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If you’re in need of cash, you might wonder if it’s possible to transfer money from a credit card to a bank account. The answer is yes, but it’s important to understand the costs and interest rates involved. You’ll also want to consider the potential impact on your credit score, and how you’ll pay the money back.

Read on to learn the nuts and bolts of how to transfer money from a credit card to bank account, the pros and cons of using your credit card to access cash, and a list of alternative options that may help you get the money you need.

How Do Transfers From a Credit Card to a Bank Account Work?

When you transfer money from a credit card to a bank account, it’s considered a cash advance. This means that instead of using your credit card to pay for a purchase, you’re tapping your credit line for a lump sum of cash. Once the money is transferred to the bank, you can spend it as you wish or transfer it to another bank account.

The amount of cash you can access through a cash advance can’t exceed the current available balance on the credit card. Often, you can only access up to your cash advance credit limit, which is typically significantly lower than the full credit limit on the card.

Unlike purchases you make with your credit card, interest on a cash advance starts accumulating right away — there’s no grace period for a cash advance. You may also be charged a cash advance fee for using the service. This might be a flat fee or it could be a certain percentage of the amount you transfer to your bank (often around 3% to 5% of the amount being transferred).

If you’re thinking about getting a credit card advance as a way of racking up cash back or travel points, you’ll want to think twice: Cash advances typically don’t qualify for credit card rewards.

5 Ways to Transfer Money From a Credit Card to a Bank

If you’re wondering how to transfer money from a credit card to a bank account, you actually have a few different options. Here are some to consider.

Visit a Bank Branch

If you have a credit card issued by a bank, you can visit a local branch of that bank and ask a teller to withdraw funds from your credit card using the cash advance feature. If you have a checking or savings account at that same bank, the teller can deposit those funds into your account. If not, you may need to bring the withdrawn cash to the other bank to deposit the funds.

Use an ATM

You can get a cash advance at an ATM but you’ll need a PIN. If you’re not sure what your PIN is, you can call the number on the back of the card.

Once you have a PIN, you can make the transfer by inserting the card into the ATM, choosing the cash advance option, and entering the amount you want to withdraw. You’ll need to accept any associated fees, then complete the transaction. If you have a credit card and a bank account with the same bank, you may be able to have the cash deposited directly into your bank account. If not, cash will be dispensed and you’ll need to deposit the money into your account.

Transfer Money Online

If your credit card and bank account are with the same institution, you may be able to do the transfer online or through your bank’s mobile app. To do this, you simply need to sign into your account and select Transfer. Choose the credit card for Pay From and the bank account you want the money transferred to for Pay To. Finally, you’ll need to select the amount you want advanced and approve the cash advance. After a few minutes, you can check your bank account to make sure the money was transferred.

Use a Credit Card Convenience Check

If your credit card originally came with convenience checks, you can use one of those checks to transfer money from a credit card account to any type of bank account. If you don’t have checks, you may be able to order them.

To use a convenience check to transfer money from your credit card to your bank account, you simply write the check out to yourself and then deposit it in your bank account.

Keep in mind that these checks work in the same way as a cash advance at an ATM. Typically, they require paying the same cash advance fee and cash advance APR, and the grace period may not apply.

Redeem Cash Back Rewards

If you have a rewards credit card and you have racked up a good amount of points, you may be able to transfer them into your checking account as cash. This is not a cash advance and, as a result, doesn’t involve interest, fees, or the need to repay the sum. However, not all cash back credit cards allow this. And some credit cards only allow you to transfer rewards as cash to a bank account if the bank account is at the same bank that issued the credit card.

Pros and Cons of Transferring Money From Your Credit Card to Your Bank Account

There are advantages to using a credit card to transfer cash to a bank account but also some considerable downsides. Here’s a closer look.

Pros

•   Quick access to funds: Depending on the method you use, transferring money from your credit card to your bank account can take less than 30 minutes. You don’t need to spend time seeking a loan or awaiting approval.

•   Can be helpful in an emergency: If you’re in a temporary financial bind and don’t have an emergency fund, a transfer from your credit card to your bank account can be a reasonable solution, provided you’ll be able to repay the advance quickly.

•   Better option than a payday loan: Transferring money to your bank account via a credit card cash advance isn’t an ideal way to access credit, but can be preferable to a payday loan. Payday loans typically come with sky-high interest rates and fast (often two-week) repayment periods. If you can’t repay on time, you get hit with another round of fees, sinking you deeper into debt.

Cons

•   High interest rates: Cash advance interest rates are sometimes higher than credit card purchase APRs. Plus, interest starts accumulating as soon as you transfer the money. Unlike making purchases with your credit card, there is usually no grace period.

•   Additional fees: Cash advances also come with fees, which may be 3% to 5% of the amount you’re borrowing, adding to the total cost.

•   Potential damage to credit: Your credit scores typically won’t be impacted if you repay the money from the cash advance promptly. But cash advances can affect your credit utilization ratio, which is the amount of credit you’re using versus your total available credit. If the added balance of a cash advance goes unpaid for a while, it could hurt your credit.

