When you’re considering starting home shopping, it’s important to put yourself in the best possible position. To do this, you’ll want to shore up your finances and increase your credit score. Follow these simple steps to get you closer to your homebuying dream.
1. Check Your Credit Score
Your credit score will be one of the main considerations in your mortgage application, so check yours to see what needs the most work. A credit score is based on a number of factors: payment history, credit usage, types of credit, age of credit, and recent inquiries. Though you can’t impact all of these in a short period of time, you can take steps to improve in some areas.
Make sure you’re paying all of your bills on time, as on-time payments have a huge impact on your score. Don’t apply for new lines of credit, but you can request a credit limit increase to current credit lines to improve your usage percentage. If you see any errors on your credit report, dispute them so that errors can be removed or corrected, and target credit usage when you make your budget.
2. Assess Your Finances
To know what you have to do to buy the home of your dreams, you need to know where you stand. Write down everything you have coming in and going out each month first. Some of these expenses, such as your car and student loan payments, stay the same over time and will come with you to your new home. Others are variable and change from month to month, including how often you eat out and your entertainment expenses, and these expenditures can most likely be shaved down or eliminated entirely with a budget.
Because homebuying comes with many expenses–a down payment, inspection fees, closing costs–your budget should be tighter in the period before you buy than normal. You’ll also want to budget for a home warranty; see if a home warranty is worth the money. When developing your budget, focus on eliminating your high-interest debt and saving for those homebuying expenses.
Lenders will also look at your debt-to-income ratio or DTI which is the amount of money you have coming in each month versus the expenses you have. Though it varies between lenders, many lenders will not give a mortgage to someone whose DTI is higher than 43%.
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3. Understand Homebuying Costs
For nearly every type of mortgage, a down payment is required. A down payment of no less than 20% is suggested to have better home options and lower monthly costs. Conventional loans allow 20%, however, you can also have a down payment of as little as 3%; for down payments below 20%, PMI (private mortgage insurance) is required. Other types of loans, like an FHA loan, require between a 3.5-10% down payment, depending on your credit score. Make sure you understand how much you’ll be spending on your new home by using a mortgage calculator.
Other homebuying fees can add up quickly and be more variable. You will likely have a loan origination fee, inspection fee, appraisal fees, and other fees. You may be able to control some of these by choosing your own professionals. However, others will be selected by the seller, real estate office, or mortgage company.
A brokerage commission may be paid to real estate agents on closing. Your home warranty, property insurance and taxes, and any points you wished to pay to lower your mortgage rate as well as current interest rates will all go into your final costs. Account for all of these expenses when deciding how much mortgage you can afford.
Take steps to improve your creditworthiness and your DTI, and know what you’re looking for when you begin shopping for a lender to work with so you get the best rate possible. With the right moves, you’ll be closing on your dream home in no time.
You may hit one of those life moments where you need a bundle of cash and fast. Maybe you have been hit with a major car repair bill, you want to attend a destination wedding, or you’re motivated to pay off your student loans ASAP.
Whatever the situation, there are smart strategies that will help you accrue that money as quickly as possible. Tactics like trimming your expenses, selling your unwanted stuff, and bundling your insurance can help you meet a savings goal at top speed.
In this guide, you’ll learn those techniques and more to help you finance whatever is most urgent on your financial to-do list.
How to Save Money Fast 10 Ways
One person’s goal for saving money quickly might be, “I need $500 by the end of the week.” For another, it could be, “I’m going to stash away $10,000 within the next year.” Wherever you may fall in terms of your short-term financial goals, these 10 tactics will help you save money daily and achieve your aspiration.
💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.
1. Getting Rid of Unnecessary Expenses
In an age of automated billings and subscriptions, it is easy to lose track of what exactly you’re paying for each month. It is entirely possible that you’re paying for something you’re not even using.
In order to pinpoint any potentially unwanted expenses, review a month’s worth of auto debits from your bank account. You may find that you’re paying $5 a month for a digital magazine you no longer read or that you could save on streaming services by dropping one or two you don’t watch but are paying $15 a month for.
Once you’ve canceled, you could reroute the money you would have spent directly into your savings account. While $20 or $30 a month saved on subscriptions might not seem like much, even small amounts can quickly add up over time. In combination with other savings techniques, this might help you build your savings fast.
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2. Negotiating and Automating Your Bill Payments
Did you know that some companies offer discounts when you set up automatic bill payments, or autopay? This means connecting a bill directly to your bank account and allowing the company to automatically withdraw the amount of the bill on the due date.
Some companies offer a discount in these situations because automatically debiting your account gives the company assurance that the bill will be paid on time. The bonus for you is double: You might get a little discount on your bills, and you won’t have to remember to manually pay the bill each month.
Autopay might also help you avoid unexpected late fees, which in turn could help you build up savings faster. There might be some downsides to autopay, however. If you set up an autopay agreement but then don’t have enough money in your account to cover the charge, you might end up with a canceled subscription or overdraft or NSF fees from your bank.
3. Carefully Considering Big Decisions
Yes, it’s hard to save money, but learning to be mindful about your purchases can help. Instead of buying something as soon as you want it, you might want to sleep on it overnight and see if you still want it the next morning. Giving yourself more time before pulling out your credit card could help you determine if you really need the item or if you were just caught up in the excitement of shopping.
This can be especially useful when making big purchases because they might require more research anyway. For example, if you’re buying a couch and you fall in love with a sectional sofa, waiting overnight might give you a chance to read reviews, double-check the measurements of your space, and look to see if there are similar styles available online that might cost less.
Some people wait longer still. They use the 30-day rule, which involves writing a note in your calendar for 30 days after you see the item you want. If you still are determined to buy it when the calendar alert pops up, then you can probably feel confident that it isn’t an impulse buy and go for it.
By delaying purchases this way, you may be able to avoid compulsive shopping and save funds, which can go towards your savings goal.
4. Considering a Spending “Fast”
Ready to learn another way to save money quickly? Some savers find that they can save money fast with a challenge: They plan a day or two every week where they eliminate all unnecessary spending. That’s what’s called a “fast”: You avoid spending money, similar to the way a dietary fast means you eat nothing.
For example, if you decide to do a two-day spending fast, you might decide that on Tuesdays and Wednesdays you don’t spend any money other than what it costs to commute to work. That means that on those days, you might choose to forgo your daily pitstop at the coffee shop, a lunch from the salad place (you’d bring food from home), or ordering the brand new book you’ve been waiting to read.
Planning to not spend could help you reign in unintentional spending. Chances are that you barely think about that $4 you spend at the coffee shop, but if you give it up twice a week, that’s $8 that could be going into your savings.
If you save an average of $40 a week with a two-day fast, that could add more than $2,000 to your savings in a year.
5. Putting Your Accounts to Work
Choosing the right account for your money can be a great way to save funds fast. Some checking accounts charge monthly or annual account maintenance fees, with little to no interest.
Savings accounts might offer higher interest rates than a checking account, but the reality is that the average interest rates on a standard savings account can still be very low. Instead, you might shop around for a no-fee, high-interest account to make your money work harder for you. These kinds of accounts are often found at online vs. traditional banks.
If you currently have, say, $5,000 sitting in a checking account, earning no interest, if you were to put it in a savings account at 4.50% interest compounded daily, you’d have an extra $230.12 a year later, with no effort on your part.
💡 Quick Tip: Want a simple way to save more each month? Grow your personal savings by opening an online savings account. SoFi offers high-interest savings accounts with no account fees. Open your savings account today!
6. Bundling Your Insurance
Insurance can be one of those “set it and forget it” expenses. You might buy a policy and then never really focus on the cost of the premium again.
Many insurers, however, will reduce your rate if you give them more of your business. Typically, this means having your auto and home insurance with the same company. You might be able to save a chunk of change and put it towards your savings goal.
It can also be wise to review your insurance annually. You might be paying for coverage you don’t really need.
7. Starting a Side Hustle
Sure, cutting back on your spending is one way to save money fast. But so is bringing in more cash. Many people find starting a side hustle is a good way to bring in more income. This could mean anything from selling your nature photography on Etsy or providing social media services to a local business or two.
While one of the key benefits of a side hustle is the money it can bring in, you also might find it personally rewarding and even an entry to a new full-time career.
8. Saving on Essentials
Looking for another idea for how to save money fast? There’s no doubt that many things you spend money on are necessities. Food, personal-care items, and gas for your car. But there are plenty of ways you can trim those costs.
• To save on food, you could do some meal-planning so you can more efficiently manage your grocery budget. Using up what you buy vs. wasting food can help you save a bundle towards your goals.
• You could get a gas card to save at the pump. There are also plenty of apps that point you towards the cheapest gas stations in your area.
• Joining a warehouse or wholesale club can help you save on your typical purchases. If you find the quantities too large (say, a 12-pack of shampoo), partner up with a friend of two to share the wealth.
9. Selling Your Stuff
If you’re trying to save money fast, you might be able to “find” a pile of cash by selling your used items that you no longer need. This could mean anything from selling gently worn clothes online (say, on Poshmark or thredUP) or IRL (at Buffalo Exchange perhaps); putting functional electronics up for sale on eBay; or offering items on places like Nextdoor or Facebook Marketplace.
Just be cautious as there are scammers who try to prey on direct sellers.
