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How to Win a Bidding War

In housing markets teeming with buyer demand, it’s not uncommon to put an offer on a home, only to be outdone by a competing offer. If two or more potential buyers want a property badly enough, they may find themselves locked in a bidding war.

Here’s what you need to build your toolkit to increase your chances of winning the war.

Know How It Works

Bidding wars usually take place in seller’s markets, when demand outpaces supply. They also typically occur when there are multiple interested parties and when there is some other sort of constraint, such as timing.

When a real estate agent receives an offer for a property that has attracted a lot of interest, the agent will usually contact other interested parties to let them know. The agent may then set a date by which would-be buyers should make their highest and best offer.

Often the highest offer is the winner, but there are other factors a seller may take into account.

Line Up Your Financing

One of the best things you can do to be prepared for a potential bidding war is to line up your finances ahead of time.

Be sure to know how much mortgage you can afford, including a down payment and monthly payments. Talk with lenders to see if you qualify for a mortgage and to familiarize yourself with what types of loans that are available to you.

Look into the things you can do ahead of time to help you qualify for a home loan, such as improving your credit score and maintaining a good debt-to-income ratio.

Show Your Preapproval Letter

Getting preapproved for a mortgage shows that you are a serious candidate to buy a home and signals that you’re willing to see the process through to the end.

The preapproval process is more rigorous than prequalifying for a mortgage. Lenders will take an in-depth look at your income, employment history, assets, and debts. They will also make a hard inquiry into your credit history to determine whether they are willing to give you a loan.

Preapproval shows that you will be able to borrow enough money to cover the cost of the home. Just be sure that the preapproval documents are for the home you want to buy specifically.

Your chosen lender can customize a preapproval letter for you.

Drop Contingencies

Contingencies are certain conditions that must be met before a real estate deal becomes binding. Potential buyers can back out of a deal without penalty if these contingencies aren’t met.

A clean offer, one with as few contingencies as possible, could be quite attractive to sellers in a competitive market.

A common contingency is the inspection clause, which allows a buyer to have a home professionally inspected to determine whether any repairs need to be made.

That contingency gives the buyer a chance to renegotiate the sale price. For example, if an inspection uncovers cracks in the home’s foundation, a buyer might request a reduced price to cover the cost of repair.

Waiving the contingency shows your willingness to move forward with the deal, but it also comes with risk. If you do discover that the home needs repairs, you may be on the hook to cover the costs yourself.

Be Quick About Your Appraisal and Inspection

Sellers want to avoid spending too much time with a potential buyer, only to have the deal fall through. Do what you can to have your appraisal and inspection done right away. Being prompt gives sellers less cause to worry that they’re taking the home off the market and potentially missing out on better offers.

Use an Escalation Clause

Perhaps unsurprisingly, one of the best ways to win a bidding war is by offering more money. Before you up your offer, be sure that your lender is OK with the plan.

You may want to include an escalation clause in your real estate contract. The clause asserts that if another buyer makes a competing offer, your bid will automatically increase by a certain amount, up to a predetermined limit, to exceed the new offer.

Say you put a $300,000 offer on a home, with an escalation amount of $5,000 and a ceiling of $330,000. If someone else then bids $310,000, you will automatically bid $315,000, up to your ceiling.

Escalation clauses are usually added when buyers assume there will be multiple offers on a property.

Stay Flexible

A willingness to be flexible can give you a leg up in the eyes of a seller.

For example, a seller might be moving across the country for work and need to close by a specific date. So if you can get the appraisal and inspection done swiftly, that could be a huge plus.

Alternatively, sellers may need to stay in the house for a little bit of extra time. Working with them on their specific needs could give you an edge.

Pay With Cash

If you are able to do it, paying with cash can be very attractive to sellers.

The cash-buying process is typically much faster than going through a lender, and sellers don’t need to worry about financing issues that might hold up the deal or cause it to fall through.

It’s even possible that a seller would choose a cash offer over a slightly higher offer backed by a mortgage.

Increase the Size of Your Deposit

A buyer puts an earnest money deposit down to secure the real estate contract. It tells the seller that you are serious about buying the house—so much so that you’re willing to put your money where your mouth is.

Increasing the size of the deposit can emphasize this point. Be sure that you meet all your deadlines and contingencies so you have a better chance of retrieving your deposit if the contract were to fall through.