•   There are more affordable ways to borrow money: Getting a personal loan, a home equity loan, or a home equity line of credit (HELOC) will typically cost less than a cash advance transfer from your credit card to your bank account.

Alternative Ways to Transfer Money to Your Bank Account

Thanks to high interest rates and fees, a credit cash advance generally should not be your go-to for borrowing money. If you’re in need of extra cash, here are some other options to consider.

Personal Loan

A personal loan is a type of loan that allows flexible use, short- to moderate-term repayment options, and relatively quick funding. Available through banks, credit unions, and online lenders, these loans typically come with fixed interest rates and predictable monthly payments. Most personal loans are unsecured (meaning no collateral is required). However, secured personal loans, which are easier to qualify for, may also be worth considering.

Home Equity Loan or Line of Credit

If you own your home and have built up equity in it, you might be able to borrow against that equity to access the money that you need. A home equity loan is disbursed in one lump sum that you pay back in equal monthly installments over a fixed term (typically five to 30 years) at a fixed interest rate. A home equity line of credit (HELOC) gives you access to a credit line that you can tap as needed. You only pay interest on what you use.

401(k) Loan

If you have money saved for retirement in a 401(k) account, it may be possible to borrow against it, provided your employer allows this type of program.

With a 401k loan (also called a retirement loan), you take money from your retirement account with the understanding that you will make regular payments, with interest, back into your account. The fees involved will vary depending on your plan administrator. You usually have five years to repay a retirement loan.

Salary Advance

Rather than transferring money from your credit card to your checking account bank account, you might be able to receive a portion of your paycheck early. Whether or not this is an option will depend on your employer’s policies. Some employers offer salary advance programs or will consider a salary advance on a case-by-case basis.

Depending on the program, you might repay the advance a little at a time or all at once. While there may be administrative fees and other costs, some programs don’t cost anything, making this a reasonable alternative to a high-interest credit card advance.

The Takeaway

It’s possible to transfer money from your credit card to your bank account using the cash advance feature. However, you generally only want to do this in the event of an emergency. Cash advance fees and interest rates make this an expensive borrowing option that could lead to a dangerous cycle of credit card debt.

To avoid the need to transfer money from your credit card to your bank, it’s a good idea to keep at least three to six months’ worth of basic living expenses set aside in a separate emergency savings account that earns a competitive interest rate. This will serve as a safety net in case you get hit with a major unexpected bill or lose income.

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 SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Will transferring money from my credit card to my bank account hurt my credit score?

Your credit scores likely won’t be impacted if you repay the money from the cash advance promptly. However, cash advances can affect your credit utilization ratio, which is the amount of credit you’re using versus your total available credit. A high credit utilization ratio (typically anything above 30%) can have a negative impact on your credit scores since it implies you rely heavily on borrowed money.

If the added balance of a cash advance transfer to your bank account goes unpaid for a while, it could adversely affect your credit scores.

Is it a good idea to transfer money from a credit card?

A credit card cash advance can be a quick and easy way to get cash fast, but these transfers come at a high cost. Cash advance annual percentage rates (APRs) are often higher than credit card purchase APRs. Not only that, the interest begins to accrue the day you can get the cash. This can lead to a dangerous cycle of debt that can be hard to break. Cash advances also usually come with fees, adding to the cost.

How much does it cost to transfer money using my credit card?

The cost will depend on the credit card issuer. Transferring money to your bank account using your credit card’s cash advance feature usually requires a 3% to 5% fee. You’ll also pay interest on the advance, starting the day you get the transfer. The annual percentage rate (APR) on a cash advance will vary by card issuer but is generally higher than the APR for purchases.

What is the best way to transfer money from credit card to bank?

To transfer money from a credit card to a bank account, you typically need to use your card’s cash advance feature. If your credit card and bank account are with the same institution, you may be able to do the transfer online or through your bank’s mobile app. You can also access a cash advance by going to an ATM or using your credit card’s convenience checks.

Keep in mind, though, that a cash advance usually comes with fees, and interest begins to accrue on the money right away.

How can I get money from my credit card to my bank account without a fee?

You typically can’t get a cash advance from your credit card without paying fees and interest. However, there may be one workaround: If you have a rewards credit card and you have racked up a good amount of points, you may be able to transfer them into your checking account as cash without paying any fees or interest (since it is not a loan).

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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Both a loan modification and a loan refinance can lower your monthly payments and help you save money. However, they are not the same thing. Depending on your circumstances, one strategy will make more sense than the other.

If you’re behind on your mortgage payments due to a financial hardship, for example, you might seek out a loan modification. A modification alters the terms of your current loan and can help you avoid default or foreclosure.

If, on the other hand, you’re up to date on your loan payments and looking to save money, you might opt to refinance. This involves taking out a new loan (ideally with better rates and terms) and using it to pay off your existing loan.

Here’s a closer look at loan modification vs. refinance, how each lending option works, and when to choose one or the other.

What Is a Loan Modification?