10. Checking Your Tax Withholding
Here’s another idea for accumulating money quickly: Double-check your tax withholding. If you get a sizable tax refund every year, you may feel as if you are getting “free money.” Not at all! That’s actually your hard-earned money that you overpaid to the government and are now getting back. It could have been earning interest in the bank rather than being whisked out of your paycheck.
If you typically receive a refund, tweak your withholding, and then put the additional money that stays in your paycheck into your savings.
Is Saving Money Fast Realistic?
Saving money fast can be realistic, as long as you keep in mind your income and the fact that most financial experts say to save 20% of that figure. That’s one of the principals of the popular 50/30/20 budget rule. Fifty percent of your money goes towards essential spending, 30% goes to discretionary expenses, and 20% gets socked away as savings.
So, if you earn $100,000 a year and have an important goal in mind, such as the down payment for a house, you might be able to stash $20K in a single year. That might involve pausing your retirement savings for a year as you go all-in on accumulating as much cash as possible for a home purchase.
Also, if you are able to bring in more income (whether by selling your stuff, starting a side hustle, or via passive income ideas), that can accelerate your savings as well.
Keeping Your Savings Safe With SoFi
Whichever strategies (or combination of tactics) you try, it’s important to find the right banking partner where your money can grow. You’ll likely want a financial institution with Federal Deposit Insurance Corporation coverage, low or no fees, and a healthy interest rate.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
Better banking is here with up to 4.50% APY on SoFi Checking and Savings.
FAQ
How can I save $1,000 fast?
To save $1,000 fast, you can try a combination of such techniques as trimming subscriptions, essential, and discretionary spending; bundling insurance to cut costs; selling your unwanted items; and/or using the 30-day rule.
How to save up $10,000 in 3 months?
To save $10,000 in three months, you need to save $3,333 after-tax dollars per month. Your income and expenses will influence how doable this is. Some ways to save this amount include going on a spending fast (meaning you eliminate all possible discretionary spending) and starting a side hustle to bring in more money.
How to save $5,000 ASAP?
To save $5,000 ASAP, you can try cutting your expenses, avoiding big purchases, making sure your money is earning a good interest rate, and bringing in more cash via a side hustle.
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Your pet is part of the family, and you’d do anything to keep them healthy and happy. But what happens if they need surgery? Will your pet insurance cover the cost? The answer isn’t always straightforward. Here’s when pet insurance typically covers surgery and when it doesn’t.
Does pet insurance cover surgery?
Pet insurance can help pay for surgery if your pet gets hurt or sick. This could include surgeries for broken bones, cancer, objects stuck in their stomach, emergencies, ligament problems or some dental issues. If you buy a wellness plan, you may also have coverage for spaying or neutering.
But pet insurance almost never covers surgeries for preexisting conditions or elective procedures like tail docking or dew claw removal.
Surgical procedures that pet insurance typically covers
Pet insurance policies typically pay for surgical procedures needed to treat an accident or illness. Depending on your policy, this may include:
Cancer treatments like tumor removal.
Removing objects like rocks, toys or sticks that pets accidentally swallow.
Emergency surgeries for life-threatening situations like bloat or internal bleeding.
Dental surgeries like tooth extractions or root canals caused by an illness or accident.
Surgeries for ruptured knee ligaments or hip dysplasia.
Procedures to treat hereditary and congenital conditions such as luxating patellas.
🤓Nerdy Tip
Many pet insurance companies won’t cover certain orthopedic issues for the first several months of your policy. Also, if your pet had a bilateral issue like hip dysplasia on one side of their body before you bought their policy, it may be considered a preexisting condition if it happens on the other side of their body. Pet insurance generally won’t pay to treat preexisting conditions.
Surgical procedures that pet insurance typically won’t cover
Pet insurance plans usually have a wide range of exclusions and limitations. Accident and illness plans often won’t cover:
Surgeries to treat conditions your pet had before coverage began.
Cosmetic or elective procedures like ear cropping, tail docking, gastropexy (a surgery to prevent bloat), microchipping, declawing or dew claw removal.
Breeding-related procedures like cesarean sections, spaying or neutering.
Some pet insurance companies offer preventive care plans that will cover some of the procedures above (such as spaying, neutering, microchipping or gastropexy).
🤓Nerdy Tip
Many pet insurers will cover curable preexisting conditions like vomiting and gastrointestinal issues if your pet has been treatment- and symptom-free for a certain period of time. Check with your insurer to see if any of your pet’s previous conditions are considered curable.
Common pet surgical procedures
While pet insurance doesn’t cover every type of surgery, it can help you save money on many procedures caused by accidents or illnesses. Here’s a look at common pet surgical procedures and whether insurance generally covers them.
Pet surgery
Generally covered by insurance?
ACL or CCL repair
Amputation
Cancer surgery
Fractures and dislocation repair
Hip dysplasia
Intestinal obstruction due to foreign body
Mass or tumor removal
Skin lacerations
Spay or neuter
No, except with some wellness plans.
How does surgery coverage work?
Surgery coverage is usually a standard part of accident and illness coverage. So if your pet needs surgery for a broken leg, tumor or cataracts — and it’s not related to a preexisting condition — insurance will likely cover it.
However, having pet insurance doesn’t guarantee that all veterinary bills will be paid. These policies typically have a deductible, a reimbursement rate and a maximum coverage limit per year or per incident. Depending on your insurer, you may also be responsible for paying exam fees related to the surgery.
The deductible is the amount you must pay before your pet insurer will begin covering your vet bills. Most insurers charge an annual deductible, but some assess deductibles per condition.
The reimbursement rate is the percentage of your vet bills your pet insurer will cover once you’ve reached your deductible. The percentage you cover is known as a copayment.
The maximum coverage limit is the total amount your pet insurer will pay per year or per incident.
Say you have a pet insurance plan with a $500 deductible, 80% reimbursement rate and $10,000 annual limit. Your pet needs surgery to remove a tumor, which will cost $3,000.
First, you’ll need to pay the $500 deductible out of pocket. After that, your insurance will cover 80% of the remaining $2,500, which comes out to $2,000. You’ll be responsible for the remaining 20%, which comes out to $500.
So in total, you’ll pay $1,000 for the surgery ($500 deductible + $500 coinsurance), and your insurance will cover $2,000. If your pet needs follow-up care later in the year, you’ll have $8,000 left of your annual limit to cover any additional medical expenses.
How to file a claim for surgery costs
There are two ways to file a pet surgery claim.
The first way is with direct billing. With this option, you won’t have to pay your insurer’s part of the bill out of pocket. Instead, your pet insurance company will pay your vet directly.
Direct billing isn’t that common. Pets Best, Healthy Paws and Trupanion are some of the only pet insurance companies that will pay your vet directly. Your vet must also be willing to accept payments directly from providers.
The more traditional way to file a pet insurance claim for surgery is to pay the full amount upfront and then submit the claim to your insurance company for reimbursement. To do this, you’ll generally need to fill out your insurance company’s claim form and provide a copy of the itemized receipt or invoice from your vet.
Your insurance company will review your claim to make sure it meets the terms of your policy. If everything checks out, your insurer will reimburse you the covered amount, minus any deductible or copay.
Can you buy pet insurance before surgery?
Yes, you can buy pet insurance before your pet needs surgery, but that doesn’t mean your policy will pay for the procedure.
Pet insurance doesn’t cover preexisting conditions, so any medical condition your pet was diagnosed with before you bought the policy won’t be covered.
Pet insurance plans also have waiting periods, the length of time between when you buy your plan and when insurance will start covering eligible treatments. Common waiting periods are 14 days for illness coverage and 48 hours for accident coverage.
How top pet insurance companies cover surgery
To give you an idea of how different pet insurance companies cover surgery, we looked at three insurers from our list of the best pet insurance companies.
Embrace surgery coverage
Embrace‘s standard policy covers exams, treatment, hospitalization and surgery for injuries and illnesses, including cancer. But you’ll need to add a wellness plan to get coverage for spaying and neutering. Embrace won’t cover surgeries arising from preexisting conditions, fighting, racing or mistreatment.
Figo surgery coverage
Figo pet insurance covers surgeries, prescription medications and diagnostic testing for accidents and illnesses. But preexisting conditions aren’t covered unless they’ve been cured and the pet is symptom-free for at least 12 months. Figo has wellness plans for things like vaccines, routine exams, dental cleaning, and spay or neuter surgery.
Pets Best surgery coverage
Pets Best’s surgery coverage is included in its accident and illness plan. The policy can also cover pre- and post-surgical care like diagnostic tests, prescription medication and physical rehabilitation. Add a wellness plan if you want coverage for spay or neuter surgery.
At the start of every new year, people set goals. Many of the most common resolutions set during the new year are financial in nature. For instance, some people resolve to pay off their debt before the year ends. Others want to decrease their spending and save money.
If you’re one of those people who want to save money, decreasing your car insurance premium is one way to get closer to your financial goals. Here are seven hacks to help you save on car insurance this year.
1. Review Your Car Insurance Every Year
One of the simplest ways to reduce your insurance premiums is to shop around once a year. It may seem unnecessary, but comparing rates from a variety of insurance companies can be beneficial. Firstly, it gives you a sense of how much your car costs to insure on average. Secondly, doing your research lets you determine if you have the best car insurance for your budget.
Remember to compare quotes from at least three providers before making a decision. But what if your current insurer is the cheapest option?
