one of the files you can find in our budget binder.
A bill pay calendar is typically used in conjunction with a budget planner to help manage financial goals and stay on track towards financial success.
This simple tool helps you manage your finances better. The useful trick is to see where all of our bills fall in relation to when we make money, so it’s easy enough for us to plan out what we need and don’t need.
The strategies are effective because they allow you a visual way to see your bills and expenses. Thus, making bill-paying much easier than ever before.
Why a Monthly Bill Calendar Works
A monthly bill calendar is a great way to keep track of upcoming bills and make sure you’re not missing any.
Also, it is helpful if you want to plan ahead for certain events like birthdays, holidays, or special occasions. Just to make sure you set aside enough money.
If you’re struggling to keep up with your bills, a monthly bill calendar can help.
It will remind you when it’s time to pay them and give you the proper schedule for future payments so that they don’t get delayed.
A monthly bill calendar is an effective way of organizing finances because it provides reminders about what needs to be paid on which day. This helps to ensure debts do not accumulate over time without being noticed until they become unmanageable.
Other benefits of a bill paying calendar:
Keeps you focused.
Motivation to improve your finances.
Visually track your progress.
Simple Bill Calendar Strategies
The financial benefits of a proper bill calendar include increased productivity, improved cash flow management, and long-term savings opportunities all brought about by thoughtful organization with an emphasis on efficiency in priority setting.
Just like with any time management idea, you must actually implement the system for it to work.
All of these strategies will give you a chance to get on top of your finances and start working towards getting out from under that large, unmanageable debt.
Five effective bill calendar strategies that will boost your finances include:
1. Use Budget Binder
Personally, I have found that those who have a printable budget binder stick to their budgets long term vs those who try to manage their finances digitally. That doesn’t mean you can use your favorite budgeting app (I love Quicken). It just means you are writing out key financial information for your reference or if someone needs to pay your bills.
If you’re looking for a way to organize your bills and keep track of when they are due, the bill calendar is an effective tool. By putting all of your bills on one page, it makes it easier to coordinate payments with your employer or other creditors.
The template allows you to add in expected paydays so that you can easily plan ahead.
2. Plan Reoccuring Time to Review
Not many people jump at the excitement of paying bills. Normally, it is a task that we put off until we just cannot wait any longer.
For me, I review our bills every two weeks. That is what I have found to work best for us.
To make the time more plausible, many couples will celebrate bill paying with a special treat or date night.
Do what you need to do.
Just make sure you review your bill payment calendar on a regular basis.
3. Avoid Paying Bills Late
Paying your bills late will incur additional fees; those penalities in extra fees and interest are just not worth it. In addition, your credit score will take a hit with each late payment.
By consistently paying your bills late, you will have access to less cash. On the flip side, you could be saving money by paying your bills on time.
To avoid paying bills late, many people have set up automatic payments. This can be done by setting up a direct debit or Automatic Clearing House (ACH) payment.
When looking at your bill payments calendar, decide what bills are going to be paid by what paycheck. Make a plan for your money.
That will help you avoid paying bills late.
4. Keep Track of Bill Due Dates
One of the most important tasks that households have is paying their bills on time. However, it can be difficult for those without a lot of organizational skills to keep track of bill due dates and upcoming bills.
One way to keep track of bill due dates is by using a calendar that has notes on each day, as well as other information such as what’s coming up in the near future.
You may want to color-code your bills by paycheck. Another option is to track your payments with colors, such as red for debt, green for paydays, etc.
Either way, you want to notate when you paid a bill and the manner you paid it.
5. Digital or Paper
Now, for the endless debate… do you use a digital or paper system? Or do you need to use both for double reminders?
Regardless of what you decide, you should use a monthly calendar printable template to track what needs to be done.
Here are some options on how to organize your bill calendar.
Keep your monthly bill calendar in your budget binder.
Print out the month’s schedule and hang it up on your refrigerator or wall for easy reference. This is an important habit because you’ll never miss due dates if you don’t have to worry about finding paper calendars or trying to remember which bills are due when.
Create a post-it note with the day’s due date on it and stick it to your monitor so you don’t forget.
Use Google Calendar or iCalendar, which are both free online calendars that can be accessed from any computer or mobile device. This allows you easy access when away from home but still keeps things relatively simple as well since these options only.
Many budget apps have cost-effective solutions with tons of cool features and helpful tools that will make your life easier.
The end goal is to keep things simple, allowing you more time for other tasks.
Bill Calendar Sample
Here is a bill calendar example.
You would personalize this for your needs and your expenses.
Remember, many times it is helpful for people to visualize how bills will be paid and when.
This helps with cash flow planning.
Bill Calendar Template
It is important to keep track of your bills and how much you have to pay each month. The best way to do this is with a bill calendar template that has columns for your monthly expenses, which include rent, utilities, phone service, groceries, etc.
Some effective strategies for keeping tabs on what’s due when are:
– Create a list of all the upcoming payments in order from high priority (such as a mortgage) to low priority (such as grocery store), and then put them in your calendar as they come due.
– Create a list of all the upcoming bills, rent from highest to lowest priority, and then put them in your calendar as they come due.
To make the most of your budget, you need to know where every dollar is going.
A bill calendar template will help you plan and prioritize which bills are due when so that money can be properly allocated for important expenses without letting any slip through the cracks or being overspent on things like entertainment.
FREE Printable Bill Calendar
A bill calendar is a type of monthly planner used to keep track of bills that are due. This free bill calendar printable can be downloaded and used personally.
Having a visual reminder of what’s coming up helps me stay focused and watch my spending because it gives me an idea at a glance of how much money comes out each month.
It also helps remind me when certain events occur such as income tax or mortgage payments.
Download your printable monthly bill calendar.(This is a perk for our readers who subscribe to our email list.)
A bill payment calendar is a helpful tool for keeping track of when your bills are due.
Bill Calendar App
A bill payment app is a form of software that helps people pay their bills online. It offers a way to manage the process and avoid any potential late fees.
Bill payment apps are useful for many individuals.
They can help you keep track of your monthly bills without having to use a paper calendar, which is typically cluttered with social events and day-to-day tasks.
Furthermore, bill month calendars organize recurring payments that occur on the same date each month so that they don’t get charged twice or renew prematurely before you know it!
Here are some great options:
How Will a Bill Paying Calendar Help You?
All in all, a bill calendar is another tool in the personal finance toolkit.
This bill organizer calendar is an important part of your managing money.
You can choose a checklist style or a monthly layout.
Bill calendars are a simple and effective way to keep track of your bills and expenses.
They can help you save money and come up with strategies to boost your finances. They come in many different types and are often used for budgeting purposes.
Many people use a bill calendar in conjunction with a budget binder with envelopes as well.
How do you see a bill calendar improving your finances?
From all of the free and paid budgeting apps, here are our top budgeting apps to check out!
This section may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. Please read the full disclosure below.
Empower Personal Wealth, LLC (“EPW”) compensates Money Bliss for new leads. Money Bliss is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.
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Settling into your dream home should be a time of joy, not stress over unexpected appliance or system failures. Whether it’s an air conditioner failing in the heat of summer or a dishwasher flooding your kitchen, these are real challenges homeowners often face.
A home warranty acts as a safeguard against the financial and emotional strain of such breakdowns, covering the repair or replacement costs of major systems and appliances due to wear and tear. More than just a policy, a home warranty serves as a protective friend for your home, preventing unexpected issues from draining your savings.