A loan modification changes the terms of a loan to make the monthly payments more affordable. It’s a strategy that most commonly comes into play with mortgages. A home loan modification is a change in the way the home mortgage loan is structured, primarily to provide some financial relief for struggling homeowners.

Unlike refinancing a mortgage, which pays off the current home loan and replaces it with a new one, a loan modification changes the terms and conditions of the current home loan. These changes might include:

•   A new repayment timetable. A loan modification may extend the term of the loan, allowing the borrower to have more time to pay off the loan.

•   A lower interest rate. Loan modifications may allow borrowers to lower the interest rates on an existing loan. A lower interest rate can reduce a borrower’s monthly payment.

•   Switching from an adjustable rate to a fixed rate. If you currently have an adjustable-rate loan, a loan modification might allow you to change it to a fixed-rate loan. A fixed-rate loan may be easier to manage, since it offers consistent monthly payments over the life of the loan.

A loan modification can be hard to qualify for, as lenders are under no obligation to change the terms and conditions of a loan, even if the borrower is behind on payments. A lender will typically request documents to show financial hardship, such as hardship letters, bank statements, tax returns, and proof of income.

While loan modifications are most common for secured loans, like home mortgages, it’s also possible to get student loan modifications and even personal loan modifications.


💡 Quick Tip: A low-interest personal loan can consolidate your debts, lower your monthly payments, and help you get out of debt sooner.

What Is Refinancing a Loan?

A loan refinance doesn’t just restructure the terms of an existing loan — it replaces the current loan with a new loan that typically has a different interest rate, a longer or shorter term, or both. You’ll need to apply for a new loan, typically with a new lender. Once approved, you use the new loan to pay off the old loan. Moving forward, you only make payments on the new loan.

Refinancing a loan can make sense if you can:

•   Qualify for a lower interest rate. The classic reason to refi any type of loan is to lower your interest rate. With home loans, however, you’ll want to consider fees and closing costs involved in a mortgage refinance, since they can eat into any savings you might get with the lower rate.

•   Extend the repayment terms. Having a longer period of time to pay off a loan generally lowers the monthly payment and can relieve a borrower’s financial stress. Just keep in mind that extending the term of a loan generally increases the amount of interest you pay, increasing the total cost of the loan.

•   Shorten the loan repayment time. While refinancing a loan to a shorter repayment term may increase the monthly loan payments, it can reduce the overall cost of the loan by allowing you to pay off the debt faster. This can result in a significant cost savings.

Recommended: What Are Personal Loans Used For?

Refinance vs Loan Modification: Pros and Cons

Loan refinance is typically something a borrower chooses to do, whereas loan modification is generally something a borrower needs to do, often as a last resort.

Here’s a look at the pros and cons of each option.

Loan Modification		Refinancing
Pros	Cons	Pros	Cons
Avoid loan default and foreclosure	Could negatively impact credit	May be able to lower interest rate	You’ll need solid credit and income
Lower your monthly payment	Cash out is not an option	May be able to shorten or lengthen your loan term	Closing costs may lower overall savings
Avoid closing costs	Lenders not required to grant modification	May be able to turn home equity into cash	You could reset the clock on your loan

Benefits of Loan Modification

While a loan modification is rarely a borrower’s first choice, it comes with some advantages. Here are a few to consider.

•   Avoid default and foreclosure. Getting a loan modification can help you avoid defaulting on your mortgage and potentially losing your home as a result of missing mortgage payments.

•   Change the loan’s terms. It may be possible to increase the length of your loan, which would lower your monthly payment. Or, if the original interest rate was variable, you might be able to switch to a fixed rate, which could result in savings over the life of the loan.

•   Avoid closing costs. Unlike a loan refinance, a loan modification allows you to keep the same loan. This helps you avoid having to pay closing costs (or other fees) that come with getting a new loan.

Drawbacks of Loan Modification

Since loan modification is generally an effort to prevent foreclosure on the borrower’s home, there are some drawbacks to be aware of.

•   It could have a negative effect on your credit. A loan modification on a credit report is typically a negative entry and could lower your credit score. However, having a foreclosure — or even missed payments — can be more detrimental to a person’s overall creditworthiness.

•   Tapping home equity for cash is not an option. Unlike refinancing, a loan modification cannot be used to tap home equity for an extra lump sum of cash (called a cash-out refi). If your monthly payments are lower after modification, though, you may have more funds to pay other expenses each month.

•   There is a hardship requirement. It’s typically necessary to prove financial hardship to qualify for loan modification. Lenders may want to see that your extenuating financial circumstances are involuntary and that you’ve made an effort to address them, or have a plan to do so, before considering loan modification.

Recommended: Guide to Mortgage Relief Programs

Benefits of Refinancing a Loan

For borrowers with a strong financial foundation, refinancing a mortgage or other type of loan comes with a number of benefits. Here are some to consider.

•   You may be able to get a lower interest rate. If your credit and income is strong, you may be able to qualify for an interest rate that is lower than your current loan, which could mean a savings over the life of the loan.