2. Get Rid of Coverage You Don’t Need
Another way to decrease your car insurance costs is by dropping unnecessary coverage. In most states, drivers are legally required to have liability coverage and personal injury protection, or no-fault coverage. In states like New York and North Carolina, drivers must also have insurance that protects them against collisions with uninsured or underinsured motorists. Beyond that, rates vary by state and personal preference.
Types of Car Insurance to Consider
Liability Coverage: This coverage protects you against the costs of covering the medical bills of other drivers after an accident. Liability insurance may also reimburse you for damage to your car. If you don’t have a significant savings cushion or other assets to cover the cost of large claims, liability insurance will protect you financially in the event of an accident.
Collision Coverage: If you’re financing your vehicle, chances are the bank will require this coverage as well. Collision insurance will pay for damage to your car resulting from a collision with another vehicle. It does not cover car damage from potholes, broken windows, fire, or theft.
Comprehensive Coverage: This is like collision insurance, but it covers damage from non-collision incidents. The most common kinds of incidents are floods, vandalism, hitting an animal, or striking a non-moving object.
No-Fault Coverage: This type of insurance protects you against the medical bills of other drivers after an accident. Unlike liability insurance, your own insurer pays your claim; it then submits a claim to the other driver’s insurer. If you have this coverage, maintaining a high deductible can be beneficial because it reduces your premium.
As you review your vehicle insurance, make a list of your state-mandated coverage, bank-mandated coverage, and ones that make sense for your location. For instance, if you live in a town that is known for seasonal hurricanes, floods, or fires, dropping comprehensive insurance might not be the best idea. Consider working with an agent who is familiar with your area.
If your car is older, consider dropping collision and comprehensive insurance. Then, set aside an emergency fund that amounts to your car’s market value.
3. Ask Your Insurance Company about New Discounts
Your insurer may provide discounts for a variety of reasons. For instance, some insurers offer a “good student” discount for teens with good grades. Others may give discounts to drivers who are members of the military or attend certain types of college. If you are enrolled in an accredited driver’s safety course, contact your insurer about getting a discount for completing the class.
Save on Car Insurance by Paying Your Premium Annually
Payment methods can also affect your car insurance premiums. Most insurers offer a discount if you pay a year’s worth of premiums upfront. If you can’t afford an entire year’s worth of premiums at once, pay at least the minimum amount necessary to qualify for this discount.
4. Downsize Your Car
The most effective way to save money on car insurance is by driving a car that costs less to insure. The type of car you choose will depend on your budget and preference, but there are a few things to consider.
For instance, the cost of repairs and parts for some vehicles can be high. Secondly, there are insurance companies that offer discounts to drivers with hybrid cars or vehicles that use alternative fuel.
When you’re looking for a new vehicle, find a safe one with the lowest possible insurance rates. Talk with your insurer, and get online quotes from other car insurance providers to compare costs.
Related Read: What Credit Score Do I Need to Buy a Car?
5. Drive Safely to Save on Car Insurance
Driving safely is often underrated. If you’re a cautious driver, you might qualify for a reduced premium. When calculating your rate, insurance companies consider the following factors:
Age
Gender
The type of car
Your driving history
Improving your driving habits could save you money each month. Plus, it’s safer for everyone on the road. If your current vehicle doesn’t have an accident history, you might also want to consider increasing your deductible, which can save you money.
6. Increase Your Car Insurance Deductible
If you drive safely, you could lower your monthly premium by raising your deductible. Increasing your deductible from $200 to $500, for example, will decrease your monthly premium. And since you know how much your deductible is ahead of time, you can set aside the amount in an emergency fund.
7. Consider Usage-Based Programs
Another way to save on car insurance is by participating in usage-based programs. With this type of coverage, you put a device in your car that records your mileage and driving habits. This data is then sent to your insurer, who can use it to determine how much you should be paying for coverage. Among the common usage-based options are:
Pay-as-you-drive: This program charges you for the miles you drive. Your insurer will typically take mileage into account when calculating your premium.
Pay-how-you-drive: With this program, you pay for your insurance based on safe driving behavior. In some cases, your insurer might offer discounts if you’re an ideal driver.
Takeaway: Saving Money on Car Insurance
There are plenty of tactics to help decrease your monthly insurance costs if you take the time to assess your habits and your vehicle insurance needs. Once you know what must stay and what needs to go, contact your insurance company to make the necessary adjustments.
The housing market will remain subdued until the Federal Reserve starts cutting rates next year, according to economists and housing pros following the central bank’s Wednesday announcement to leave the benchmark rate unchanged in the target range of 5.25%-5.5%.
Until interest rates come down, affordability challenges will continue to put first-time buyers on the sidelines, housing industry observers said. Real estate experts reiterated caution against further rate increases.
While Fed Chair Jerome Powell emphasized incoming data will determine whether the central bank will raise its federal funds rate at its next FOMC meeting in November, the “dot-plot” of rate projections showed policymakers foresee one more hike by the year-end. The bulk of central bank officials expect to have interest rates finishing the year at around 5.6%.
In an elevated rate environment, the lack of inventory continues to be the biggest challenge for many potential buyers, the Mortgage Bankers Association said.
“While homebuilder sentiment is clearly impacted by the recent surge in mortgage rates, permits for single-family homes provide a positive outlook for the pace of construction in the year ahead. If mortgage rates trend down in 2024 as we anticipate, the combination of more homes for sale and somewhat lower rates should support stronger purchase volume,” Mike Fratantoni, SVP and chief economist at the MBA.
The MBA expects mortgage rates should begin to reflect that the Fed’s moves in 2024 will be cuts – not further increases. MBA’s mortgage finance forecast projected the 30-year fixed mortgage rate to decline to 5.4% in 2024 and 5.1% in 2025.
Powell also noted in a press conference that because people locked in “very low rate mortgages, even if they want to move now, that would be hard because the new mortgage would be so expensive.”
Rates are most likely to stay elevated until 2024, said Danielle Hale, chief economist at Realtor.com,thus putting a damper on the number of home sales transactions.
“Higher mortgage rates have radically altered homebuyer purchasing power and have been a key factor in existing home sales dropping from a more than 6.5 million unit pace in early 2022 to the roughly 4 million unit pace in recent months,” Hale said.
More importantly, higher mortgage rates continue to keep existing homeowners sidelined, with as many as one in seven buyers out of the market because they don’t want to borrow at today’s much higher rates, Hale noted.
Short-term mortgage rate movement
In the short-term, mortgage rates are likely to bounce around a bit as the markets digest upcoming economic data, Melissa Cohn, regional vice president of William Raveis Mortgage, said.
Incoming data of job and CPI reports next month will provide more clarity on how strong the economy is. Reports on jobs and inflation will be released on October 6 and October 12, respectively.
“If the data reveals that inflation remains elevated and employment is still growing, then mortgage rates are likely to move up and we can look for what we hope to be the last rate hike of this cycle,” Cohn said.
The rapid ascent is mostly behind us but it will be a while before the economy sees any sign of a gradual descent, Marty Green, principal at mortgage law firm Polunsky Beitel Green, added.
“In my view, this means the mortgage interest rate environment will continue to bounce sideways through the next several months,” Green said.
Mortgage rates have been on an upward trend this year with rates in August surging to 7.23%—the highest since 2001.
Fed officials expect interest rates to be at 5.1% in 2024, up from the 4.6% projected in June. Officials expect fewer cuts in 2025 with the median estimate for the benchmark rate to be at 3.9%, up from 3.4%.
The committee raised its projections for growth, and is looking for a better-than-expected labor market as well, with the jobless rate peaking at 4.1%, rather than 4.5%.
Pushback against further rate increases
With two more scheduled FOMC meetings in November and December, housing experts cautioned against further rate increases.
The Fed must consider the potential economic damage arising from any future rate hikes, Lawrence Yun, chief economist at National Association of Realtors, reiterated his position.
“Commercial real estate has come under stress from higher interest rates, which will further negatively impact community banks due to their large exposure to the sector. Therefore,the Fed needs to wait and not raise rates. Possible interest rate cuts then need to be considered once inflation is fully under control,” Yun said.
Overall data point to an accelerating slowdown but continues to be mixed because of some lagging indicators, Green noted.
Unemployment rates and the CPI component lags measures of market rents by around a year.
“With rates elevated into restrictive territory, I expect the Fed to be patient and hold off on any additional increases until it becomes clearer that an additional rate hike is warranted,” Green said.
Hyperinflation occurs when prices for goods and services rise uncontrollably. It is an economic condition that fuels nightmares for consumers and for economists alike.
According to data from Johns Hopkins University professor Steve Hanke, there have been more than 60 documented instances of hyperinflation since the 1700s, and in every instance, economic conditions deteriorated so fast that in all cases, national currencies failed, meaning that they lost nearly all of their purchasing power both domestically and internationally.
That begs a key question: Could hyperinflation come in the United States? And, if so, could hyperinflation take down the U.S. dollar and trigger a recession?
Theoretically, the answer is “possibly.” Realistically, the answer is “not likely.” Let’s take a look at hyperinflation and evaluate the possibility of inflation on steroids taking root in the U.S. economy.
What Is Hyperinflation?
If you’re still not quite clear on what is hyperinflation, economists define the term as when the price of goods and services rises uncontrollably over a specific timeframe, with no short-term economic remedy able to bring those prices back down again.
While figures linked to hyperinflation vary, some economists say hyperinflation occurs when the price of goods and services in a country’s economy rise by 50% over the period of one month.