This guide explores the essentials of home warranties, including coverage details and the benefits of securing one. Whether you’re moving into your first home or aiming to protect your existing one, understanding the importance of a home warranty is key to ensuring peace of mind and financial stability.
How do home warranties work?
Home warranty plans provide a form of protection for homeowners by covering the costs associated with repairing or replacing major appliances and systems within your home, such as heating, cooling, electrical, and plumbing systems, as well as refrigerators, ovens, and washers. These plans are especially beneficial for mitigating unexpected expenses that arise from normal wear and tear.
When you purchase a home warranty, you have the flexibility to tailor your plan to fit your specific needs. This means you can choose to cover just your major appliances, systems, or a combination of both, depending on what you deem most critical to your home’s functionality and comfort.
The cost of your home warranty, known as the premium, will vary based on the scope of coverage you select. Plans that offer more comprehensive coverage for multiple systems and appliances will generally have higher premiums than more basic plans.
In addition to the annual or monthly premium, home warranty plans typically require a service fee or deductible to be paid each time a repair person is dispatched to your home to address a covered issue. This fee is predetermined in your home warranty contract and remains constant, regardless of the actual cost of the repair or replacement, providing a predictable expense for homeowners.
Home Warranty Coverage: What’s Included and What’s Not
When it comes to home warranties, knowing what is covered and what isn’t can save you a lot of time and prevent frustration when you need to use your policy. Home warranties are designed to offer homeowners peace of mind by covering the costs associated with repairing or replacing major systems and appliances due to wear and tear. However, coverage can vary significantly from one plan to another, making it crucial to understand the specifics of your policy.
What does a home warranty cover?
Most home warranty plans offer coverage for a core set of systems and appliances that are essential for daily living. This usually includes:
Heating and cooling systems: Central air conditioning and heating systems, including furnaces, are often covered because they’re crucial for maintaining a comfortable home environment.
Kitchen appliances: Built-in microwaves, dishwashers, refrigerators, ranges, and ovens are usually covered. These appliances are considered essential for food storage and preparation.
Electrical and plumbing systems: Comprehensive coverage typically extends to the guts of your home – the electrical wiring and plumbing systems that make modern living possible.
Water heaters: Given their importance in providing hot water for bathing, cleaning, and cooking, water heaters are commonly included in home warranty plans.
What’s Often Excluded
While home warranties cover many systems and appliances, certain items and scenarios are typically not covered:
Pre-existing conditions: Issues that were present before the start of the warranty period are usually not covered.
Improper installation or maintenance: Appliances or systems that haven’t been installed correctly, or that have been neglected, might not be eligible for coverage.
Cosmetic damage: Aesthetic issues that don’t affect the functionality of an appliance or system are generally excluded.
Structural components: Items like your home’s foundation, walls, and roof are not covered by a standard home warranty and are typically addressed by homeowners insurance policies.
Unusual Coverage Options
Some home warranty providers offer unique coverage options that can be added to your plan for an additional fee. These might include:
Pool and spa equipment: Coverage for pool pumps and heaters can be added, perfect for homeowners who enjoy their backyard oasis.
Second refrigerator or wine cooler: For those with multiple refrigerators or specialized cooling appliances, additional coverage is available.
Septic systems and well pumps: Homes with these features can often add specific coverage to address repairs or replacements.
Making Sense of Your Coverage
To truly understand what your home warranty covers, take the time to read your policy’s fine print. Look for a clear breakdown of covered items, and pay attention to any limits on coverage amounts or the number of claims you can file within a certain period. If your policy includes a comparison chart or sidebar summarizing coverage, use it to quickly reference what’s included and what’s not.
Remember, the goal of a home warranty is to protect you from unexpected repair costs for essential home systems and appliances. By thoroughly understanding your coverage, you can make informed decisions about your home maintenance and prepare for any issues that might arise.
Evaluating the Cost of Home Warranties
When considering a home warranty, it’s essential to weigh the cost against the potential savings and peace of mind it offers. A home warranty isn’t just another expense; it’s a strategic investment in protecting your home and budget from unexpected repair or replacement costs. Let’s break down the cost of home warranties and compare it to the potential out-of-pocket expenses without one.
The Annual Cost of Home Warranties
The price of a home warranty can vary widely depending on several factors, including the coverage scope, your home’s size, and its location. On average, homeowners can expect to pay between $300 and $600 per year for a home warranty plan. This fee can be paid upfront annually or in monthly installments, making it a flexible addition to your financial planning.
Potential Savings with a Home Warranty
To truly appreciate the value of a home warranty, consider the cost of repairing or replacing major systems and appliances without one. Here are a few examples:
Air conditioning system repair/replacement: Without a warranty, fixing or replacing an AC unit can cost anywhere from $150 for minor repairs to over $5,000 for a full replacement.
Refrigerator repair/replacement: Repairing a fridge can cost between $200 to $400, while buying a new one can set you back $1,000 or more.
Plumbing issues: Addressing plumbing problems can easily cost hundreds to thousands of dollars, depending on the severity.
In contrast, with a home warranty, you would typically only be responsible for a service call fee ranging from $75 to $125 each time you report an issue, regardless of the actual cost of the repair or replacement.
Variability in Cost
The cost of a home warranty is influenced by several factors:
Home size: Larger homes may have higher warranty costs due to the greater number and size of systems and appliances.
Location: Pricing can vary by state or region, reflecting the local cost of living and the availability of service technicians.
Age of home: Older homes might incur higher home warranty costs due to the increased likelihood of systems and appliances failing.
Making an Informed Decision
When evaluating whether a home warranty is worth the investment for you, consider your financial ability to handle unexpected repairs or replacements. If a single significant repair could strain your budget, a home warranty could offer valuable protection and peace of mind.
Additionally, think about the age and condition of your home’s systems and appliances. Newer homes with newer appliances might not benefit immediately from a home warranty, but as systems begin to age, the potential for savings increases.
Ultimately, a home warranty can be a wise investment, offering significant savings and convenience compared to the potential high costs of repairs and replacements. By carefully considering your home’s specific needs and circumstances, you can decide if a home warranty is the right financial safety net for you.
How to Choose the Right Home Warranty Company
Selecting the ideal home warranty company requires careful consideration of several key factors to ensure you get the best protection for your home. Here’s what to evaluate to make an informed choice:
Assess the Claims Process
The efficiency and ease of the claims process are crucial. Inquire about how to initiate a claim with the home warranty company and the average time it takes to get a response. A reliable provider should offer 24/7 support to assist you whenever issues arise. Ensure the company has a reputation for a straightforward claims process, minimizing stress and inconvenience during urgent situations.
Examine Coverage and Exclusions
Understanding what is covered by the home warranty plan is vital. Check if the home warranty provider covers all essential home systems and appliances, or if you’ll need additional coverage for comprehensive protection. Be wary of exclusions that could affect key components of your home, and ask about options for supplemental coverage if necessary.
Compare Costs and Fees
Evaluate the affordability of the home warranty plan by comparing the cost of premiums and service fees with other providers. A competitive monthly or annual premium, along with reasonable service call fees, indicates a good value proposition. However, the lowest price isn’t always the best choice; balance cost-effectiveness with the extent of coverage and service quality.
Research the Provider’s Reputation
The credibility and reliability of the home warranty company are paramount. Look for accreditation by the Better Business Bureau (BBB) and review their ratings and customer feedback.