•   You may be able to shorten or extend the term of the loan. A shorter loan term can mean higher monthly payments but is likely to result in an overall savings. A longer loan term generally means lower monthly payments, but may increase your costs.

•   You may be able to pull cash out of your home. If you opt for a cash-out refinance, you can turn some of your equity in your home into cash that you can use however you want. With this type of refinance, the new loan is for a greater amount than what is owed, the old loan is paid off, and the excess cash can be used for things like home renovations or credit card consolidation.


💡 Quick Tip: If you’ve got high-interest credit card debt, a personal loan is one way to get control of it. But you’ll want to make sure the loan’s interest rate is much lower than the credit cards’ rates — and that you can make the monthly payments.

Drawbacks of Refinancing a Loan

Refinancing a loan also comes with some disadvantages. Here are some to keep in mind.

•   You’ll need strong credit and income. Lenders who offer refinancing typically want to see that you are in a solid financial position before they issue you a new loan. If your situation has improved since you originally financed, you could qualify for better rates and terms.

•   Closing costs can be steep. When refinancing a mortgage, you typically need to pay closing costs. Before choosing a mortgage refi, you’ll want to look closely at any closing costs a lender charges, and whether those costs are paid in cash or rolled into the new mortgage loan. Consider how quickly you’ll be able to recoup those costs to determine if the refinance is worth it.

•   You could set yourself back on loan payoff. When you refinance a loan, you can choose a new loan term. If you’re already five years into a 30-year mortgage and you refinance for a new 30-year loan, for example, you’ll be in debt five years longer than you originally planned. And if you don’t get a lower interest rate, extending your term can increase your costs.

Is It Better to Refinance or Get a Loan Modification?

It all depends on your situation. If you have solid credit and are current on your loan payments, you’ll likely want to choose refinancing over loan modification. To qualify for a refinance, you’ll need to have a loan in good standing and prove that you make enough money to absorb the new payments.

If you’re behind on your loan payments and trying to avoid negative consequences (like loan default or foreclosure on your home), your best option is likely going to be loan modification. Provided the lender is willing, you may be able to change the rate or terms of your loan to make repayment more manageable. This may be more agreeable to a lender than having to take expensive legal action against you.

Recommended: 11 Types of Personal Loans & Their Differences

Alternatives to Refinancing and Loan Modification

If you’re having trouble making your mortgage payments or just looking for a way to save money on a debt, here are some other options to consider besides refinancing and loan modification.

Mortgage Forbearance

For borrowers facing short-term financial challenges, a mortgage forbearance may be an option to consider.

Lenders may grant a term of forbearance — typically three to six months, with the possibility of extending the term — during which the borrower doesn’t make loan payments or makes reduced payments. During that time, the lender also agrees not to pursue foreclosure.

As with a loan modification, proof of hardship is typically required. A lender’s definition of hardship may include divorce, job loss, natural disasters, costs associated with medical emergencies, and more.

During a period of forbearance, interest will continue to accrue, and the borrower will still be responsible for expenses such as homeowners insurance and property taxes.

At the end of the forbearance period, the borrower may have to repay any missed payments in addition to accrued interest. Some lenders may work with the borrower to set up a repayment plan rather than requiring one lump repayment.

Mortgage Recasting

With a mortgage recast, you make a lump sum payment toward the principal balance of the loan. The lender will then recast, or re-amortize, your remaining loan repayment schedule. Since the principal amount is smaller after the lump-sum payment is made, each monthly payment for the remaining life of the loan will be smaller, even though your interest rate and term remain the same.

Making Extra Principal Payments

With any type of loan, you may be able to lower your borrowing costs by occasionally (or regularly) making extra payments towards principal. This can help you pay back what you borrowed ahead of schedule and reduce your costs.

Before you prepay any type of loan, however, you’ll want to make sure the lender does not charge a prepayment penalty, since that might wipe out any savings. You’ll also want to make sure that the lender applies any extra payments you make directly towards principal (and not towards future monthly payments).

The Takeaway

Loan modification vs loan refinancing…which one wins?

It depends on your financial situation. If you’re dealing with financial challenges and at risk of home foreclosure, you may want to look into a loan modification, which could be easier to qualify for than loan refinancing.

If you’re interested in getting a lower interest rate or lowering your monthly debt payment, refinancing likely makes more sense. A refinance may also make sense if you’re looking to tap your home equity to access extra cash. With a cash-out refi, you replace your current mortgage with a new, larger loan and receive the excess amount in cash.

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

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What are the disadvantages of loan modification?

A loan modification typically comes with a hardship requirement. A lender may ask to see proof that your financial circumstances are involuntary and that you’ve made an effort to address them before considering loan modification.

A loan modification can also have a temporary negative effect on your credit.

Is a loan modification bad for your credit?

A lender may report a loan modification to the credit bureaus as a type of settlement or adjustment to the loan’s terms, which could negatively impact on your credit. However, the effect will likely be less (and shorter in duration) than the impact a series of late or missed payments or a foreclosure on your home would have.