The causes of hyperinflation typically stem from a skyrocketing boost in a country’s money supply without any accompanying economic growth. That scenario usually occurs when a country’s government essentially prints and spends money in short-term bursts, thus triggering a rise in that country’s money supply.
When a government pursues a high level of short-term economic spending at a rate significantly higher than the country’s gross domestic product (GDP) rate, more money flows through the economy. When that happens, the real value of a nation’s currency declines, the price of goods and services rises, and inflation spikes.
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Is Hyperinflation Coming to the United States?
While U.S. inflation rates and the prices of many goods and services are on the upswing, economists dismiss the notion that U.S. hyperinflation is looming for the country for several reasons. First, it’s important to remember that hyperinflation and inflation aren’t the same thing, and the Federal Reserve would likely raise interest rates if inflation concerns grew.
According to data published in September 2023, the annual U.S. inflation rate was 3.7% for the 12 months that ended in August 2023. That’s a significant drop from June of 2022, when the inflation rate was 9.1%, which was led by certain items such as airline tickets, lumber, and hotel rates. Many economists attributed this to ongoing inventory shortages and supply chain issues and the release of post-pandemic pent-up demand.
Even the largest inflation rate in U.S. history — 23% in June, 1920 — wouldn’t come close to approaching hyperinflation levels of 50% in a month. Still, ongoing inflation is something that the U.S. economy hasn’t seen in more than four decades, and it’s a risk that investors may want to consider when devising their portfolio strategy.
How Can Hyperinflation Affect the United States?
Economists have largely downplayed the chances of a hyperinflation in the USA, but with inflation on the rise, it’s helpful for consumers to get a better grip on hyperinflation, in particular, and on inflation in general.
Hyperinflation Causes:
These are some of the typical causes of hyperinflation:
Falling Dollar Value
Like most major global currencies, the dollar trades on foreign currency exchanges. When a country faces inflationary risks, investors grow skittish, and may bypass that country’s currency in favor of more stable currencies. Even without hyperinflation, a weaker dollar can significantly hurt the U.S. economy.
(Hyperinflation is the extreme opposite of what happens during deflation, in which prices for goods and services decline and the value of a currency rises.)
Fewer Major Purchases
As inflation seeps into an economy, high prices may prompt individuals and businesses to defer or cancel large purchases. Consumers, for example, could hold off buying new homes, new vehicles, or major household appliances. Businesses might postpone big-ticket purchases like heavy machinery, office buildings, and commercial vehicles.
Some investors may hesitate to put money into stocks in a down market. All of those decisions could stall economic growth, as fewer dollars are circulating through the economy.
Monetary Policy
When inflation occurs, banks and financial institutions may not lend money or extend credit to consumers and businesses, as confidence in the overall economy wanes.
The economic fix for skyrocketing inflation typically comes from a country’s central bank. In the United States, that would be the Federal Reserve. When necessary, the Federal Reserve uses monetary policy to slow rising inflation by curbing the U.S. money supply, often by raising interest rates. Higher interest rates give consumers and businesses more incentive to save and less incentive to spend. That, in turn, slows rising inflation.
Recommended: What Is Monetary Policy?
Lower Investment Returns
Inflation eats into real investment returns. As the value of a dollar declines, investors need to earn more than their average return on investment in order to generate the same purchasing power.
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How to Combat Hyperinflation
Individuals can’t do much to combat hyperinflation on their own. In fact, during hyperinflation, economies and societies can break down or collapse. Fortunately, periods of hyperinflation are rare. And remember, the 3.7% inflation rate as of August 2023 in the U.S. is nowhere near the levels of 50% in a month, which is when many economists believe hyperinflation occurs.
That said, there are things that might help individuals lessen the impact regular or high inflation might have on their investments. These actions include having a balanced and diversified portfolio, and investing in Treasury Inflation-Protected Securities (TIPS), in which the principal amount invested adjusts with inflation.
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Real-World Examples of Hyperinflation
Zimbabwe offers a relatively recent example of hyperinflation. Just over a decade ago, Zimbabwe’s inflation rate stood at a staggering 98% daily inflation rate as the country’s economy went into free fall. That means consumer prices doubled on a daily basis.
Today, the Zimbabwe dollar is very weak, as the country continues to struggle with the issues that often lead to hyperinflation, such as an increased money supply, political corruption, and a major decline in economic activity.
Even historically stable country economies have experienced hyperinflation.
In the immediate aftermath of World War I, the Weimer Republic of Germany fell into economic decline due to war reparation debts and significantly reduced economic activity. The German government printed too much money in an effort to handle its economic obligations and to ignite a stagnant economy. The country faced an inflation rate of 323% per month by November, 1923 — that’s an annual inflation rate of three billion percent.
In today’s dollars, the consumer impact of hyperinflation is particularly onerous. For example, a small cup of coffee that normally would cost $3 would cost $22 at a 1,000% inflation rate. Similarly, a rental payment for an apartment in a major U.S. city might normally cost $2,000. With a 1,000% inflation rate, that rent would cost $22,000.
Hyperinflation also exists on the world’s economic stage in 2023. Venezuela, for example, has an estimated inflation rate of about 400%.
The Takeaway
While hyperinflation is certainly an economic condition any country would strive to avoid, there’s no compelling evidence suggesting it’s on the U.S. economic horizon — now or anytime in the near future. Still, the country has been in an inflationary period since 2022, so investors may consider using some inflation-hedging strategies to reduce its impact.
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FAQ
How does hyperinflation differ from regular inflation?
Inflation is the rate at which prices for goods and services are rising in a given economy. Hyperinflation is considered out-of-control inflation, at levels of about 50% in one month, and it can be a sign that a severe economic crisis is on the horizon.
Has the United States ever experienced hyperinflation in its history?
No. The closest the U.S. has come to hyperinflation is when annual inflation peaked at almost 30% during the Revolutionary War in 1778.
Are there any warning signs or indicators that could suggest the onset of hyperinflation?
Signs that might suggest that hyperinflation could happen include significant price increases of goods and services (such as increases of 50% in one month), the value of a country’s currency plummets, and economic activity slows or stops.
How can individuals protect their assets and finances during periods of hyperinflation?
Hyperinflation is quite rare, especially in countries with a central bank, like the Federal Reserve, that works to control inflation. However, there are things an investor might do to help limit the impact regular inflation might have. This includes having a balanced and diversified portfolio, and investing in Treasury Inflation-Protected Securities (TIPS), in which the principal invested adjusts with inflation.
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By Evlin DuBose · Tuesday, 19 September 2023
· 3 min read
Fact Checked
Advertiser disclosure
House prices in Australia have been daunting for a while, but while soaring values are good for investors and owners building home equity, they’re bad news for first-home buyers.
According to Mozo’s analysis, Australians nationwide now need at least six figures in savings to afford the 20% home loan deposit required for the average mortgage. For many home buyers, this could mean saving two and a half times their yearly income.
“Despite rising interest rates historically leading to a drop in housing prices, the cost of buying a home in Australia is becoming increasingly unaffordable,” says Mozo banking and rates expert Peter Marshall.
“Borrowers are now searching for more than $100,000 to cover a 20% deposit.”
So what’s the average deposit size in Australian states and territories? And is buying with a small deposit worth it?
Average home loan deposit size by Australian state and territory
Unsurprisingly, New South Wales has the steepest home loan deposit costs. Housing markets like Sydney have significantly skewed the savings needed just to get in, and now NSW buyers need $233,500 in savings to afford a 20% deposit.
According to data from the Australian Bureau of Statistics, a deposit of this size is 245% of the average NSW annual income.
State
Average dwelling value
20% home loan deposit
Average annual income
% Average annual income
NSW
$1,167,500
$233,500
$95,259
245%
VIC
$904,800
$180,960
$95,311
189%
QLD
$781,600
$156,320
$93,132
168%
SA
$684,700
$136,940
$87,246
157%
WA
$671,000
$134,200
$106,044
127%
TAS
$662,200
$132,440
$84,204
157%
NT
$521,700
$104,340
$92,347
113%
ACT
$947,900
$189,580
$105,191
180%
But the place with the cheapest property, the Northern Territory, isn’t much better. The average property price in NT is $521,700, meaning a 20% deposit is $104,340, which is still over 110% of the average yearly earnings in the territory.
Why is the standard home loan deposit 20%?
The purpose of a 20% home loan deposit is to establish your loan-to-value ratio (LVR) and give you a financial stake in your home. The deposit pays part of the upfront property price.
If you have a 20% deposit, you own 20% of your home. A home loan covers the remainder, giving you 80% LVR.
This LVR tier is where borrowers get the most competitive interest rates. An LVR higher than 80% is financially risky in the lender’s eyes since the borrower could struggle to afford their home loan repayments.
To offset the financial risk, lenders slap buyers with smaller deposits with additional fees, such as higher interest rates and Lenders Mortgage Insurance (LMI), which can add thousands of dollars to mortgage repayments.
Lower LVRs, on the other hand, receive lower interest rates because the risk to the lender is smaller. They also don’t have to pay LMI.
You can see this play out in the latest averages for owner-occupied home loans tracked in the Mozo database. The difference below 80% is less severe. Above 80%? The interest rate skyrockets.
Average home loan interest rate by LVR tier – (19 September 2023)
LVR Tier
Average interest rate
60%
6.52% p.a.
70%
6.57% p.a.
80%
6.60% p.a.
90%
6.92% p.a.
95%
7.16% p.a.