Checking with your state’s insurance commissioner can provide additional insights into the provider’s standing and history. Avoid companies with a track record of evasive behavior or those known for disappearing when a claim is filed.
Read the Fine Print
Before making your final decision, thoroughly review the contract. Confirm that the plan’s terms, including coverage details and limitations, match what was advertised or quoted. Understanding the fine print can save you from surprises down the line.
How to File a Home Warranty Claim
To ensure your home warranty claim is processed efficiently, follow these steps:
Review your coverage: Check your home warranty contract to confirm the issue is covered, noting any exclusions or limitations.
Initiate the claim: Contact your home warranty provider as soon as possible using their provided channels, such as online portals, email, or phone.
Provide details: Offer clear information about the problem, including model numbers and a description of the issue, to expedite the repair process.
Schedule the service: The company will arrange for a technician to assess and address the issue. Communicate any scheduling preferences you have.
Prepare for the visit: Ensure the area around the appliance or system is accessible for the technician.
Understand the outcome: After evaluation, the technician will repair or, if necessary, recommend replacement based on your warranty’s terms.
Tips for a Smooth Claims Process
Keep all warranty documents and maintenance records for reference.
Follow up with the company if updates on your claim are delayed.
Be aware of the service fee required for each claim to avoid surprises.
Bottom Line
A home warranty, combined with regular upkeep, represents a smart investment for safeguarding your home and budget. It offers peace of mind by covering repair or replacement costs of major home systems and appliances, potentially saving you substantial amounts in the face of unforeseen breakdowns.
While it requires an upfront cost, the long-term savings and convenience can far outweigh initial expenses, making it a worthwhile consideration for homeowners looking to minimize financial surprises.
Frequently Asked Questions
How long does a home warranty last?
When you choose home warranty coverage, it will come with a service contract for a set period of time. In most cases, it lasts for one year. You’ll then be able to renew your plan annually to keep your coverage intact. Cancellation policies will vary depending on which home warranty company you choose to work with.
Is a home warranty the same as home insurance?
No, they serve different purposes. Home insurance covers damage to your property from unforeseen events, while a home warranty covers repairs and replacements of major systems and appliances due to normal wear and tear.
How do I purchase a home warranty?
Research and compare different home warranty providers to find one that suits your needs. Reputable home warranty companies include Choice Home Warranty and Advanced Home Warranty. You can view a comprehensive list of top home warranty companies here.
Once you’ve chosen a provider, apply for coverage and pay the fee once your application is approved. Coverage typically lasts for one year and can be renewed annually.
Do home warranties cover all repair costs?
Home warranties usually require you to pay a service fee for each repair visit, but this fee is often significantly lower than the full cost of repairs. The warranty covers the rest, up to your contract’s limits.
Isn’t it cheaper to just use homeowners insurance?
Not necessarily. Your homeowners insurance policy covers damages from events like natural disasters, theft, and fire, but it doesn’t cover the cost of repairing or replacing appliances and systems due to wear and tear. That’s where a home warranty comes in, covering those gaps.
Is a home warranty part of closing costs?
A home warranty can be included in your closing costs if you choose to purchase one when buying a home. Sometimes, the seller or your real estate agent can negotiate a one-year home warranty into the deal.
Can I buy a home warranty after closing?
Yes, you can purchase a home warranty at any time, not just when buying a home. However, pre-existing conditions may not be covered, so it’s advantageous to get a warranty as soon as possible.
Are home warranties transferable?
Yes, most home warranty plans can be transferred to new homeowners if you sell your home, making your property more attractive to potential buyers.
What should I do if my claim is denied?
If your home warranty claim is denied, review the reason for denial and check your contract for coverage details. You can often appeal the decision by providing additional information or clarification about the issue.
How often can I use my home warranty?
There’s generally no limit to how many times you can use your home warranty within the contract period, but there may be limits on the amount covered for certain items or systems. Check your contract for details.
Can I choose my own repair technician?
Most home warranty companies require you to use their network of approved service providers. However, some plans may allow you to choose your own technician, subject to approval and reimbursement policies.
What happens if a covered item can’t be repaired?
If a covered item cannot be repaired, your home warranty plan typically covers its replacement. The specifics, such as whether you’ll receive a new model or the depreciated value in cash, depend on your contract’s terms.
Are home warranties tax-deductible?
No, home warranties are generally not tax-deductible for your primary residence. However, if you use part of your home for business, like a home office, or if you rent out a portion, you may be able to deduct a fraction of the home warranty cost. This fraction corresponds to the percentage of your home used for business purposes.
Looking for the Best Home Warranty Company?
Check out our reviews of the top home warranty companies.
Refinancing could make financial sense if you want to lower your interest rate, change your loan term, eliminate PMI or switch to a fixed-rate mortgage.
You can also refinance to tap into your home equity and consolidate high-interest debt or fund home renovations that increase your property value.
Refinancing is not always a wise financial decision — you’ll want to assess the pros and cons of doing so and calculate the break-even point before applying.
Many choose to refinance a mortgage to lower monthly payments, pay off the loan faster or tap home equity for cash. Homeowners usually think of refinancing when interest rates are sinking or stable — and the current environment has been anything but. Still, swapping your old home loan for a new one could make financial sense for you. Read on to learn when to refinance a mortgage and when it might be better to consider other options.
When should you refinance your home?
When deciding if refinancing is right for you, consider current mortgage rates. The math isn’t as simple as comparing the interest rate you locked in when you were approved for your mortgage versus the rate you can qualify for now. There are several kinds of refinance options out there, each with unique pros and cons. Review this trio of factors from Bill Packer, chief operating officer of reverse mortgage lender Longbridge Financial, LLC, as you consider each:
The after-tax monthly savings (new payment compared to old payment, after any tax-favored treatment)
The amount of time that you intend to be in the home
The cost of obtaining the new mortgage
Once you know these three things, you can calculate your return and see if it is positive, says Packer.
Reasons to refinance your mortgage
Some of the best reasons to refinance your mortgage include saving money on monthly payments and paying off your mortgage faster. More specifically, it’s often a good idea to refinance if you can lower your interest rate by one-half to three-quarters of a percentage point, and if you plan to stay in your home long enough to recoup the refinance closing costs.
Lower your interest rate
If interest rates have dropped since you first obtained your mortgage, a rate-and-term refinance can provide you with a lower rate. You might also qualify for a better interest rate if your credit score has improved since taking out your current loan.
The best mortgage rates and terms go to those with the best credit (a score of at least 740), so check your credit report to understand your risk profile. If you’re carrying a lot of credit card debt or you’ve missed a payment recently, you might look like a riskier borrower.
Consolidate high-interest debt
You can use a cash-out refinance to tap your home’s equity and lower or pay off high-interest debt. Whether it’s credit card balances or other forms of debt that are costing you a fortune, using the funds from a cash-out refinance could save you several thousands of dollars.
Eliminate private mortgage insurance
If your home’s value has increased, you could refinance to get out of paying private mortgage insurance (PMI) on conventional loans or mortgage insurance premiums (MIP) on FHA loans. Most commercial home loan products require PMI until you reach 20 percent in equity. MIP on standard modern FHA loans (post-2013) stays in effect for the life of your loan, unless your down payment cleared a certain amount. If you paid at least 10 percent down, MIP goes away after 11 years of on-time payments.