Write a Personal Letter

When sellers are choosing a buyer during a bidding war, they’re often just looking at numbers on a page. Consider writing an offer letter to humanize the transaction.

As you write your letter, share personal details about what makes you the ideal candidate to buy the home. For example, perhaps you believe it would be the perfect place to raise a family.

You may want to note things you have in common with the sellers. You’re a ceramicist and noticed an artist’s studio in the backyard. You have dogs; they have a dog door. That big elm reminds you of one you had at your childhood home.

Be complimentary about the things you like about the house and how it has been maintained. And be sure to keep the letter concise.

The Takeaway

What to know when buying a house? For one, how to anticipate and win a bidding war. With a few simple tactics, you can tip the odds in your favor.

As noted, getting prequalified and preapproved for a mortgage are essential prep in a hot market, when homes often have many suitors.

See what SoFi has to offer. The first step is to find your rate.

Apply for a mortgage with SoFi today.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.

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


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What’s the Difference Between Homeowners Insurance and Title Insurance?

When purchasing a home, there can be a million questions that need answering, especially when it comes to getting the proper insurance to protect such an important investment.

Soon-to-be homeowners may see both title and homeowners insurance on the lending documentation and wonder what the difference is between the two.

Both types of insurance can provide vital coverage for homeowners, but they differ vastly in their purpose and protection.

What Is Homeowners Insurance?

Taking out a homeowners insurance policy protects a home, as well as personal property, from either loss or damage. It may also provide insurance in the event someone is injured while they are on the property.

Some common things homeowners insurance may cover are:

•   Damage that may occur in the home, garage, or other buildings on the property.
•   Damaged, lost, or stolen personal property, such as furniture.
•   Temporary housing expenses if the homeowner must live elsewhere during home repairs.

Homeowners insurance may also cover the following claims depending on what a specific policy covers.

•   Physical injury or property damage to others caused by the homeowner’s negligence.
•   An accident that happens at home, or away from home, for which the homeowner is responsible.
•   Injuries that take place in or around the home to any person who is not a family member of the homeowner.
•   Some coverage may apply to lost or stolen money, jewelry, gold, or stamp and coin collections.
•   Damage or loss of personal property in storage.

Buying Homeowners Insurance

While someone can legally own a home without taking out homeowners insurance, the mortgage loan holder may require the homeowner to purchase an insurance policy. Typically, lenders do require this as a condition of the home loan. When shopping for homeowners insurance, there are a few things that can be worth keeping in mind.

The cost of homeowners insurance can vary depending on the value of the home and personal belongings, as well as the desired coverage.

To begin, it’s important to understand that homeowners need to insure the home, but not the land underneath it. Some natural disasters—tornadoes and lightning, for example—are covered by typical homeowners policies. Floods and earthquakes, however, are not.

Homeowners in an area where floods or earthquakes are common may want to consider purchasing extra insurance to cover damages from potential disasters. Checking your policy for specific coverage is recommended.

Special coverage may also be worthwhile for those who own valuable art, jewelry, computers, or antiques.

Buying just enough coverage to replace insured property can save money. There are typically two policy options available to homeowners, “replacement cost coverage” and “actual cash value.” The former covers the cost to rebuild the home and replace any of its contents. The latter simply pays the current value of the property at the time of experienced loss.

Actual cash value will oftentimes pay less than replacement cost coverage, because any age or wear to the home can lower the value.

When it comes time to shop for homeowners insurance, asking trusted friends, family, or financial advisors for their recommendations can be a good place to start. Searching for homeowners insurance companies online can be helpful, too, as it’s possible to consider customer reviews when doing so.

Before making a final decision, it can be worthwhile to contact multiple companies and request quotes in writing to compare their offerings. That process can give a good idea of who is offering the best coverage for the most affordable price.

What Is Title Insurance?

Title insurance provides protection against losses and hidden costs that may occur if the title to a property has defects such as encumbrances, liens, or any defects unknown when the title policy was first issued.

The insurer is responsible for reimbursing either the homeowner or the lender for any losses the policy covers, as well as any related legal expenses.

Title insurance can protect both the homeowner and lender if the title of the property is challenged. If there is an alleged title defect, which the homeowner may be unaware of at the time of purchase, title insurance can provide protection to cover any losses resulting from a covered claim.

The policy will cover legal fees incurred if there is a claim against the property.