Borrowers buying with a small deposit (< 20%) could just decide to pay the higher interest rates. However, their home loan applications will be run through serviceability tests, meaning lenders will see if they can afford principal & interest repayments at a rate up to 3% higher than the one they apply for. A 7% interest rate may be fine, but could you theoretically afford a 10% one?
Given that saving for the deposit can be a stretch, this interest rate may be a tall order – especially with average Australian incomes only ranging between $84k and $106k.
Is it a good idea to buy with a small home loan deposit?
Government schemes such as the Family Home Guarantee can help bridge the deposit gap for a select few borrowers, usually first-home buyers.
There are other options available for buying with a smaller deposit, too, such as:
Having a guarantor.
Accepting the deposit from a family or friend as a cash gift.
Using a deposit boost loan, such as through OwnHome.
The viability of these pathways will depend on your financial situation. However, there are risks to consider with each, warns Marshall.
“A [small] deposit may seem enticing, but a loan with a lower deposit will cost more in interest over the term of the loan,” Marshall explains.
“With smaller deposits, it’s also very easy for a negative equity situation to arise, so it’s crucial to get professional advice from a broker before being enticed by the low deposit amount.”
Until then, housing affordability will require governmental reform.
Can you afford a $600,000 or $750,000 home? How about $900,000? Crunch the numbers with Mozo’s home loan calculators.
Compare low-deposit home loans in the table below.
Compare low deposit home loans – last updated 19 September 2023
Search promoted home loans below or do a full Mozo database search . Advertiser disclosure
Featured Product
Unloan Variable
Owner Occupier, Refinance Only, LVR <80%
interest rate
comparison rate
Initial monthly repayment
5.74% p.a.variable
5.65% p.a.
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
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Unloan Variable
For refinancers only. Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply in as little as 10 minutes.
interest rate
5.74% p.a.variable
comparison rate
5.65% p.a.
Ongoing fees
$0.00
Discharge Fee
$0.00
Extra repayments
yes – free
Redraw facility
yes – free
Offset account
no
Maximum loan to value ratio
80.00%
minimum borrowing amount
$10,000
maximum borrowing amount
$10,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
–
Own Home Loan
Owner Occupier, Principal & Interest, LVR <80%
interest rate
comparison rate
Initial monthly repayment
5.94% p.a.variable
6.18% p.a.
Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.
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Details Close
Own Home Loan
Competitive variable rate. Multiple offset accounts available. Borrowers can also make extra repayments. Redraw facility available. Simple online application process.
interest rate
5.94% p.a.variable
comparison rate
6.18% p.a.
Ongoing fees
$250.00 yearly
Discharge Fee
$300.00
Extra repayments
yes – free
Redraw facility
yes – free
Offset account
yes
Maximum loan to value ratio
80.00%
minimum borrowing amount
–
maximum borrowing amount
–
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
–
Express Home Loan
Owner Occupier, Principal & Interest, LVR <90%
interest rate
comparison rate
Initial monthly repayment
5.72% p.a.variable
5.87% p.a.
Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
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Details Close
Express Home Loan
Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
interest rate
5.72% p.a.variable
comparison rate
5.87% p.a.
Ongoing fees
$10.00 monthly
Discharge Fee
$350.00
Extra repayments
yes – free
Redraw facility
yes – free
Offset account
yes
Maximum loan to value ratio
90.00%
minimum borrowing amount
$5,000
maximum borrowing amount
$3,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
–
Variable Home Loan 90
Principal and Interest, LVR <90%
interest rate
comparison rate
Initial monthly repayment
5.79% p.a.variable
5.81% p.a.
Affordable home loan rate for buyers or refinancers.. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.
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Details Close
Variable Home Loan 90
Affordable home loan rate for buyers or refinancers.. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.
interest rate
5.79% p.a.variable
comparison rate
5.81% p.a.
Ongoing fees
$0.00
Discharge Fee
$0.00
Extra repayments
yes – free
Redraw facility
yes – free
Offset account
yes
Maximum loan to value ratio
90.00%
minimum borrowing amount
$50,000
maximum borrowing amount
$2,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Weekly, Fortnightly, Monthly
Special Offers
–
Home Variable Rate
Owner Occupier, Principal & Interest, Refinance Only
interest rate
comparison rate
Initial monthly repayment
5.90% p.a.variable
5.90% p.a.
Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.
Compare
Compare
Details Close
Home Variable Rate
Enjoy a competitive variable interest rate from Up. No application, monthly, annual, redraw, or discharge fees to pay. Up to 50 free offset accounts available. Up home loans are only available to owner-occupiers buying or refinancing in major Australian cities. Up is 100% owned by Bendigo Bank. New joiners get $10 by signing up to the app using code UPHOMEMOZO. (T&Cs apply) Mozo Experts Choice award winner.
interest rate
5.90% p.a.variable
comparison rate
5.90% p.a.
Ongoing fees
$0.00
Discharge Fee
$0.00
Extra repayments
yes – up to $30,000
Redraw facility
yes – free
Offset account
yes
Maximum loan to value ratio
90.00%
minimum borrowing amount
$50,000
maximum borrowing amount
$10,000,000
type of mortgage
Variable
Repayment types
Principal & Interest
Availability
Owner Occupier
Repayment options
Monthly
Special Offers
–
*
WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
**
Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
Mozo provides general product information. We don’t consider your personal objectives, financial situation or needs and we aren’t recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don’t cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
One interesting aspect of the home loan process is the sheer number of individuals you’ll work with along the way.
You don’t just speak to a salesperson and call it a day. Lots of people are involved in what is a very complex transaction.
Aside from salespeople, there are loan underwriters, processors, appraisers, escrow officers, real estate attorneys, and more.
Let’s discuss the roles these people hold to help you better understand what it takes to get a mortgage.
Remember, you’re asking to borrow a large sum of money, so it’s going to take time and energy (and lots of people) to get to the finish line.
The Sales Rep/Loan Officer/Mortgage Broker
The first step in the home loan process typically involves a sales person, which can be a banker at your local branch or credit union, a loan officer, or a mortgage broker.
If we’re talking about a purchase, this may come before/during your home search or after you’ve found your property with the assistance of a real estate agent.
If it’s a mortgage refinance, you’d simply jump right to this step to rework the details of your existing home loan if you wanted a rate and term refinance or a cash out refi.
You might be referred to an individual/company, or you might do your own discovery to find a suitable partner. Either way, always look beyond the referral you were given.
Your real estate agent might know a great lender, but you your own research as well.
It’s important to gather multiple quotes from different companies to ensure you get the best deal.
Now, this individual will be your main point of contact during the loan process, and perhaps most importantly, will provide you with pricing.
Bankers and loan officers work at the retail level, while mortgage brokers offer wholesale rates from their lender partners.
You can read more about the differences (banks vs. brokers) but either way they’ll likely be the person you speak with most.
Aside from providing pricing, these individuals can help get you pre-qualified or pre-approved for a mortgage, discuss different loan scenarios, and guide you on loan choice.
If you have mortgage questions, they should be able to provide answers and give you guidance.
They may make certain recommendations, such as down payment amount, loan type, or provide an opinion about paying discount points or when to lock your rate.
This individual will be with you from start to finish, but doesn’t work alone. They’ve got an entire team to help you close your loan in a timely fashion.
FYI, you may also come across a “mortgage planner,” which is an individual who may assist a busy senior loan officer.
They can communicate loan status, provide follow-up, collect conditions, and perform other tasks if the LO is unavailable or simply needs a hand.
The Loan Processor
Once you’ve spoken to a sales representative (or LO/broker) and have decided to move forward, you’ll be in put in touch with a loan processor.
The main goal of the processor is to put together a clean loan file that can be submitted to the underwriting department.
This means collecting key documents, ensuring there are no red flags, double-checking everything, and making any necessary corrections.
The processor may also reach out after the loan is approved to collect additional documents to satisfy any outstanding conditions.
They will also provide updates to the loan officer or broker, who will then keep you in the loop about where you’re at in the process.
The processor essentially acts as a liaison between the underwriter and sales rep/LO/broker.
This ensures things move along smoothly and any hiccups can be resolved quickly without delay.
The Loan Underwriter
The loan underwriter probably holds the most important role in the home loan process.
They decide if the mortgage is approved, declined, or potentially suspended pending further explanation.
It’s for this reason that the loan processor only sends the loan package to the underwriter once everything has been thoroughly checked.
You only get one chance to make a first impression, so it’s imperative to get it right. Otherwise you could face delays or simply get flat out denied.
Aside from approving the loan, the underwriter will also provide a list of conditions needed to close the loan.
Most mortgage approvals are conditional, meaning you might need to furnish additional information or documentation to obtain your final approval.
Once these documents are provided, whether it’s another bank statement or letter of explanation, the underwriter will clear the outstanding conditions and move the loan to the funding department.
The Home Appraiser
While your loan is being reviewed by the underwriter, an appraisal will be ordered to determine the value of the underlying property.
Remember, aside from determining your ability to repay the loan, the bank also needs to ensure the collateral for the loan is valued properly.
This individual will visit the property to assess its condition, take photographs, and determine recent sales comparisons.
They will formulate a valuation based on the property details, such as number of bedrooms and bathrooms, square footage, amenities, location, lot size, condition, and so on.
The value they come up with, known as the appraised value, is used as the basis for the loan-to-value ratio.
Generally, the goal is for the appraiser to support the purchase price of the property or the value declared for a refinance.
If the value is lower, the details of the loan may need to be reworked, such as a higher down payment.