You don’t plan to move soon
Refinancing could also be sensible if you qualify for more competitive loan terms and are planning to stay put for some time to take advantage of the cost-savings. However, it might not be smart to refinance if you plan to move in the near future, which gives you little time to recoup the costs associated with taking out a new loan.
Change your loan term
If you’re struggling to make your monthly mortgage payments, you can refinance to get a longer loan term, which means a smaller monthly payment. However, overall the loan will be more costly since you will be paying interest for a longer period.
Pay for home renovations
Home renovations can be costly, but if they increase your home’s value, pulling out funds through a cash-out refinance could be a worthwhile investment.
When not to refinance
It might not be smart to refinance for any of these reasons:
Save money for a new home: Refinancing isn’t free; you’ll pay between 2 percent and 5 percent of the loan’s principal in closing costs, and it can take a few years to break even. The costs of refinancing could outweigh the benefits if you’re planning to move within a few years.
Splurge on luxury purchases: Tapping into your home equity for luxury purchases is similar to using a credit card or personal loan, despite the lower interest rate. Both can be costly over time and defaulting on your mortgage if you can’t make payments also means you could lose your home.
Move into a longer-term loan: If you’re already at least halfway through the loan term, refinancing generally isn’t a good idea. You’ve already reached the point where more of your payment is going to principal than interest; refinancing now means you’ll restart the clock on your loan and pay more toward interest again.
Pay off your home faster if you haven’t met other financial goals: You could shortchange yourself by using funds that could otherwise be spent on more pressing financial goals. These include reducing high-interest debt, investing to build wealth, boosting your retirement contributions or increasing college fund savings.
You recently bought your home: Refinancing within a year isn’t advisable. In most instances, the lender derives the greatest benefit — not the borrower.
How much does it cost to refinance?
Refinancing may save you money in the long run, but it comes with closing costs you’ll need to be prepared to pay. The cost of refinancing your mortgage will depend on your property’s location, which company is servicing your loan and which closing cost fees apply to your specific situation. For example, you might need to pay an appraisal fee, an origination fee and an attorney fee.
Rather than pay all that money upfront, many lenders allow you to roll the closing costs into your principal balance and finance them as part of the loan. Keep in mind, though, that adding those costs to the loan only increases the total amount that will accrue interest, ultimately costing you more.
How much can I save by refinancing?
The amount you can save by refinancing depends on several factors, including your closing costs. If you refinance to a $250,000 loan and the closing costs total 2 percent of that, for example, you’d owe $5,000 at closing.
You won’t begin to reap the benefits of a refinance until you reach the break-even point — when the amount that you save exceeds the amount you spent on closing costs. To determine the break-even point on your refinance, divide the closing costs by the amount you’ll save each month with your new payment.
Let’s say that refinancing will save you $150 per month, and the closing costs on the new loan are $4,000.
Mortgage Calculator
$4,000 / $150 = 26.6 months
So, if you were to close your new loan today, you’d officially break even just over two years and two months from now. If you live in the home for five years after refinancing, the savings really start to add up — $9,000 total.
You can use Bankrate’s refinance break-even calculator to figure out how long it will take for the cost of a mortgage refinance to pay for itself. If you think you might sell the home before your break-even point, refinancing might not be worth it.
Example: Deciding when to refinance a mortgage
Let’s say you took out a 30-year mortgage for $320,000 at a fixed interest rate of 6.23 percent. Your monthly payment would be $1,966. Over the life of that loan, you’d pay about $707,901, which includes $387,901 in interest.
Now say about 15 years into the loan, you’ve paid $86,551 toward the principal and $257,499 in interest and you want to refinance the remaining $233,449 of your principal balance with a new 15-year fixed-rate loan at 5.11 percent.
The new loan would trim your monthly mortgage payment to $1,859 per month, giving you an additional $107 of wiggle room in your monthly budget. Over the life of the loan, you’d pay $334,756, of which $101,307 would be interest. Add in the $344,050 in principal and interest you paid on the previous mortgage, and your total cost will be $678,806.
By refinancing, you’d not only lower your monthly payments — you’d see a long-term savings of about $30,000.
Current mortgage
Refinance
Monthly payment
$1,966
$1,859
Interest rate
6.23%
5.11%
Total payments
$707,901
$678,806
Savings
$0
$29,095
Is refinancing worth it?
Is refinancing a good idea? If it frees up money in your monthly budget or reduces the overall cost of the loan, refinancing can be well worth the work and money.
That said, there’s no one correct path to do it. You might want to switch from an adjustable-rate mortgage to a fixed-rate loan that has the same monthly payment, or you might want to shorten your loan’s term from 30 years to 15 years and save yourself a bundle in interest charges. You could also simply move from one 30-year mortgage to another 30-year mortgage with a lower rate.
Additionally, refinancing allows you to get rid of PMI after you have accumulated 20 percent equity in your home.
A cash-out refinance is another option that allows you to pull equity from your home. You can use the funds however you see fit, whether it’s to pay off credit card debt or cover the cost of renovations that will improve your home’s value.
To decide if you should refinance your mortgage, conduct a cost-benefit analysis to see if it’s right for you. Make sure you understand how each mortgage refinance option works to inform your decision.
Next steps on refinancing your mortgage
When you’re ready to move forward, start by shopping around to find lenders with refinance options that could work for you. Get quotes from three or more lenders and compare the figures to identify the most attractive loan offer.
Frequently asked questions on refinancing a mortgage
Refinancing a mortgage involves swapping out your current home loan for a new one, often with a different rate and term. The process is similar to when you initially purchased your home. Refer to Bankrate’s mortgage refinance guide to learn more.
How soon you can refinance a mortgage varies by the loan type. Some lenders require you to wait at least six months to refinance a conventional loan, particularly if you are seeking to refinance with the same lender, while others might let you refinance with no waiting period. Government-backed loans each have their own requirements, so check with your lender on waiting periods to refinance.
It depends on your mortgage product and financial situation. To decide if the time is right, conduct a cost-benefit analysis to learn when you’ll break-even. Consider using Bankrate’s mortgage refinance calculator to get an idea of potential cost-savings (or losses).
Whether you’re a first-time homebuyer or selling and moving into a new house, you will most likely need to take out a home loan to finance your purchase. But choosing a loan can be more complicated than simply picking one off a list — there are myriad considerations that go into selecting and getting approved for the right mortgage.
Military members and veterans can take out a VA loan, which offers advantages like 0% down and no minimum credit score requirement. Still, it’s important to look into the specifics of VA loans and cross-compare with conventional loans to determine the best option for you and whether you should shop around for the best mortgage lenders or the best VA lenders.
This guide will break down the ins and outs of VA and conventional loans, explain their differences and help VA-qualifying homebuyers decide what type of loan to choose.
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What is a conventional loan?
Conventional home loans are any type of mortgage not backed or insured by a government agency like the Federal Housing Administration or the Department of Veterans Affairs. They’re offered by private lenders like banks and mortgage companies, and they typically require a down payment between 3% and 20% of a home’s sale price.
Two government-sponsored enterprises (GSE), Fannie Mae and Freddie Mac, set the guidelines and requirements for conventional loans. Conventional loans will usually require a strong credit history and score — as well as a certain income and stable finances — for borrowers to qualify for competitive interest rates and terms. Borrowers may have more flexibility when it comes to property type and loan amounts compared to government-backed loans.