Buying Title Insurance

Both home buyers and lenders can purchase title insurance. If the home buyer is the purchaser, they may want to insure the full value of the property (the value of the property will affect how much the policy costs). When the lender is the purchaser, they typically only cover the amount of the homeowner’s loan. When it comes time for a home buyer to purchase title insurance, it’s worth noting that they have full choice of the insurer.

According to the Real Estate Settlement Procedures Act (RESPA) of 1974, the seller cannot require the home buyer to purchase title insurance from one certain company.

Lenders are required to provide a list of local companies that provide closing services, of which title insurance is just one. But it may be worth doing independent research, as lenders may not select their recommendations based on the home buyer’s best interest, but instead because a service provider is an affiliate of the lender and provides a financial incentive in exchange for a recommendation.

Again, seeking the counsel of friends and family and doing online research may help uncover competitive prices and learn which service providers have a solid reputation.


In short, title insurance can protect against losses caused by defects in the title and is a one-time fee payable during the closing process. Homeowners insurance, on the other hand, is an ongoing cost (billed monthly, quarterly, or annually) that helps cover damage or loss of the home and possessions within the home.

The advantage to having both types of coverage is that each policy can protect homeowners against financial loss in very different circumstances.

Learn more about mortgage loans with SoFi today!

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.


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Pros & Cons of Having a Dual Agent

So you’ve decided to buy a home. Luckily, there’s a pro out there who can help with showings, home loans, negotiations, and inspections: a real estate agent. But what if that person also works for the seller? That is called dual agency, and there’s a lot to consider before agreeing to the arrangement.

Here’s what future homebuyers need to know about dual agency so they can decide what path is right for them.

What Is Dual Agency?

A dual agent represents both the buyer and seller in the same real estate deal. Dual agents are also sometimes referred to as transaction brokers.

Dual agency can be controversial and is banned in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, and Vermont.

Other states do not explicitly make it illegal, but some do warn against using a dual agent.

For example, the New York Department of State issued a memo advising consumers to be extremely cautious when signing on with a dual agent because in doing so they forfeited their right to an agent’s loyalty.

However, in every state where dual agency is legal, the law requires agents to disclose their work with both the buyer and the seller. Both buyer and seller must agree to use a dual agent and sign a consent form indicating they understand what they are agreeing to.

Dual agency may also refer to deal-making of seller’s agents and buyer’s agents at the same real estate company.

For example, Keller Williams, one of the largest real estate firms in the nation, has both seller’s and buyer’s agents. If one of its seller’s agents puts a home on the market, there’s a decent chance that one of its buyer’s agents may have a client for the property.

This is less controversial and poses fewer issues as it is still two separate people overseeing the seller’s and the buyer’s interests.

What Are Agents’ Fiduciary Responsibilities?

Real estate agents are legally bound to represent the best interests of their clients. This means agents are to disclose any information they have that may or may not help their clients in the negotiating phase.

The obligation to disclose could pertain to information on inspection reports, defects with the house, or anything else that affects the property’s value.

While representing a buyer, an agent must also disclose any existing relationship with the seller.

A seller’s agent must disclose any relationship with potential buyers and all offers made on the property—unless, in general, the seller has instructed his agent in writing to withhold certain kinds of offers.

Real estate agents are also expected to put their clients’ financial best interests above their own. This could mean putting in an offer below asking price, which would reduce their own commission.

With all of that in mind, it becomes clear that issues of loyalty and confidentiality become challenging in a dual agency situation.

Pros of Dual Agency

Smoother communication: Having one agent representing both the buyer and seller could help create a smoother communication path. Because the person represents both parties, they may be able to speed up any negotiations. In this case, the dual agent may also better understand both the seller’s and the buyer’s timelines, their schedules, and any internal deadlines better than two separate parties could. Buyers wouldn’t have to wait for the seller’s agent to call back and sellers wouldn’t have to wait for a buyer’s agent to call back, because with dual agency they are the same person.

Potentially more information on the home: A dual agent may be able to obtain more information on the home than an agent just representing the potential buyer. In turn, they can relay any pertinent information, such as structural issues, inspection reports, and any updates made to the home, to the potential buyer.

Potentially more access to a larger pool of homes: Remember, dual agency also means a buyer’s agent and seller’s agent working for the same agency. That means, if one home doesn’t work out, the two agents could look internally to find more potential homes their agency represents for the would-be buyers. They may even be able to find a few homes that haven’t hit the market yet.