For certain types of loans, such as FHA loans and VA loans, the home appraiser will also ensure that certain Minimum Property Requirements (MPRs) are met.
This ensures the property is safe for the occupants, that there are adequate living conditions, and no major hazards, such as lead paint or termites.
The Home Inspector
If we’re discussing a home purchase, you’ll want to get an inspection done. And you’ll want to do it ASAP while any contingencies are still in place.
While a home inspection typically isn’t required, they’re generally a good idea.
Aside from finding out what’s potentially wrong with the property, you can ask for credits from the seller if the inspector finds any significant issues.
As the name suggests, a home inspector will come out to the property and assess the condition of the structure itself, the foundation, the interior, the roof, the electrical, HVAC, and more.
Some may also inspect the pool and spa, if one exists, though you could be charged extra.
They’ll make notes as they survey the property and issue a formal report afterwards. This can be used to negotiate with the seller if anything material comes up.
The Notary Public
Once it’s time to sign your loan documents, you’ll need to make an appointment with a notary public.
This individual serves “as an impartial witness” when signing important documents, such as those related to a home purchase or mortgage loan.
Your settlement agent should organize a time to meet with this individual to conduct your signing.
The notary may come to your home or meet you somewhere else to review and sign documents.
The main job of the notary is to verify the identity of the signer and ensure they are willing to sign the documents “without duress or intimidation.”
This requires you to furnish identification, such as a driver’s license, during the signing appointment.
The Escrow Officer
Another very important individual in the transaction is the escrow officer, a third-party who facilitates the loan closing and collects/disburses funds to the appropriate parties.
Some of their key roles include preparing final statements for the buyer, such as cash required to close, and determining costs such as property taxes, insurance, prepaid interest, and loan payoffs.
The escrow officer will send you a settlement statement that lists all the fees and closing costs associated with your loan, along with any lender credits and loan payoffs and funds required.
They will also liaise with a title company and forward necessary documents for loan recording.
Importantly, they’ll provide wiring instructions to all parties, including the buyer, so you know where to send funds (cash to close).
If you have questions about things like prepaid items, mortgage impounds, and loan payoffs, they can be particularly helpful.
The Title Agent
To ensure the property is free of any liens, encumbrances, or defects, a title insurance policy is usually required in order to take out a mortgage.
A title agent is the individual who conducts a title search, orders a preliminary title report, and eventually issues title insurance on the subject property. This makes them a licensed insurance agent
They are also in charge of recording the deed and loan documents with the county once the loan has funded.
You might hear the words title and escrow used interchangeably, but title has to do with property ownership/lien history, while escrow is about the calculation, collection, and disbursement of funds.
However, they may perform other settlement tasks beyond just title depending on the state where they’re located.
The Loan Closer/Funder
If you’ve made it this far, it means the loan is almost funded. But there’s still work to be done.
The loan closer/funder has to review the file to ensure everything is accurate and complete, and if not, address and fix any errors or outstanding issues.
They must ensure all prior to funding (PTF) conditions are satisfied and work with the settlement agent to prepare funding figures and timing of disbursement.
This includes the review of signed closing documents and items like hazard insurance and the preliminary title report.
And if everything looks good, request the wire instructions from escrow after a thorough review.
The Real Estate Attorney
Note that in certain states, a real estate attorney could be required to prepare certain documents and/or to conduct the loan closing.
This individual may order and certify a title report, review loan documents, and advise you if necessary.
Beyond that, they can ensure the interests of all parties are protected, and handle any legal issues or disputes that may come up.
One last thing. You may find that there is some overlap with a title company and escrow company, as the former can also provide escrow and notary services as well.
So depending on where you live, you could have one company or individual handle several tasks.
As you can see, there are quite a few people involved in the funding of a home loan, which explains why they take a month or longer to close.
Once you know more about each person’s role, it should be easier to navigate the home loan process and make better sense of it all.
And perhaps adjust your expectations that there isn’t a same-day mortgage and likely won’t be for the foreseeable future.
Buying insurance coverage helps keep you protected from the full financial fallout of an accident or injury. But even with insurance, you’ll probably still be responsible for some costs when you file a claim.
An insurance deductible is the amount of money the insured party is responsible for at the time of loss or damage: it’s the cost you have to pay before the insurance company pays out its share.
Here’s what you need to know about the different types of insurance deductibles and other insurance-related costs you may face.
What Is a Deductible?
When you buy insurance, you’ll encounter several different costs depending on the type of coverage you’re purchasing. These may include monthly premiums, copays, out-of-pocket maximums, and possibly others.
The vast majority of insurance policies, whether they’re auto, health, or homeowners, carry a deductible. So what is a deductible, and how does it work?
The deductible is a sum of money you, as the insured party, are expected to pay toward a loss. Another way to think about it: It’s the amount the insurance company deducts from the total claim and asks you to pay.
For instance, say you get into a car accident in which you sustain $8,000 worth of damage and you have a $1,000 deductible. When you file your claim, you’ll pay $1,000 toward repairs and the insurance company will cover the remaining $7,000 (or up to whatever limits are laid out in your insurance contract).
Your deductible can be a fixed dollar amount or a percentage, depending on your individual plan and the kind of insurance policy you’re talking about. Homeowners insurance, for instance, is commonly offered with deductibles calculated as a percentage of the property’s total insured value.
It’s important to understand that your deductible is separate from your premium, which is the amount of money you pay each month in order to keep your insurance policy active.
Also remember that you may also be responsible for other insurance-related expenses, like copays or coinsurance, so always read the fine print carefully. 💡 Quick Tip: If you have a mortgage, a homeowners policy may be required by your lender. Surprisingly, unlike auto insurance, there is no legal mandate to carry insurance on your home.
Copay vs Deductible
With certain types of insurance — primarily health insurance products — you may be required to pay a copay each time you go to the doctor’s office or receive a covered service. This copay is separate from your deductible, and, generally, your copay doesn’t count toward your deductible amount.
As with other types of insurance, the health insurance deductible must be paid by the insured person before the insurance company begins its coverage. However, individual health plans may cover certain services, such as regular check-ups, even before the deductible is paid in full.
Here’s an example: Say you twist your ankle and visit your doctor, who orders an MRI. If your copay is $25, you’ll pay $25 at the office before or after you see your physician. If the total cost of the doctor’s care and imaging services is $1,000 and you have a $500 deductible, you may still be responsible for the full $500. Any copays you’ve paid along the way won’t be subtracted from your deductible.
Some plans may carry a coinsurance cost rather than a copay. The two are similar, but not identical. Coinsurance is an amount you pay when you receive a medical service, separate from your deductible. Unlike copays, which are charged at a fixed dollar amount, coinsurance is calculated as a percentage of the total cost of the service. Your plan might even include both copays and coinsurance.
All insurance policies are different, and your individual costs and experience may vary depending on the services you’ve received and the specific coverage you have. You can consult your insurance paperwork or contact your insurer for full details on what’s covered in your plan.
Out-of-Pocket Maximums
Health insurance policies in particular are subject to federally mandated out-of-pocket maximums. This is the highest total dollar amount you’ll have to pay toward covered healthcare over the course of a single year, including both deductibles and copays.
The out-of-pocket maximum does not include the amount you pay toward your monthly premium, however. Nor does it include out-of-network services or services that your plan expressly does not cover.
For 2023, the out-of-pocket maximum for a Marketplace plan can’t be more than $9,100 for an individual or $18,200 for a family. In 2024, that limit rises to $9,450 for an individual or $18,900 for a family. (The maximum is allowed to be lower, however, so consult your plan paperwork for full details.)
Do You Want a High or Low Deductible?
When shopping for insurance coverage, you’ll likely have a range of options to consider, including varying deductible costs. And when it comes to figuring out whether you want a high or low deductible, the answer is: It depends.
Generally speaking, the lower your deductible, the higher your premium will be and vice versa. This makes sense when you think about it. If you have a low deductible, the insurer will have to pay out a higher amount when you incur a loss. So in exchange for the promise of covering most of the costs when a claim is filed, the company expects you to pay more up front in the form of a higher premium.
While choosing a higher deductible can help you save money over time since your monthly premiums will be lower, it also means you’re assuming more risk. If something happens and costs are incurred, you’ll be responsible for a larger share of those expenses.
On the other hand, choosing a lower deductible means you’ll likely pay a higher premium each month. But you’ll also have less to worry about if you do need to file a claim, since the insurance company will cover more of the costs (assuming that all the damages and expenses are covered under your policy).
As with so many other financial matters, what’s right for you comes down to a number of factors, including your risk tolerance, budget, and even your lifestyle. If you participate in extreme sports, for instance, and are at risk for catastrophic injuries, you might want to pick a health insurance policy with a lower deductible and higher premiums.
Recommended: How Much Is Homeowners Insurance?
Zero-Deductible Insurance: Is It a Thing?
You may see ads for zero-deductible insurance policies and wonder if they’re too good to be true. While zero-deductible insurance policies do exist, they usually carry higher premiums than policies that do carry deductibles, and you may also be responsible for a one-time no-deductible fee or waiver.
Furthermore, some insurance coverages are required by state law to carry a minimum deductible, particularly when it comes to auto insurance.
Before you sign up for any kind of insurance coverage, be sure to read the contract thoroughly to ensure you understand what costs you’re responsible for.
Recommended: What Does Auto Insurance Cover?