Types of conventional loans
There are several types of conventional home loans to consider, each with its own terms and requirements.
Conforming vs. non-conforming loans
Conforming home loans have lending criteria set by Fannie Mae and Freddie Mac. These guidelines can include factors like credit and income requirements, down payment minimum, debt-to-income ratios, and more.
Conforming loans usually have lower interest rates because lenders consider them lower risk for their strict standard lending criteria. GSEs set a maximum limit on conforming loans, which can vary depending on location.
Non-conforming loans don’t adhere to the criteria established by Fannie Mae and Freddie Mac. These loans have higher maximum loan limits than conforming loans, often making them necessary for larger loan amounts. For instance, “jumbo loans” are a common type of nonconforming loan for properties that exceed the maximums set by GSEs.
Interest rates are generally higher for non-conforming loans because they are riskier for lenders, who may also demand a bigger down payment than they would for a conforming loan. Eligibility for non-conforming loans can be more flexible and they’re often underwritten manually, which means an underwriter will evaluate your documents and verify whether you’re qualified to borrow.
Fixed-rate vs. adjustable-rate loans
When choosing a home loan, you’ll also have to decide between a fixed-rate loan or an adjustable-rate loan (ARM). Your selection will depend on your financial situation, risk tolerance, and how long you expect to live in the home you purchase.
A fixed-rate loan (aka fixed-rate mortgage) stays the same throughout the entire term, while an ARM’s interest rate can change at designated points of a loan’s term after an initial fixed-rate period. Fixed-rate loans offer more stability, which can help you plan out your expenses and budget more easily. When interest rates are low, they allow borrowers to lock in a favorable rate for the long term.
ARMs often have lower initial interest rates, which means your monthly payments will also be lower during the fixed-rate period. However, interest rate adjustments are unpredictable, and those payments may increase, resulting in higher housing costs.
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VA loans explained
VA loans are specifically designed to provide active-duty military, veterans and eligible spouses assistance in purchasing or refinancing a home. They’re backed by the U.S. Department of Veterans Affairs and offer various benefits, but you have to meet specific service requirements and provide a Certificate of Eligibility from the VA.
Key differences between a VA loan vs a conventional loan
There are a few advantages to VA loans, like a $0 down payment and competitive interest rates for eligible veterans and military personnel. While conventional loans are more widely available, you normally have to pay money down and meet more stringent criteria.
Loan eligibility requirements
Qualifying for a VA loan is primarily tied to your military service record and status. Active-duty service members, honorably discharged veterans, National Guard and Reserve members who meet service requirements and certain surviving spouses are typically eligible.
You will also need a Certificate of Eligibility from the VA as proof of your service. VA loans tend to be more flexible than conventional loans regarding credit requirements, but lenders can still look into your credit history and income to determine whether you can afford the loan you’re applying for.
The home you buy with a VA loan has to meet the VA’s standards for safety and habitability, and it must be your primary residence.
Conventional loan requirements vary but are typically more strict than government-backed loans. You will usually need a credit score of at least 700 to get the best interest rates. The stronger your credit history, the more likely you are to qualify — be prepared to provide documents that show proof of income, bank statements and more to prove financial stability.
You’ll also need to meet property standards for conventional loans and pay for an appraisal to determine the property’s condition and value.
Loan closing costs and fees
VA loans require a funding fee in most cases, a one-time payment that depends on factors like service status and whether you used a VA loan in the past. The amount of your fee depends on the amount of your loan and the type of loan you get.
Conventional loan closing costs also depend on the type of loan you get, your loan amount and where you live. Closing costs typically vary between 3% and 6% of your loan amount and can include appraisal fees, attorney fees and processing fees you pay your lender to process your loan.
Down payment requirements
Minimum requirements for conventional loan down payments usually start between 3% and 5% of a home’s sale price, though paying 20% is considered ideal by many lenders and can reduce the cost of your monthly mortgage payment.
VA loans do not require any down payment, which can make homeownership more affordable for qualifying borrowers. Paying money down can, however, reduce your funding fee and decrease your monthly mortgage payment and interest.
Loan limits
Loan limits are adjusted periodically to accommodate changes in the housing market — the baseline conventional conforming loan limit in the U.S. for 2023 is $726,200, according to the Federal Housing Finance Agency. It’s higher in Alaska and Hawaii ($1,089,300) because average home prices are more expensive in those regions.
The standard limit for VA loans also increased to $726,000 in 2023 for most U.S. counties.
Mortgage insurance requirements
With a conventional loan, if your down payment is less than 20%, your lender may require Private Mortgage Insurance (PMI) for protection against default. This adds to your monthly costs but can be removed once you reach a loan-to-value ratio of about 80% or lower.
VA loans do not require PMI or any other type of ongoing mortgage insurance.
Property restrictions
The condition and characteristics of a property can impact whether you qualify for a conventional loan. Requirements vary, but typically, you must ensure the property meets specific safety and habitability standards — so if there is significant damage to the foundation or roof, you may be denied or need to make repairs before closing.
An appraisal is required to determine the property’s value and confirm that it meets lender and loan-to-value ratio requirements. Property type matters, too: Most single-family loans in sound condition qualify for conventional loans, but eligibility can vary for condominiums, townhouses or multi-unit properties.
Lenders usually require homeowner’s insurance to protect their investment, especially if the home is in a high-risk area. You’ll need to ensure there are no issues with the home’s title like outstanding liens or disputes.
Many of the same property requirements apply to VA loans, although there are some differences. The property you’re purchasing must be your primary residence and satisfy the VA’s Minimum Property Standards, which concern areas like structural integrity, roofing, HVAC, plumbing and more. You will need to have a VA appraisal to assess the property’s value and confirm that it meets the Minimum Property Standards set by the VA.
Other requirements specific to VA loans include stipulations regarding distance to military facilities and private road access. The lender may impose additional safety restrictions if you purchase a home near a military facility, such as an airfield. Properties located on private roads must be accessible year-round and well-maintained, and you will need to have a written road maintenance agreement.
Resale and refinancing
If you want to refinance with a conventional loan, lenders will evaluate your eligibility by looking at your credit score, income stability and debt-to-income ratio. In most cases, you can refinance as soon as you want, although you may have to wait several months to refinance with the same lender.
You’ll sign the new loan agreement, replacing the old one, if you are approved. There is no time requirement for reselling a home after purchasing it with a conventional loan.
Homeowners with a VA loan looking to refinance can do so with VA-backed cash-out refinance loans or the Interest Rate Reduction Refinance Loan (IRRRL).
Both refinancing options require you to wait about 240 days, or six to seven payments, whichever period is longer. The VA does not impose any time requirements if you have a VA loan and want to resell your home.
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The benefits of a VA loan vs conventional loan
A VA loan can offer distinct advantages compared to a conventional loan, but only for active service members, veterans and qualifying spouses. Conventional loans typically require down payments of at least 3%, whereas VA loans do not.
Unlike conventional loans, VA loans can further reduce monthly costs because they don’t require private mortgage insurance and often have more lenient credit score requirements.
The benefits of a VA loan
No down payment required
No private mortgage insurance required
More lenient lending criteria
VA funding fee can be rolled into the loan amount, reducing upfront costs
Access to VA cash-out refinance and IRRRL loans
Low interest rates
More stringent appraisal process
Potentially longer closing timeline
The benefits of a conventional loan
Accessible to a wider pool of borrowers
Fewer property use restrictions
Competitive interest rates
Beneficial for buyers with strong credit
Diverse term options and potential for lower total interest cost
Down payment usually required
PMI requirements for down payments less than 20%
Stricter qualification requirements
Is a VA loan better than a conventional loan?