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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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Whether to have a joint bank account when married is a personal decision, but most couples do merge finances, according to research at the Kellogg School of Management at Northwestern University. Between 52% and 65% of couples surveyed do so, while 10% to 15% maintain completely separate bank accounts. The remainder have a hybrid approach, sharing some accounts and keeping others separate.

If you’re wondering whether to merge bank accounts when married, it can be a wise move to consider the pros and cons of joint and separate scenarios and then make your decision. In this article, you’ll delve into the upsides and downsides, so you’re ready to make an informed decision about what suits your finances and your relationship best.

What Is a Joint Bank Account?

First, consider this definition of a joint bank account: It’s similar to a standard account, but it has more than one owner. With a joint account, the account holders each fully share access to the account. Each of you will get a debit card, checkbook, and the other typical benefits that come with a checking account.

In this way, a joint bank account brings transparency to a marriage, which may make some people cheer and others cringe. Everything’s out in the open, including debits (those pricey clothes sneaking into your closet? Check), deposits, and your in-real-time account balance.

Why Have a Joint Bank Account in Marriage?

A joint account in marriage can offer a simplified approach to your personal finances, and it can symbolize trust. But, as with most things in life, there are pros and cons to this kind of banking relationship. Take a closer look.

Pros and Cons of a Joint Bank Account in Marriage

Whether a joint bank account in marriage is right for you can depend on a variety of factors. Are you starting out on equal financial footing? Are you comfortable revealing your spending habits? Would a shared account come in handy when setting financial goals? Consider the following points:

Pros	Cons
Clarity: An easy, instant read on how much, as a couple, you’ve spent and how much you’ve saved. Less time needed to communicate about finances.	Total transparency: Spending habits become completely visible, which can become ammo in money arguments.
Teamwork: Two sets of eyes on the account. You’re both contributing to your shared financial life and health.	Loss of autonomy: You may feel as if you’ve lost your sense of independence, both financially and personally. Also, potential resentment if partners enter with unequal assets.
Convenience: Easier management of monthly payments such as mortgage and insurance. You may save on fees, too.	Vulnerability: Generally, each of you has the right to withdraw the funds and even close the account.
Legal streamlining: Shared access in case of emergency or death; avoidance of court proceedings.	Legal complications: More challenging division of assets if you divorce.

As you can see, a joint account in marriage offers convenience and a sense of more complete coupledom. You are truly partners in finance. It can make managing your money and shared goals easier.

However, along with this, your finances become an open book. Some expenses that you might have kept private — from pricey personal-training sessions to a surprise gift for your spouse — become totally visible to your partner.

There are also legal implications: If your sweetie brings significant debt to the marriage, your money is now mixed in as an asset should a collector come calling. Also (and we hate to mention the d-word), if you were to split, untangling whose money is whose may be a major endeavor.

Consider these factors and your comfort level. Depending on your and your spouse’s personalities, comfort levels, and financial situations, a joint account might be the right move for you.

Why Have Separate Bank Accounts in Marriage?

Some couples choose not to merge their bank accounts, or not do so completely. Maybe you check your bank-account balance obsessively, while your partner is more of an “Oops, am I overdrawn?” kind of person. If you have different money styles, separate accounts could be a great peace-keeper, so you don’t argue over money. Take a closer look at the upsides and downsides here.

Pros and Cons of Separate Bank Accounts in Marriage

Here’s a closer look at the pros and cons of separate bank accounts in marriage.

Pros	Cons
Autonomy: Ability to individually manage your money, which may suit your personalities and accommodate different financial styles.	Isolation: You may not feel as connected as a couple when your accounts aren’t merged.
Privacy: No one else sees your spending habits and bank balance.	Communication: More conversation about your financial habits and goals will be required.
Protection: Your assets may be safe if your spouse confronts debt collection and available in the event of a death.	Complexity: Potentially more time and energy needed to pay monthly expenses like rent, groceries, and utilities.
Ease: Depending on the state you live in, simplified division of assets if you divorce.	Separation: Contributing toward shared money goals could be harder.

Marriage is a major life transition, often with lots of adjustments and, yes, compromises required. Having separate bank accounts when you are wed can give you a sense of independence, control, and privacy over your finances.

Keeping your accounts apart can also make sense if one of you entered marriage with, say, child support or with debt to clear up. That spouse can be solely responsible for paying that. And if one person significantly out-earns the other, they can do what they want with some of their moolah rather than pooling it. The fact that separate accounts may protect you in the event of a split is also worth noting.

That said, if you do choose to keep your dollars and cents in separate bank accounts once you’re hitched, know that communication will be key. Having regular check-ins will help you stay aware of how well each of you is managing your spending and progress toward financial goals.

Recommended: How to Make a Budget in 5 Steps

Recap: Joint Bank Account vs Separate Bank Accounts

Should married couples have joint bank accounts? Figuring out your financial life is a big decision, but remember, there’s no right or wrong answer.

When it comes to whether to have a joint bank account or keep your cash separated, it’s all about what works for the two of you. Here’s a recap of the key features of each.