Types of Deductibles
There are many different types of insurance policies with deductibles on the market. Common ones include:
• Health insurance deductibles
• Auto insurance deductibles
• Homeowners insurance deductibles
• Renters insurance deductibles
• Life insurance deductibles
The deductible amount varies by type of insurance, company, and plan, among other factors. 💡 Quick Tip: Online insurance tools allow you to personalize your coverage for homeowners, renters, auto, and life insurance — all with zero paperwork.
The Takeaway
Purchasing insurance is an important — and sometimes legally mandated — step toward protecting yourself from the high costs of personal accidents, property damages, and medical bills. But most policies involve set costs, including deductibles. This is the portion of the claim the insured party is responsible for paying.
Whether you’re comparison shopping or switching from your current plan, it’s important to understand what your deductible will be. Having a full picture of all the costs involved can help you find coverage that fits your life and finances.
When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.
Find affordable auto, life, homeowners, and renters insurance with SoFi Protect.
Insurance not available in all states. Experian is a registered service mark of Experian Personal Insurance Agency, Inc. Social Finance, Inc. (“SoFi”) is compensated by Experian for each customer who purchases a policy through Experian from the site.
Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
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Here’s how this social worker has paid off $28,000 of student loan debt in 15 months.
Today, I have a great debt payoff progress story to share from Taylor. Taylor is a social worker who is working on paying off $277,000 of debt and retiring early. She shares tips on how she is cutting her expenses, the ways they’ve increased their income through various side hustles, house hacking advice, and how she qualified for an $88,000 student loan award.Enjoy!
Now, don’t let the title deceive you into thinking we are debt free; we most certainly are not.
As of this writing, we still have $251,195.39 of debt (all student loans).
This is our story about the debt payoff strategies we used in paying off $28,026.02 of debt and our goals for the future!
Who are we?
My name is Taylor, and I am a 29-year-old medical social worker who finished grad school in 2018. I am also a part-time social media coordinator and with both jobs combined, I make $96,000 (gross).
I live with my husband, Bret, who I have been with for 11 years and married for 3. He is a full-time student and has been in grad school since September 2020 (he has about 2 more years left). We love to travel, try new restaurants, hang out with our friends and family, and just have a good time.
I also have a blog at Social Work to Wealth.
Related articles:
How did we get here?
First, I need to give you some background before we get into the nitty gritty of our debt numbers and payoff strategies.
2012: We met when both of us were in college. I was 18 and Bret was 22. Soon after we met, Bret took a few years off from school while I finished my bachelor’s. I relied entirely on student loans, and don’t remember applying to any scholarships. When Bret returned to school to finish his bachelor’s, he did receive some scholarships and worked a summer job to pay forhousing but still needed to rely on student loans to pay the bulk of his tuition.
I will speak for myself when I say I didn’t take the time to calculate how much loan money I actually needed and blindly accepted the total amount. Looking back, maybe I would have needed it all or maybe not, but I wish I would have at least done the exercise.
We have always been open with talking about our debt and money in general, but I remember us both expressing the thought that we would probably always have our student loans. We would just live our life, pay our minimum payments, and that would be that. There was never any talk about debt payoff strategies, or any money management strategies, really.
We went through many life transitions. Living apart for two years while I went to grad school, him returning to school to finish his bachelor’s, various jobs, and a post-bach program.
2019: Bret was finishing up his post-bach program and got accepted into grad school. We were newly engaged and began planning and saving for our wedding scheduled for July 11th, 2020. Such exciting stuff!
March 2020: We got the news our wedding venue was closing for the foreseeable future due to the COVID-19 pandemic, and we decide to cancel our wedding. We switched gears and used the money we saved for a down payment on a new home. Then, we had a small intimate wedding featuring a hot-air balloon with 18 of our closest family members! We personally saved a ton and also had tremendous help from our family.
September 2020: I start a new job and Bret starts grad school. We are newlyweds and settling into our new home in a new city.
I wish I could talk more about 2020 because it was a HUGE year for us with buying a home, moving, getting married, Bret starting grad school and me starting a new job, but that’s a conversation for another day!
From frugal to spenders
When we were saving for our wedding, we were very frugal. Any extra money we had, we put toward our wedding savings (which again, ended up being used for the down payment on our house and a smaller wedding ceremony).
We went from frugal to swiping our cards left and right to prepare for our wedding and furnish our house. It was sooo nice to finally be able to spend the money we had been saving for so long! But this continued into 2020… and 2021…
We were mostly spending on eating out and experiences. We do like to buy “things” but we definitely value food and experiences a lot more. We even decided to put a trip to Hawaii on our credit card costing us around $5,000, along with other expenses, because why not? We deserved it!
We didn’t have much of a budget, our bills were getting paid, but the credit card bill kept increasing. Since I was the only one bringing in income, we took out some student loans to help with a portion of our living expenses. And the credit card bill continued to increase.
The “wake-up call”
The “wake-up call” is such a theme throughout many debt payoff stories. So, here’s mine.
I went to breakfast with two friends in December 2021, and one of them brought up high-yield savings accounts (HYSA). I had never heard of this type of account before and was shocked to learn that these savings accounts had a way better interest rate than a regular savings account.
How was I just hearing about this at 28 years old? My mind was blown!
I thought, what else don’t I know? So of course, that led me to deep dive into the world of personal finance. I consumed any book, video, blog, or podcast I could get my hands on. I read stories after stories of people paying off thousands of dollars’ worth of debt, leveraging credit card points for free travel, investing, and so much more!
It was so motivating. I was hooked! (And still am.)
Bret was open and willing for me to share with him what I was learning. We started realizing that for the last year and a half, we hadn’t been telling ourselves “No”. We had just been buying whatever we wanted, and we had the credit card bill and no savings to show for it.
We learned that we could pay off all our debt and it didn’t have to stay with us forever. We learned there was a way to use a credit card responsibly (we thought we were). We learned that we could even retire early. That one sounded real nice! We dreamed of having more time doing our hobbies, traveling and being with our friends and family. And if we ever had kids, we dreamed of being able to work part-time so we could be home more with them and available for school activities.
Knowing this, we started reining in our spending, trying to just be more “mindful”, but no major change was made.
We take on more debt
April 2022: People in our neighborhood were getting new fences. We started thinking, “Hey, we need a new fence, too…” In some areas it was broken, it hadn’t been stained so was rotting, and was 15 years old. We were also going to get an updated appraisal to see if we could get our primary mortgage insurance (PMI) removed after just two years of owning our home and thought a new fence might help.
A coworker told me she was using a home equity loan to buy a fence and to do some other home renovations. We investigated options and ended up opening a $20,000 home equity line of credit (HELOC) instead with about a 4% interest rate. We buy our fence which ends up being about ~10,000 and we were set on it…
The second “wake-up call”
When it was all said and done, we loved our fence. We still love our fence, it’s beautiful! (And it better be at that price!) We stained it and we believe it will last us for many years.
But we start talking again about our debt and how we probably didn’t need this fence right now. We know we didn’t need this fence right now. Our PMI was removed, and it could have maybe happened even without the fence. Who knows.
We began thinking we need to make some serious changes in the way we manage our money. We need to do more than just be “mindful” about our spending. We make a real plan. We plan to make an actual budget, stop taking on unnecessary debt, and take a break from using our credit cards for the foreseeable future.
May 2022: Beginning of our debt payoff journey
Since we were serious about our new money management changes, I documented how much debt we had so we could track our progress.
$277,721.41
Here was the breakdown:
$260,390.25 in student loans, Bret & I’s combined – various interest rates
$10,676.24 HELOC – 4% interest rate
$5,430.76 is from credit card spending – 4% interest rate*
$449 for furniture – 0% interest rate
$775.16 for Peloton bike – 0% interest rate
*We moved our credit card debt to our HELOC since our credit card was around a 25% interest rate.
July 2023: Current debt numbers
Our current debt balance is $251,195.39, * which are all student loans.
We have paid off a total of $28,026.02 of debt!
*Our current balance will increase to ~$255,000 once Bret gets his final student loan disbursement (more on that later).
I want to also mention that we do have our mortgage, but we aren’t trying to pay that down as quickly as possible for a few reasons: we have a 3% interest rate, we don’t plan on this being our forever home, and one day we might rent it out or sell it.
Actions that helped us pay off $28,026.02 of debt in 15 months
We found a budgeting method that worked for us
We realized we could live off my income alone and not take on anymore debt, but we would have to have a somewhat rigid budget.
Finding a budgeting method that worked for us took some time. I don’t know how many times over the years I have tried to track my expenses in a budget app or an excel sheet, only to find out it was too overwhelming and that I was still overspending!
I am a visual person and learned about the envelope budgeting method, so we decided to give that a try, but use a digital variation.
So, for our entire money management system we have 4 checking accounts and 2 savings accounts (short-term and emergency fund). Our checking accounts include bills, food and miscellaneous, and two personal spending accounts.
This may seem like a lot of accounts to some, but it has worked tremendously for us. I love having a separate account for each major category in our budget so I can easily see how much money we have left in a certain category without having to add every expense into an app or Excel spreadsheet. We are joint owners on all of these accounts.
We then use the zero-based budget method to determine how much goes into each account.
We do have multiple cards to manage, but the pros VERY MUCH outweigh the cons here.
And with our own spending accounts, we have a certain amount of money allotted to us each month, so we individually have some spending freedom. We don’t have to feel guilty and know this money is set aside specifically for our personal spending.