For those who qualify, VA loans can be more advantageous than conventional loans because of their low interest rates and no down payment requirement, which can mean significant long-term savings. Not having to pay any money down also makes homeownership more affordable for many people entering the market for the first time.
VA loans typically don’t require PMI, and they feature more lenient lending criteria than conventional loans, making them a better option for borrowers with a limited credit history.
Finally, including the VA funding fee in the loan, can reduce the upfront expense of buying a home.
Summary of Money’s VA loan vs conventional loans
Veterans, active duty military and some spouses can use a VA loan or a conventional loan when making a home purchase.
Conventional loans can benefit homebuyers with strong credit and enough money to make at least a 20% down payment. But with VA loans, there is no down payment or PMI requirement, which can lead to major savings on monthly mortgage payments.
VA loans aren’t as customizable as conventional loans, and it may take longer to close on a house because VA loans have a stricter appraisal process. However, the advantages of a VA loan, which typically include low interest rates and more lenient lending criteria, may outweigh these drawbacks.
A roof over your head is a great blessing. However, homeownership has its ups and downs. One of those low points might be shelling out thousands of dollars to replace the roof that has protected you from the elements for years.
At some point, every roof will need to be replaced. It’s one of the many joys of homeownership. But, according to Angi, the average roof replacement cost ranges from $4,900 to $14,100. With a wide range of costs, you may be wondering how you can land the best deal.
The wide range of roof replacement costs is due to various factors such as style, location, the size of your roof, and the professional you hire.
Let’s take a closer look at how you can lower your overall costs and get ready for this significant undertaking.
Factors Affecting Roof Replacement Cost
The cost of replacing your roof can vary significantly based on several key factors. Understanding these factors is crucial for managing your budget effectively. Here are the primary elements that influence roof replacement costs:
Roofing material: The type of material you choose for your new roof can have a substantial impact on the overall cost. Materials like asphalt shingles are generally more affordable, while options such as metal or slate can be considerably more expensive.
Location: Your geographical location plays a role in cost variations. Areas prone to extreme weather conditions or high wind zones may require more durable and costly roofing materials.
Roof size and complexity: Larger roofs with multiple peaks and angles, as well as varying roof pitch, will require more materials and labor, leading to higher costs.
Professional you hire: The choice of roofing contractor can affect costs. Highly experienced professionals may charge more for their expertise.
Additional accessories: Roofing accessories such as flashing, underlayment, and ventilation systems can add to the overall expense.
Types of Roofing Materials and Their Costs
When it comes to replacing your roof, one of the critical decisions you’ll face is choosing the right roofing material. The choice of material not only affects the aesthetics of your home but also significantly impacts the overall cost of the project. Let’s delve deeper into some common roofing materials, their characteristics, and how they influence the cost of roof replacement.
Asphalt Shingles
Cost: Basic asphalt shingles are often the most budget-friendly option, with prices ranging from $1.20 to $4 per square foot.
Durability: They offer reasonable durability and come in various styles and colors to match your home’s design.
Energy efficiency: Standard asphalt shingles are less energy-efficient compared to some other materials.
Metal Roofing
Cost: Metal roofing tends to be more expensive, typically starting at around $5 per square foot.
Durability: Metal roofs are known for their longevity and resistance to harsh weather conditions.
Energy efficiency: They are highly reflective and can help reduce energy costs.
Slate Tiles
Cost: Slate tiles are among the costliest roofing materials, often exceeding $10 per square foot.
Durability: They are incredibly durable and can last for a century or more if properly maintained.
Energy efficiency: Slate tiles provide excellent insulation, contributing to energy efficiency.
Wood Shingles
Cost: Wood shingles fall in the mid-range of roofing material costs, typically starting at $5 per square foot.
Durability: They offer a charming, rustic look but may require more maintenance.
Energy efficiency: Wood shingles provide decent insulation but may not be as energy-efficient as some other options.
Solar Panels
Cost: Solar roofing can be expensive, considering both the cost of the panels and installation.
Durability: Solar panels have a long lifespan and generate renewable energy.
Energy efficiency: Solar panels are highly energy-efficient, potentially reducing your utility bills.
Clay Tiles
Cost: Clay tiles are often on the higher end of the cost spectrum, starting at around $10 per square foot.
Durability: They are incredibly durable and can withstand severe weather conditions.
Energy efficiency: Clay tiles provide good insulation, contributing to energy efficiency.
It’s important to note that the roofing costs mentioned here are approximate and can vary based on factors such as your location, the complexity of the project, and the specific product you choose. When selecting a roofing material, consider not only the initial cost but also its longevity and energy efficiency, as these factors can impact your long-term savings and the value of your home.
By understanding the characteristics and costs associated with different roofing materials, you can make an informed decision that aligns with your budget and aesthetic preferences. Keep in mind that the choice of material is a significant factor in determining the overall cost of your roof replacement project.
When Should You Replace Your Roof
The first thing you need to do is determine whether you really need a new roof. A visible hole in your ceiling is not the sign you should be waiting for. If you get your roof replaced before it reaches the final stop of its useful life, then you could be avoiding potentially bigger problems down the road.
A few signs that your roof is ready to be replaced include:
Water leaking into the house
Cracked shingles
Missing shingles
Shingles that are curling on the edges.
“Bald spots” on your roof where granules are missing.
Overall signs of age on your roof.
Another tip is to be mindful of your neighbors. If your homes were built in the same time period, then you may notice many new roofs in the area. It could be a sign that the inevitable demise is coming to your roof soon.
As soon as you spot any of these signs, you should start considering a new roof. The longer you wait, the more damage might be done to the value of your home.
If you are considering selling your home, do not assume that you can pass along the failing roof to the new owner. Many buyers will shy away from aging roofs because it is an added cost that they can easily avoid by choosing another home to buy.
Make sure to regularly take a closer look at what is happening on your roof. You can help prolong the life of your roof by taking care of it. For example, removing moss and algae growing in your shingles can prevent damage to the shingles can help prevent damage to your roof’s shingles.
How much does a roof replacement cost?
As with all things in life, you have choices for your roof replacement. The total roof replacement cost will vary considerably based on your choices.
The costs stem from the materials, labor, and disposal of your old roofing material.
In terms of material, you’ll need to choose between numerous shingles such as wood, clay, asphalt, solar, slate tiles, metal, and more. The material you choose may be based on cosmetic preference or necessary toughness to combat the elements of different locales. For example, in high wind areas of hurricane-prone Florida, homeowners are required to upgrade their roofing materials in hopes of withstanding potential hurricanes.
Asphalt shingles will most likely be your least expensive choice. An asphalt shingle roof costs about $1.20 to $4 per square foot to remove and replace an entire roof. Other materials, such as metal roofing, will generally cost at least twice as much per square foot. However, a new metal roof will likely save you money on homeowners insurance.
The cost to install 30-year architectural shingles is typically around $350 to $500 per square foot. And 50-year architectural shingles are even more expensive. Of course, they are stronger and last longer.
For labor, the size and construct of your roof will be a significant factor. If you have many peaks and ledges, expect your labor costs to be higher.