Joint Bank Account	Separate Bank Account
Equal access for both partners	Division of accounts, which can be beneficial if one partner has debt or out-earns the other
Transparency of all transactions for both of you	Privacy in terms of how each of you spends and saves
Ability to retrieve funds in emergencies	Protection of your assets in case of divorce
Connectedness since your assets are pooled	Autonomy because you still control your money

Still not sure whether a joint or separate account is best for you and your spouse? Consider a hybrid approach.

Both of you can keep your separate accounts while contributing to a joint account to handle common expenses such as monthly bills and future financial goals. It’s not uncommon for a single person to have multiple bank accounts, so why not try it as a couple?

If you decide to go down this route, you may want to make sure you’re clear about what the account is used for. Since you and your partner will be juggling multiple accounts and financial priorities, you may have to figure out a system for keeping in touch and on top of your money. Regular check-ins that are scheduled on both your calendars (with reminders switched on) can be a good tactic.

Recommended: How to Automate Your Finances

The Takeaway

There are good reasons for joining together your finances — and there are good reasons for keeping them apart. What’s right for you depends on a number of factors, including how much transparency you want, whether one of you has more payments or debt than the other, and whether one of you comes to the union with a lot more money than the other.

Whether you decide to keep your accounts separate, combine them, or take a hybrid approach, finding the right banking partner is an important step. Investigate your options for joint accounts, including those offered by SoFi.

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 SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Is it normal for married couples to have joint bank accounts?

The majority of couples do have joint bank accounts, but a significant number also have a hybrid approach (a shared account as well separate ones). About 10% to 15% keep their money completely separate.

Are joint bank accounts the secret to a happy marriage?

While finances are a significant player in how couples get along, there is no one secret to a happy marriage. For some couples, the simplicity and transparency of a joint account work really well. For others, the relationship is happier with separate finances.

What percentage of married couples have joint bank accounts?

Research indicates that 52% to 65% of married couples choose to have joint bank accounts. Another segment will have both a joint bank account as well as separate bank accounts.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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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If you’re shopping for a home loan, you may be wondering if using mortgage points to “buy down” your interest rate is a good move for you.

The answer is … it’s complicated.

Whether you’re buying or refinancing your home, purchasing mortgage points from your lender can lower your monthly payment and reduce the overall amount of interest you’ll pay on your loan. And that’s certainly an appealing prospect.

But it’s important to understand how points work — how much they can cost and how much they might save you over the life of your loan — before you decide to hand over that extra cash up front at your closing.

What Are Mortgage Points?

Mortgage points, also known as discount points, may be used by a borrower to prepay some of the interest on a home loan in exchange for a lower mortgage rate. The borrower pays more up front (the points are paid as a fee at closing) but can end up saving money over time because the interest rate is then reduced for the life of the loan.


💡 Quick Tip: SoFi’s Lock and Look ⁺ feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

How Do Mortgage Points Work?

Lenders typically base their interest rate offers on several factors, including a borrower’s credit profile and current market rates. But once you receive that initial offer, your lender also may give you the opportunity to buy down your rate through the use of mortgage points. (If the lender doesn’t bring it up, you can ask.)

Every point purchased reduces the interest rate a borrower pays by a predetermined percentage, which can vary from one lender to the next. But let’s say your lender offers you an initial rate of 3.25% and provides a 0.25% rate reduction if you purchase one discount point. If you decide to buy the point, your rate would then be 3%.

Each point you buy typically costs 1% of the amount you’re borrowing, and that money is due up front. So, for example, if your loan is for $200,000, a point will cost $2,000 at closing. If that seems too steep, you may be able to purchase a fraction of a point. A half-point in this scenario would cost $1,000, or three-quarters of a point would be $1,500.

How Do Points Affect Your Mortgage?

Here’s a hypothetical example to illustrate how buying one point could reduce the cost of a 30-year, fixed-rate $200,000 mortgage. (This is a bare-bones example, so the payment amount includes principal and interest only.)

Discount points purchased	None	1 point ($2,000)
Loan principal	$200,000	$200,000
Interest rate	3.25%	3%
Monthly payment	$870	$843
Total interest paid over life of the loan	$113,348	$103,555
Total saved over life of the loan	None	$9,793

Keep in mind that the borrower in this scenario would have to stay with the loan for the entire 30-year term to get the full savings — and that can be rare these days. Homeowners only stay in a home for an average of eight years, and many refinance their home loans.

That’s why it’s important to factor in your “break-even point” — when the savings from the lower mortgage cost offset what you paid for the discount points — before you make your decision.


💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

What Is the Break-Even Point?

Paying points on a mortgage can lower your monthly payment and save you thousands of dollars — if you keep the same loan long enough to recover the money you paid up front. If you plan to move or refinance before you reach and pass that threshold, paying points may not make sense.