Possibility for a discount on commission: In a typical real estate transaction, the seller’s agent and buyer’s agent split the commission. A dual agent may be willing to negotiate down their commission since they are double-ending the deal.

Dual agents still have to do their job: In the end, even dual agents must present all offers, prepare all paperwork, present all disclosure agreements, and help to complete the deal.

Cons of Dual Agency

Buyers (and sellers) won’t get special treatment: Agents only working for one side will likely be willing to go all out for their client to ensure that the client gets the best deal. An agent working for both sides may be more tempted to get the best deal for themselves to maximize the commission (hey, it’s just human nature to look out for No. 1). A buyer (and a seller) usually wants loyalty above all else when looking for a home. Homebuyers may want to seek out someone who has their back.

Buyers (and sellers) may not get the price they want: Again, a dual agent’s allegiances are split down the middle during the deal-making process. A seller’s agent is meant to promote the home and get the best price for it possible with the fewest contingencies.

A buyer’s agent is on a mission to find every tiny thing that needs to be fixed with the home to get the buyer the best deal they can. If a person is representing both sides, how can they do both? It’s important to discern an agent’s allegiances before signing on the dotted line.

No pushback from the other agent: In a two-sided real estate deal, the two agents will typically go back and forth on the home’s price, any reductions the buyer may want in exchange for repairs, the home’s inspection report, and much more. This creates a system of checks and balances for both sides, which can be important when negotiating a fair deal. However, if one person is playing both sides, things may get muddled, hurting both the seller and the buyer.

The Takeaway

Dual agency is rare in the real estate world because most buyers and sellers want to find an agent who is loyal to them and has their best interests at heart. Still, if you find yourself in a dual agent situation, there is much to know.

(Hey, if you really wanted to, you could forgo a real estate agent altogether.)

There’s another important decision most homebuyers must make: getting the right home loan. Different lenders may offer different terms, rates, or perks that may fit a buyer best.

SoFi offers mortgage loans with competitive rates, the possibility of a low down payment, and a team of mortgage loan officers who can answer all questions.

Add SoFi home loans to your shopping list.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.


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What Does a Mortgage Broker Do?

Finding the perfect home to buy is no small feat: so many online searches and drive-bys or open houses. Then, for most, the time-sucking process of finding the right mortgage. A matchmaker called a mortgage broker can help.

The broker goes fishing for multiple loan offers from different types of lenders in pursuit of the best deal.

So what is a mortgage broker exactly? Keep reading for the answer, how to find one, and pros and cons of working with one.

First, Mortgage Basics

Whether a consumer chooses to work with a mortgage broker or not, it’s best to know what it means to take out a mortgage.

These are some of the basics.

Loan term: This refers to how long borrowers have in order to repay their loan. A typical term is 15 or 30 years.

There are pros and cons to choosing a shorter or longer loan term. For shorter terms, the monthly payments are higher but the interest rates are usually lower, and the total cost of the loan is lower.

For longer-term loans, the total cost is higher and generally the interest rates are higher, too, but monthly payments are lower.

Fixed rate vs. adjustable rate: The chosen interest rate dictates whether the interest rate will change over time or stay consistent, if the monthly principal and interest payment will change, and how much interest will be paid over the life of the loan.

Typically fixed-rate mortgages have no surprises but carry a higher rate than the initial rate of an adjustable-rate mortgage, or ARM. Fixed interest rates don’t change over time, and the monthly principal and interest payment remain the same.

With an ARM, after an initial period, the interest rate can fluctuate based on the market, which can lead to the monthly principal and interest payments increasing or decreasing over the life of the loan.

What Is a Mortgage Broker?

In short, a mortgage broker is a middleman between the homebuyer and mortgage lenders. While requirements vary by state, typically brokers are trained professionals who must obtain certain licenses.

When you plan to buy a home, it can be smart to research multiple lenders. Doing so allows you to see which lender is offering the best rate and fees for your particular financial situation and down payment.

This can be a time-consuming process that requires submitting multiple documents and applications. A mortgage broker can do all of the work associated with applying for the consumer.

Because mortgage brokers generally have partnerships with multiple lenders, they can help find the best financial fit for their clients while saving them the time it would take to do the work themselves.

Pros of Using a Mortgage Broker

Why use a mortgage broker? It’s not for everyone, but there are some benefits worth considering.