Assessing the Condition of the Current Roof
Before diving into a roof replacement project, it’s essential to assess the condition of your existing roof thoroughly. This step can significantly impact your overall cost and project planning. Here’s how to evaluate your roof’s condition:
Look for signs of damage: Check for water leaks, cracked or missing shingles, curling edges, bald spots, and any visible signs of aging.
Neighborhood trends: Pay attention to neighboring homes; if many have recently replaced their roofs, it might be a sign that your roof is due for replacement soon.
Preventive maintenance: Regular maintenance, such as removing moss and algae, can extend your roof’s lifespan and help you avoid costly roof repairs.
When evaluating the condition of your current roof, you might find that not all areas require a full roof replacement. In some cases, a partial roof replacement can be a viable option. This approach is typically chosen when the damage is localized to specific sections of the roof or when budget constraints are a concern.
Estimating the Size and Complexity of the Project
Understanding the size and complexity of your roof replacement project is vital for accurate cost estimation. Here’s how to estimate the scope of your project:
Measure your roof: Determine the square footage of your roof to calculate the amount of materials needed.
Consider roof design: Roofs with many peaks and angles may require more labor and materials, leading to higher costs.
Roofing layers: If your existing roof has multiple layers, removal and disposal costs will increase.
Roof features: Any additional features like chimneys, skylights, or roof vents can affect the complexity of the project.
Labor and Installation Costs
The cost of labor and installation is a significant part of your roof replacement budget. Several factors influence these costs:
Roof size: Larger roofs require more labor hours, leading to higher installation costs.
Roof complexity: Roofs with unique designs or many angles may demand more skilled labor, increasing costs.
Contractor expertise: Experienced contractors may charge higher labor fees, but their quality of work can be worth the investment.
Location: Labor costs can vary by region due to local labor rates and demand.
Additional Costs for Roofing Accessories
In addition to the primary roofing material and labor, there are other accessories and components that can impact your roof replacement cost. These include:
Flashing: Necessary for sealing roof joints and preventing leaks.
Underlayment: Provides an extra layer of protection beneath the roofing material.
Ventilation systems: Ensures proper airflow in the attic, which can affect the longevity of your roof.
Gutters and downspouts: Proper drainage is essential to protect your home’s foundation.
Removal and Disposal of the Old Roofing Materials
Before installing a new roof, the old roof must be removed and properly disposed of. This is a necessary step in the replacement process and can add to your project cost. Key points to consider:
The number of existing layers: Removing multiple layers of old roofing can be more labor-intensive and costly.
Disposal fees: Depending on your location, there may be fees associated with disposing of old roofing materials.
Potential Hidden Costs and Unexpected Expenses
While you plan your roof replacement budget, it’s essential to be prepared for potential hidden costs and unexpected expenses that may arise during the project. Some factors to be aware of include:
Structural damage: If hidden structural issues are discovered during the replacement, repairs can be costly.
Unforeseen leaks: Roofing projects can reveal additional leaks that were not visible before, requiring immediate attention.
Weather delays: Adverse weather conditions can cause project delays, potentially leading to increased labor costs.
Comparing Quotes from Different Contractors
To make an informed decision, it’s crucial to obtain multiple quotes from different roofing contractors. Here’s how to effectively compare these quotes:
Ensure each quote includes warranty information for both materials and installation.
Beware of significantly low bids, as they may indicate lower quality work.
Check online reviews to gauge the reputation of the roofing company.
Verify that the contractor is licensed by contacting your state consumer protection office.
How to Reduce Your Roof Replacement Costs
You should expect to pay thousands of dollars for your roof repair. However, there are methods to lower your overall roof replacement cost.
1. Hire a Professional Roof Inspector
If you’ve noticed that your roof is looking a bit worse for wear, then you should call in an inspector. Although it can cost a few hundred dollars to hire an inspector, it might be well worth the cost.
An inspector will be able to tell you whether you really need a new roof. They might recommend a patch or suggest that you wait a few years before replacing the whole roof. Either way, it will give you a better understanding of the problem at hand.
2. Replace or Repair?
After receiving the inspection report recommendations, you’ll need to decide whether you will replace or repair the roof. It is a good idea to go with the guidance of the inspector. However, as the owner, you have the final say in this decision.
3. Check the Home Warranty
When was your roof last replaced? If the answer is recently, then the replacement might be under warranty.
If you recently bought the home, you should check through the closing paperwork. Home warranty information is often available in that fine print. If you can’t find the information, consider contacting the previous owners to see if they can provide you with that paperwork.
The home warranty may cover your replacement costs, so it is an option you should look into.
4. Decide What You Want
Before talking to a roofing contractor or salesman, make sure you know exactly what you want on your new roof. Take the time to research the different materials and options and choose the one that will work well for your area and your budget.
Build an understanding of the features of your roof. Is it huge? Does it have many peaks and ridges that will increase labor costs?
With this level of research, you’ll be able to discuss the details of contractor bids coherently. Doing this homework helps ensure that you are not being taken advantage of. You might not need the latest and greatest product that the salesman attempts to sell you.
5. Compare Bids
Once you have a good understanding of what you need, then it is time to call in the contractors. Obtain estimates from various roofing contractors. Each bid should include roof warranty information on both the materials and the installation.
Do not automatically jump for the lowest bid. If the bid is significantly lower, do more research before accepting that bid. Sometimes very low bids translate into lower quality work. Online reviews of a roofing company may help you find out if the company is worth doing business with.
Make sure to confirm that the bid is from a licensed contractor. You can contact your state consumer protection office to confirm this.
Trust your instincts when choosing a roofer. You want a roof that will last for years to come at an affordable price. Cutting corners now will only cause more problems down the line.
6. Go the DIY Route
In the world of homeownership, there is always the option to fix the problem yourself. Although the roof is a high stake home repair, you may be able to do part of it yourself for a fraction of the cost.
The labor costs of a DIY roof replacement can account for the bulk of the expense. Sometimes, a contractor will allow you to remove the old roofing material yourself to cut the total cost. However, you should only pursue this option if you have the proper tools and knowledge.
7. Check Your Insurance Policy
If you are like most Americans, you carry a homeowner’s insurance policy on your home. In that case, the policy might cover roof damages.
Most insurance policies will help cover some or all of your roof replacement. However, if the need for replacement is due to neglect, then it is unlikely they will assist you. Call your insurance provider to find out how much they might be willing to cover.
8. Ask for a Discount
Most roofers are at the whim of seasonal work. In the winter, work can dry up in some places. Whereas in the summer, they can’t work through the jobs fast enough.
If you are willing to wait for a convenient time for the roofing company, then ask if they will give you an off-season discount. For example, you could request a 10% discount to wait until they have a slow month for your roof repair.
It never hurts to ask; the worst thing they can say is ‘no.’
Financing Options for Roof Replacements
Replacing a roof can be a significant financial undertaking. If you’re concerned about the upfront cost, consider these financing options:
Home improvement loans: Home improvement loans are tailored for renovation projects like roof replacement. They typically offer competitive interest rates and flexible terms, available from banks or online lenders.
Home equity loans or lines of credit: Leverage your home’s equity to finance your roof replacement. Home equity loans provide a lump sum upfront, while home equity lines of credit (HELOCs) offer flexibility in accessing funds.
Insurance coverage: Review your homeowner’s insurance policy to check if it covers roof replacement, especially for damage caused by specific covered perils like severe storms or hail.