To calculate the approximate point at which you would get back what you spent on prepaid interest, you can divide the amount you paid for any points by the amount you’ll save each month on your payment. For example, as noted in the chart above, if you purchased one point for $2,000 at closing, you’ll save $27 each month. Divide $2,000 by $27 and you’ll see you can expect to break even in 74 months — or about six years. If you plan to stay in your home much longer than that, buying down your rate could be worth considering.

Can You Buy Points for an ARM?

You can buy points if you decide to go with an adjustable-rate mortgage (ARM) instead of a fixed-rate mortgage. But it may not be worth it if the points apply only to the ARM’s initial interest rate, which typically lasts for three, five, seven, or maybe ten years. If the rate goes up after that and you decide to refinance, you could lose out on the savings you hoped to get when you paid for the points.

Recommended: How an Interest-Only Mortgage Works

Are Mortgage Points Tax Deductible?

Discount points, which are considered prepaid interest, may be deducted as home mortgage interest if you itemize deductions on Schedule A of your Form 1040. But you’ll need to meet certain criteria in order to deduct mortgage points and you may not be able to deduct all of the mortgage interest and points in the year you paid them.

It’s important to note that only discount points, which represent prepaid interest, are tax deductible. “Origination points,” which also may be referred to as mortgage points, are not tax deductible. These points, which you’ll also pay at closing, refer to the various fees lenders may charge in preparing your mortgage (such as processing, underwriting, administration, or document preparation costs).

Your accountant or tax preparer should be able to answer your questions if you aren’t clear about the amount you can deduct on your annual return.

Is There a Limit on the Points You Can Buy?

The maximum number of points you can purchase to reduce your interest rate may differ based on factors like the financial institution, type of loan you choose, or how much you need to borrow. According to a survey of lenders performed weekly by Freddie Mac, the average number of points reported on 30-year, fixed-rate conventional loans in 2022 was 0.9.

Benefits and Risks of Mortgage Points

Here are some things to consider when you’re deciding if buying points makes financial sense for you.

How Long Do You Plan to Stay in the Home?

If you run the numbers and think you’ll keep your loan past your break-even point, it could be worth paying extra up front. But if it’s a starter home, or you expect to relocate for your career, buying points may not be prudent.

Do You Have Plenty of Money Saved?

Homeownership can be expensive. Are you certain you have enough saved to make a decent down payment, pay for points as well as other closing costs, and still have funds in reserve for the inevitable expenses related to homeownership? If not, you may want to reconsider the benefits of buying down your interest rate.

Did the Seller Agree to Pay Some Closing Costs?

If the seller agreed to pay some or all of your closing costs, you may be able to negotiate discount points as part of that offer.

Do You Plan to Make Extra Payments?

Paying for points could be a smart strategy if you expect to hold on to the same loan for a long time. However, if your goal is to pay off your mortgage early — perhaps by paying more toward the loan principal whenever possible — points may not offer the savings you expected.

Would the Money Be Better Spent on Your Down Payment?

If you have plenty of money saved and you’re trying to decide between increasing your down payment or buying points, you may want to run the numbers to determine which choice will give you a better return on your investment.

If your time horizon is short, you may save more by making a bigger down payment. If you plan to stick around for several years at least, you may choose to put your money toward discount points.

Remember, depending on the type of loan you have, if you make a down payment that’s less than 20%, your lender probably will require that you purchase private mortgage insurance. PMI could add about 0.3% to 1.5% to the cost of your mortgage. And you’ll likely have to pay it every year until your equity in the home reaches 20%.

Pros and Cons of Mortgage Points

Pros	Cons
You can lower your monthly mortgage payment	High up-front costs can make closing even more expensive
You may be able to save on interest over the life of your loan	Could deplete cash needed for furniture, renovations, moving, etc.
Discount points may be tax deductible for those who itemize	Could lose money if you sell or refinance before breaking even

Ready to Go Rate Shopping?

Make sure when you shop rates, you’re comparing apples to apples. Some lenders may offer an interest rate that appears lower than others but has a fraction of a point or a point tied to it. If two lenders are offering a 3% interest rate on a 30-year, fixed-rate loan, but one is charging a point to get that rate and one isn’t, the one that isn’t charging the point is offering you a more affordable deal.

Be cautious when comparing mortgage rates: If it isn’t clear how much you’ll pay to borrow, you can ask a loan officer to walk you through your loan estimate and/or to calculate your costs based on different time frames. Lenders are required to disclose information about their products in a way that allows borrowers to make meaningful comparisons.

The Takeaway

What’s the point of mortgage points? They allow homebuyers to reduce their loan’s interest rate by paying some of the interest up front. Buying discount points can save you money on interest over time, but only if you keep the loan long enough to recover the upfront cost.

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

SoFi Mortgages: simple, smart, and so affordable.

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

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

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

⁺Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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If you think you need a down payment of 20% of a property’s price in order to start home shopping, think again. Most homebuyers put down a significantly smaller amount. Opting for a lower down payment has the benefit of getting you into a home sooner than if you scrimped and saved for years. And you might reap the benefit from market appreciation as soon as you own a property.

Prospective homeowners may explore such options as mortgages with lower down payments (some are even available with 0% down to qualified borrowers), as well as down payment assistance programs.