Cut expenses and increased our income
I know some people are tired of hearing about this recommendation, but it’s something that really did help us! We reined in our spending a bit but mostly we had to increase our income. At a certain point, there wasn’t much more to cut.
We didn’t have many streaming services, started to limit our eating out, we didn’t have car payments, and we meal planned and prepped. We did (and still do) aaalll the things. We had to increase our income somehow.
Ways we increased our income
My income increase
I continued with my second job as a social media manager and then started dog sitting.
I have been dog sitting for about 5 years and have primarily used the Rover platform to list myself as a dog sitter. I like this app because it’s easy to use and I can specify various services to offer (e.g., house sitting, boarding, drop in visits, day care, or dog walking).
It also allows me to mark which days I am available and then people reach out to me if I seem like a good fit and my availability matches with their needs! Setting up my profile took some time, but now that it’s done, everything else is fairly low maintenance.
I now just have to respond to inquiries in a timely manner and set up a meet and greet if it seems like a good fit.
I currently only offer house sitting and on Rover and I charge $65/night. Rover takes a cut, so I end up pocketing $52. I also have private clients who pay me directly, and I have gotten those by referrals from past Rover clients. I charge my private clients $40/night.
I recently increased my rates on Rover and have been slow to increase my price with my private clients because they’re loyal.
I don’t make a ton of money dog sitting, but I am able to make a couple hundred dollars a month. My schedule is very limited, but there are people with better availability who make significantly more than I do!
I love animals and we don’t have any due to our sporadic work schedules, so it’s a great way for me to spend time with pets and get paid, too!
Bret’s income increase
Last year, Bret decided to take a break from grad school and soon after, he was offered a summer job in Alaska.
When we first started dating, he used to spend almost every summer there working for a family who owned a set-netting fishery. His uncle had spent many summers in Alaska working for this family and one summer brought Bret to work with him. They would catch salmon and sell it to a buying station in their area.
He went up there for about 6 summers in a row, until he got too busy with school and couldn’t go anymore.
He hadn’t been to Alaska in over 5 years, but someone who worked for the buying station remembered Bret, called him, and asked if he’d be interested in working at the buying station! Since he was already on a break from school, he said yes and worked up there for 8 weeks.
We were able to put every paycheck he earned towards our debt because we could manage all our expenses on my income alone. It was also a great way for Bret to spend part of his summer and I was finally able to visit as I never gotten the chance in previous years.
House hacking
We also started house hacking! We had a spare bedroom and bathroom I would use for my office and occasionally, for guests. A friend of mine and her husband are really into the real estate space and gave us the idea to rent it out.
We weren’t comfortable with the idea of having a long-term roommate, and with both of us working in healthcare, we knew there was a need for short-term and furnished housing for travelling healthcare professionals.
For us, short-term meant renting for 1-6 months, but we were open to individuals staying longer if it worked well for everyone involved!
Some questions we had to address before renting:
Did we need a permit?
How much should we charge for the deposit, rent and pets?
What furniture and amenities are important for travelers?
Where should we list the room?
How to create a lease agreement?
In our county, we did not need a permit to rent out the room if we were renting for at least 30+ days at a time.
After researching rental prices in our area, I found rooms that were of similar caliber listed for $1,100 per month or more. We wanted to be competitive and so we initially settled on $900 per month and have steadily increased it. We have now landed on $995 per month which includes all utilities and internet.
We set the deposit at $995, with an additional $300 for a pet deposit, and no ongoing pet rent.
We wanted to upgrade the furniture in the room and IKEA was a great place for us to find affordable, durable, and aesthetically pleasing furniture. We made sure the room had a bed, large dresser, bedside table, and we kept my desk in there too.
I read it’s important for travelers to have their own TV available so they can unwind in their room. We were able to find a decently priced smart TV off Facebook Marketplace.
Furnished Finder is where we decided to list our room, which started out as a platform for traveling nurses to find furnished housing. It is now used heavily by many healthcare professionals, students, and professionals in other fields.
Travelers reach out to us through the Furnished Finder website and if the dates work out, we move forward with scheduling a video interview. It’s important for us to be able to talk to the person, even if it’s just over video, and we want them to see our faces and home in real time as well.
For the lease agreement, we used ez Landlord Forms, because they have leases for each state with specific information on what’s required to include.
We don’t ask for anything major from tenants. The most important things to us are that they are respectful of our space, don’t smoke in the house, and pay their rent on time. We also added a page at the end for tenants to add two emergency contacts in case we need to call someone on their behalf.
We have had 4 renters so far with the room being occupied for 13 out of the last 14 months. It has really helped us with our debt payoff goals and we have also met some awesome people through the process! We plan to continue renting it out for the foreseeable future.
Applied for in-state student loan help
My state offered a program called the Oregon Behavioral Health Loan Repayment Program where they help minorities in the behavioral health field, or those who serve them, pay back their student loans.
This program is funded by The Behavioral Health Workforce Initiative which has the goal of recruiting and retaining behavioral health providers who, “Are people of color, tribal members, or residents of rural areas of Oregon, and can provide culturally responsive care for diverse communities.”
To apply, I had to show I was employed and actively providing behavioral health services and give them detailed documentation about my student loans. I also had to answer two essay questions related to being a part of and/or working with communities who are underserved and how my training has equipped me with supporting these communities.
I applied last year and was a recipient of an award!
As a recipient, there is a two-year service commitment which means I have to continue providing some sort of behavioral health service during that time frame (which I planned to). Over the next two years, I will be getting ~$88,000 in quarterly disbursements to put towards my student loans. So far this year, I have received ~$11,000, and it’s been life changing to say the least!
Alongside this support, I am also pursuing Public Service Loan Forgiveness (PSLF) for additional student loan relief.
Managing our mental health while paying off debt
Since I am a social worker, I often think about how money and debt affect individuals’ mental health. It’s one of the reasons why I started my blog in the first place.
I realized managing money is a universal task and many of us don’t know what we are doing because talking about money is taboo. And when you have financial stress, it can really take a toll on your mental health. So, I wanted to share our journey in hopes of helping others.
Bret and I aren’t those individuals who want to avoid eating out and fun experiences until we are debt free. And, we are also privileged to not have to take those extreme measures either. It has been important for us to make this journey sustainable and not deprive ourselves of experiences while we are going through it.
Here’s how we are making our journey sustainable:
Still going out to eat
Budgeting for personal spending money, aka fun
Setting realistic debt payoff goals
Putting aside money for travel
Not comparing and thinking other people are better than us because they’re able to pay off their debt quicker
Tracking our debt payoff progress (we use Excel). With so much debt left to pay off, being able to see our progress is really motivating
Openly talking about our debt. Avoidance is a coping mechanism for many, for us, acknowledging and addressing it has been so freeing (but it wasn’t always this way).
Talking about our dreams and reminding ourselves why we want to do this in the first place
We know that if we eliminated going out to eat, budgeting for fun, or both, we could be paying off our debt much quicker. However, that sounds miserable to us. It’s worth it to still go out to dinner, travel, or buy plants (in my case) than to deprive ourselves of the joy these things bring.
We are making great progress and we know in time, we will be debt free.
Our debt payoff journey is not linear
A few months ago, we decided to take out $6,000 of student loans. Bret currently has a full tuition scholarship, so we are tremendously lucky in that regard, but he just learned about some conferences that would be really helpful to his professional growth. We have gotten $1,500 of this loan money already which is included in our current debt balance, but we haven’t received all of it yet.
We could have pinched and saved to avoid taking on any of this debt, but that would have caused me to work more than I currently am. Again, not in line with our current goal of making this journey sustainable!
We were very intentional about how much to take out. We estimated how much he would need for a few conferences and declined the rest. We even opened a separate savings account for the money to make sure it didn’t get accidentally spent on anything.
I’m SO proud of us for that!
The goal here is progress not perfection. So cliche, I know. But we are learning how to think critically about our money, spend thoughtfully, use our money as a tool to reach our goals, and enjoy our life along the way. And right now, that meant taking on a little more debt.
We are moving in the right direction, and we know when he starts working, that will really accelerate our debt payoff journey since we have proven to ourselves we can live on my income alone.
Our plan going forward
Bret is still in school which means his loans are on deferment, so we currently have his on the back burner.
With the loan payment assistance I am receiving, it’s allowing us to put any extra money we have each month towards our savings. Our priority right now is building up a good emergency fund of about $16,000 (~4 months’ worth of expenses).
This has been difficult because of inflation and just little emergencies that keep popping up, but we are slowly making progress.
I am also prioritizing investing in my employer retirement plan, but only up to the amount that gets me my employer match which is 6% of my income.
Bret will be graduating in 2025, so at that time, we will pivot to incorporating his loans into our budget. Our goal is to be debt free by 2028.
It will take a lot of discipline and persistence, but I think we can do it. I am manifesting it!
We want to continue to learn, implement, and grow. We want to keep having transparent discussions about money and building our money foundations. And I personally want to continue sharing our journey with hopes of inspiring, encouraging and educating others. Here’s to sharing the wealth.
Do you have debt? What are you doing to pay it off?
Taylor is a social worker and personal finance blogger at Social Work to Wealth where she shares tips, resources, and lessons learned on her family’s journey to paying off $277,000 of debt and retiring early. She hopes to inspire and empower social workers with financial education so they can have a better relationship with their money. When she’s not working or blogging, you can find her traveling, gardening, trying a new restaurant, or buying too many plants.