Provides more access. Because of their professional relationships, mortgage brokers usually have more access to different lenders than the average person does—some that many consumers don’t even know exist because they offer home loans only through mortgage brokers.

May find better rates and terms. Mortgage brokers may be able to find lower rates and fees than the average homebuyer could find on their own.

Keeps it simple. As mortgage brokers are experts in their field, they can make the entire process simpler to understand. They’ll break down the differences between lenders and help their clients understand mortgage jargon. It’s worth noting that consumers should still educate themselves so that they have a good understanding of the process.

Saves time. Buying a home is time-consuming and can be stressful. A broker will research rates, fees, and minimum credit score requirements so that clients don’t have to.

Cons of Using a Mortgage Broker

There are also some downsides worth considering before pursuing this path.

Cost can vary. Before agreeing to work with a broker, ask how they make their money. In some cases, the lender pays the mortgage broker, and in others, the client pays the broker. If payment is the client’s responsibility, ask if they charge a flat fee or earn a commission.

Lenders usually pay a higher commission than borrowers do. Lenders typically pay between 0.5% and 2.75% of the loan amount. When a client pays a commission, a broker usually charges an origination fee of less than 3% of the loan amount.

The housing market in a particular area can influence what a broker charges.

Conflicts of interest may arise. While at first glance it may seem more beneficial to work with a mortgage broker who is paid by the lender, give this some thought. Is the broker biased toward lenders that pay the commission? Researching brokers before working with them and asking for referrals can help. Do some digging to see if past clients found them to be trustworthy.

Some lenders don’t work with mortgage brokers. Some lenders only work with brokers, and some never work with them. People who hire a mortgage broker may miss out on certain opportunities.

How to Shop for a Mortgage Broker

The search for the right mortgage broker should not be taken lightly. Doing research and considering options are important steps toward making the experience a positive one.

One of the first steps to take toward finding a good mortgage broker is to ask for references from trusted friends, family members, or colleagues who have recently bought homes with the help of a mortgage broker.

To widen the search, there are also websites that host customer reviews of local mortgage brokers. While any broker may have a few negative reviews, look for patterns in the reviews to make sure that negative experiences are the exception, not the norm.

Treating shopping for a mortgage broker like an interview can be helpful. Ask about their certification and experience, commissions, and what the homebuying process would look like in tandem with them.

You can usually check if a broker is licensed .

Finding a Mortgage Without a Mortgage Broker

People who aren’t interested in working with a mortgage broker can shop for a mortgage on their own from a commercial bank, credit union, or private lender.

Prequalifying, based on self-reported data, will give you an idea of how big a loan you may qualify for—a ballpark figure. (Prequalifying involves a soft credit inquiry, which does not affect a credit score.)

If you’re serious, preapproval is the next step, when lenders verify your employment status, income, credit history, and debt to determine how much you can reasonably afford to borrow. If approved, you’ll receive a conditional commitment in writing for an exact loan amount. (Applying with too many lenders may result in score-lowering hard inquiries, but having many offers in hand provides negotiating leverage with individual lenders.)

Working with an online lender may be a good option for soon-to-be homeowners. SoFi aims to make applying for home loans as painless as possible, while offering competitive rates and exclusive member discounts.

Applicants don’t have to worry about pesky hidden fees or prepayment penalties.

The Takeaway

What is a mortgage broker? A go-between between the loan seeker and lenders. There are many pros and cons to consider. A mortgage broker can be just the ticket for some but not all homebuyers.

Loan hunting? Find your rate for a mortgage at SoFi with ease.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.


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Overview of No Closing Cost Refinance

In the market for a “no cost refinance”? Although these mortgages can help borrowers avoid paying a big lump sum at the time the papers are signed, it’s important to understand that associated costs and fees don’t disappear forever.

Rather, a no closing cost refinance allows the borrower to either add the closing costs to the principal or exchange them for an increased interest rate. Either way, you’re still on the hook.

However, a no cost refinance can still help some homeowners make their finances more manageable. Read on to decide if the no fee refinancing approach is right for you.

No Cost Refinance: How Does It Work?

You know how they say that if something sounds too good to be true, it usually is?

Well, that’s true in this case, too. If your question is Can I refinance my mortgage with no closing costs? the answer, unfortunately, is not really.

Rather, a refi without closing costs means you get to process the refinance without paying closing costs right now … but those bills still need to be paid in the long run.

Let’s break it down.

What Is Refinancing?