Contractor financing: Many roofing companies offer financing options to help you manage the cost of roof replacement. When considering this option, inquire about terms, interest rates, and the company’s reputation to ensure transparency and fairness in their financing offerings.
Bottom Line
Understanding the cost of roof replacement is a crucial step for homeowners. It’s not merely an expense but an investment in the protection and value of your home. By taking the time to assess your roof’s condition, research materials, budget wisely, and seek multiple quotes, you can make informed decisions that align with your financial situation.
Roof replacement can be a substantial undertaking, but with careful planning and consideration, you can ensure the longevity and safety of your home. Remember that each roof is unique, and roofing costs can vary based on several factors. Whether you’re facing an imminent replacement or planning for the future, being well-informed is the key to making cost-effective choices for your roofing needs.
Frequently Asked Questions
How much does a roof cost?
The cost of a roof varies widely based on factors like size, materials, and geographic location. For standard materials like asphalt shingles, prices can range from $7,000 to $12,000 for an average-sized home. More premium materials like metal, slate, or tile can significantly increase the cost. Additional factors like roof design complexity, labor rates, and regional costs also play a crucial role in determining the final price.
What is the average cost of replacing a roof?
The average cost of replacing a roof in the United States is around $10,000, but pricing can vary widely depending on factors like the size of the roof, materials used, and geographic location. High-end materials or complex roof designs can push costs significantly higher.
How do different types of roofs affect the replacement cost?
The type of roof has a major impact on replacement costs. Asphalt shingles are generally the most affordable, while materials like metal, tile, or slate are more expensive. The complexity of the roof design, such as the presence of skylights or multiple levels, also affects the cost.
Are there any additional expenses associated with roof replacement?
Yes, there can be additional expenses beyond the basic cost of materials and labor. These might include costs for permits, structural repairs, gutter replacement, or disposal of the old roofing materials. These costs should be considered when budgeting for a roof replacement.
Does the size of the roof influence the cost?
Absolutely. The larger the roof, the more materials and labor will be needed, which increases the overall cost. Roofing costs are often calculated by the square foot, so a larger roof area will result in a higher total cost.
What factors can affect the overall cost of a roof replacement?
Several factors can affect the total cost, including the type of roofing material, the complexity of the roof’s design, the need for structural repairs, local labor rates, and whether the old roof needs to be removed first. Weather conditions and seasonal demand can also play a role.
Is roof removal included in the replacement cost?
In many cases, the cost of removing the old roof is included in the roof replacement quote. However, this is not always the case, so it’s important to clarify this with the contractor. The cost of removal can vary depending on the size and material of the existing roof.
Do I need permits for a roof replacement?
Yes, most local governments require permits for a roof replacement. The cost and requirements for these permits vary by location. It’s important to factor in these costs and ensure that your contractor handles the permit process.
Are there any financing options available for roof replacement costs?
Many roofing contractors offer financing options to help manage the cost of roof replacement. Additionally, some banks and credit unions offer home improvement loans. It’s advisable to compare rates and terms to find the best financing solution.
What are some signs that indicate a need for a roof replacement?
Signs that you may need a roof replacement include missing or damaged shingles, frequent leaks, sagging, and daylight visible through the roof boards. If the roof is more than 20 years old, it might also be time to consider replacement.
How long does a typical roof replacement take?
The time required for a roof replacement can vary, but most projects are completed within a few days to a week. Factors that influence the timeline include the size of the roof, weather conditions, and the complexity of the job. More complex projects or unforeseen issues can extend this timeline.
How much can I save by replacing my roof myself?
DIY roof replacement can lead to significant savings, primarily by eliminating professional labor costs. You may also reduce expenses by sourcing materials and handling waste disposal yourself.
However, while DIY can cut initial costs, it’s crucial to consider the value of professional workmanship, which often ensures quality and adherence to safety standards. Inexperienced DIY attempts might lead to costly future repairs, potentially offsetting the initial savings.
Embarking on the journey of purchasing a home in the Badger State is an adventure filled with anticipation and, often, a measure of uncertainty. Central to this process is the pivotal step of a Wisconsin home inspection—an essential safeguard that delves beneath the property’s surface, ensuring that your future haven is as sound in structure as it is inviting in appearance. This Redfin article will explore the ins and outs of Wisconsin home inspections, covering everything from their importance to specialized inspections, requirements, and costs. So whether you’re buying a home in Madison or a home in Green Bay, keep reading to learn everything you need to know about getting a home inspection in Wisconsin.
Why should you get a home inspection in Wisconsin?
Buying a home is a big investment, and getting a home inspection is a crucial step in protecting that investment. A professional home inspector will thoroughly assess the property, identifying any hidden issues, structural concerns, electrical and plumbing problems, and other potential red flags that may be missed during a casual walkthrough. This complete examination provides you with valuable insights, negotiation leverage, and peace of mind, ensuring you make an informed and confident decision about your new home.
“In Wisconsin, a home inspection is a smart step for buyers and sellers alike,” says Patrik Neuwirth of Inspect Karma, a Milwaukee-based home inspector. “It serves as a critical safeguard, uncovering potential issues from seasonal wear due to the state’s harsh winters and humid summers, to more hidden and costly problems. An inspection provides transparency and confidence, ensuring that one of life’s biggest investments is sound and secure.”
Are there any specialized inspections that Wisconsin buyers should consider?
While a standard home inspection covers the fundamentals, Wisconsin buyers should be aware of specialized inspections tailored to specific concerns. These include radon testing, especially in areas with elevated radon levels, mold inspections for properties prone to mold growth, lead paint assessments in older homes, and well and septic inspections in rural areas with these systems. These specialized inspections are key for ensuring your home is safe and free from potential hazards.
1st Choice Inspection in Milwaukee emphasizes the importance of sewer drain scoping, especially for houses built before the 1970s because tree roots can cause issues.
Are home inspections required in Wisconsin?
In Wisconsin, home inspections are not mandatory, but they come highly recommended for all homebuyers. While not required by law, certain lenders may impose inspection requirements as part of the mortgage approval process, such as pest inspections or appraisals. It’s important to note that despite the lack of mandatory inspections, opting for a home inspection is a wise and cost-effective choice.
Donn Anderson of Anderson Home Inspections advises that although inspections aren’t required in the state, they are more than worth the cost. It’s not uncommon for homebuyers to incur thousands of dollars in surprise expenses because they decided against getting a home inspection.
How much does a home inspection cost in Wisconsin?
The cost of a home inspection in Wisconsin can vary based on several factors, including the property’s size, age, location, and the scope of the inspection. On average, you can expect to pay between $300 and $500, with specialized inspections incurring additional expenses. While it may seem like just another added cost, the investment is well worth the peace of mind and potential long-term savings it provides.
Can you sell a house in Wisconsin without an inspection?
Wisconsin does not require sellers to conduct a pre-listing inspection, but many opt for this proactive approach. A pre-listing inspection can help find and address issues upfront, making the selling process smoother and more attractive to potential buyers. While not mandatory, it’s a strategic move for sellers looking to increase their home’s market appeal.
Wisconsin home inspection: the bottom line
In the world of real estate, knowledge is power. A home inspection in Wisconsin is your key to making an informed decision when purchasing a property. It provides you with insights into the home’s condition, negotiation power, and peace of mind, ensuring that you are investing in a safe and sound property. Regardless of where in the state you’re looking to move, a home inspection is a wise investment in your future.