A mortgage refinance is exactly what it sounds like: a new mortgage loan that might allow a borrower to pay off their home faster, lower their monthly mortgage payments, or both.

A couple of signs a refinancing may be a good idea is if mortgage rates have fallen or if your creditworthiness has significantly improved since the time the first mortgage was taken out.

It can also help borrowers transition from an adjustable-rate mortgage to a fixed-rate mortgage—or a fixed-rate mortgage to an ARM.

Closing Costs? What Closing Costs?

When a borrower signs mortgage documents, there are a variety of fees and expenses (aside from the obvious cost of the home itself) that come along for the ride, which you probably remember from signing your mortgage the first time.

Rolled into the cost to refinance might be:

Lender fees. Borrowing money costs money! Your lender might assess an application fee to process your refinancing request, attorney’s fees if your state requires the presence of an attorney in order to formalize the loan, and a loan origination fee—also sometimes known as an underwriting fee—for preparing the mortgage, which can be 0.5% of your loan total.

You’ll also likely need to prepay the interest on the first month’s mortgage payment, and if you work with a mortgage broker, they’ll want a cut, too.

Third-party fees. Just like the original home loan, the process of refinancing may require a property appraisal, which means paying an appraiser, or necessitate a title search, which can run a couple hundred dollars. Basically, the costs of any service your lender has to pay for in order to make the mortgage happen are likely to be passed on to you in the end.

Other costs. Property taxes, homeowners insurance, and other costs may also be rolled into the bill due at closing. While it depends on your lender and the type of loan you’re taking out, all of these “and also” expenses can get pretty darn pricey.

The bottom line: Closing costs for refinancing usually end up being about 2% to 6% of the total loan amount, although the figure will vary based on the size of your loan, where you live, and other factors.

This can amount to several thousand dollars, and can be a large financial pill to swallow if the costs are to be paid upfront.

The Cost of a ‘No Cost Refinance’

Given all of those closing costs, a “no cost refinance” might be sounding better and better. But as mentioned, those bills don’t just disappear because they’re not due right now.

Rather, with a no cost refinance, closing costs will either be rolled into the principal balance of the new loan total or result in higher interest rates on the new mortgage. Either way, the borrower is still responsible for paying those costs over time.

And depending on their total expense, as well as the interest rate and loan term, closing costs can eclipse the savings you stand to gain by refinancing in the first place.

That’s why it’s always important to parse out the full amount you’ll pay over the life of the loan, rather than just looking at the interest rate and monthly payment.

Pros and Cons of a No Closing Cost Refinance

No closing cost refinances, like all other financial options and products, have both drawbacks and benefits to consider.

Benefits of a ‘Refinance Without Closing Costs’

•   This kind of refinance can help keep homeowners from owing a hefty bill all at once, making it possible to refinance if they don’t have a lot of cash on hand.
•   Depending on the terms of the loan, not paying a large sum upfront may mean you break even on the refinance more quickly.

Drawbacks of a ‘Refinance Without Closing Costs’

•   The closing costs may be compensated for in the form of a higher interest rate, which can be costly over time.
•   If the closing costs are added to the principal loan balance, borrowers may end up paying more interest over the life of the loan than they would have if they’d paid closing costs upfront.

Is a No Closing Cost Refi Right for You?

If you stand to save a significant amount of money by refinancing your home—and if you’ll be in your home long enough that you’ll break even on the refinance, even with closing costs factored in—it might be worth footing the elevated interest rate or higher loan principal that come along with a no closing cost mortgage refinance.

For those who don’t have the cash on hand to pay for closing costs upfront, this approach is the only feasible way to achieve a refinance at all.

If, however, you have the option to pay closing costs upfront, doing so can help keep the loan less expensive over its lifetime.

The Takeaway

Although it’s called a no closing cost refinance or no cost refinance, these mortgages don’t let a borrower off the hook. Closing costs are either added to the principal or exchanged for a higher interest rate.

While a no closing cost refinance can make refinancing possible for those who can’t pay for closing costs upfront, it’s important to look at the life of the loan and your plans as a homeowner to ensure it’s an approach that makes financial sense.

If refinancing seems right for you, SoFi offers a line of mortgage refinance options, including cash-out refinancing, all at competitive interest rates. While the loans aren’t free of closing costs, SoFi is transparent about them, and members save on processing fees.

Want to learn more about SoFi’s mortgage refi options? Check your rate today.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See for more information.

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


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