Learn more here, including:

•   What is a down payment?

•   How much money should you put down to buy a house?

•   How can you lower down payment requirements when buying a property?

What Is a Down Payment?

First, the basics: What exactly is a down payment? A down payment is the amount of money that goes paid, in cash, toward the purchase price of the home. It must cover the gap between the purchase price of the home and the amount of the mortgage.

A down payment determines what kind of loan you can get, whether or not you’ll pay private mortgage insurance (PMI), what your monthly payment will be and even what your interest rate will be. A down payment doesn’t include closing costs.


💡 Quick Tip: Don’t overpay for your mortgage. Get a competitive rate by shopping around for a home loan.

How Much Should You Put Down on a House?

You might be wondering how much is a down payment and how long it will take you to save that down payment amount for. Here are some options to consider when it comes to down payment amounts:

•   20% Down payment: Many people believe mortgage lenders say this is the amount they must come up with, though that is not true. Yes, a bigger down payment lowers your mortgage. Your monthly mortgage payment is lower because of your higher down payment, and you’ll pay less interest over the life of the loan. Also, when your down payment is above 20%, your lender does not require you to purchase PMI, which can save you hundreds of dollars each month.

But paying 20% can take a lot of cash out of your pocket when you buy your home. For example, 20% on a home that costs $400,000 is $80,000 dollars. There are many people who want to buy a property, but simply can’t come up with that amount of cash or at least not until they’ve saved for a considerable amount of time.

•   8% Down payment: This is the average down payment on a house for first-time homebuyers, according to the National Association of Realtors®. (For repeat homebuyers, the figure jumps to 19%.) Making this much of a down payment means you won’t avoid PMI in most cases, but you’ll be able to buy a home with a smaller down payment and without having to save as much money. For a house that costs $400,000, that’s $32,000 you need to come up with.

•   3% to 5% Down payment: With a down payment between 3% and 5%, you’ll have a higher monthly payment because your loan amount is higher than if you were able to make a larger down payment. You’ll also pay more each month because of the PMI payment. Lower down payments mean you’ll also pay more interest over the life of the loan.

However, the main benefit of a low-down-payment loan is you’re able to buy a home sooner than if you wait to save a full 20%. For a $400,000 home, a 3% down payment is $12,000 and a 5% down payment is $20,000. Some loans have the option of eliminating PMI once the loan’s remaining principal balance drops to or below 80% of the original mortgage.

•   0% Down payment: Zero down payment options come with higher monthly payments, and there may be certain restrictions or qualifications (say, a certificate of eligibility for military members). They may be niche programs specific to a group of people or locality. Some zero-down programs do not require PMI, but may have an upfront cost to fund their own mortgage insurance, like USDA loans (more on those in a minute).

Considerations to Determine Your Down Payment

The large amount of cash typically needed makes first time homebuyers wonder how they can afford a down payment and if it’s possible to figure out how to lower a down payment on a house. A couple of points to consider:

•   It is possible to get a lower mortgage payment by paying down principal on your home with a larger down payment. A 20% down payment on a house eliminates the need to pay PMI every month, which saves you even more on your monthly payment. In this way, a larger down payment can benefit your cash flow and overall financial situation.

•   However, 20% of the price of a home in your market may be hard to save for. You can learn how to buy a house with no money down, but there are also 3%, 3.5%, or 5% down payment options available. A lower down payment may be able to help you buy a home sooner. You can begin reaping the benefits of home ownership that much soon and hopefully your home’s value will rise, contributing to your personal wealth.

Recommended: First-Time Home Buyer Programs

How to Lower Down Payment Requirements?

If you’re moving towards purchasing a home, you might be wondering if you can lower your down payment before closing. Generally speaking, you have a handful of options for lowering your minimum down payment amount requirement as you take out a home mortgage loan and become a homeowner.

Buy a Home in an Area Approved for USDA Loans

USDA loans have 0% down payment requirements, so if you can find a home in an area approved by USDA (typically but not always in a rural location), you may be able to get a 0% down payment loan. For the USDA loan, there are property and income requirements which are determined by the county you live in (or want to live in).

Use a VA Loan to Buy a Home

Qualifying veterans, active duty, National Guard, and Reserve members of the military can use a VA loan, a mortgage that comes with zero-down-payment financing.


💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!^{†^}

Pay the Minimum Amount for a Down Payment

One solution is to look for a loan without potentially restrictive eligibility requirements, as with a USDA or VA loan, and instead shop around for a loan that has low down payment policies. Many lenders offer mortgages with as little as 3% down, which may work well for some homebuyers.

Find a Down Payment Assistance (DPA) Program

Down payment assistance programs vary from area to area as far as requirements and amounts go. If you really need down payment assistance, try to buy a home in an area that offers one of these options. DPAs are usually reserved for first-time homebuyers or low- to moderate-income buyers. They typically come in three forms:

•   Second mortgage. DPAs are often offered in the form of a second mortgage with low or zero interest rates. Some second mortgages may not need to be repaid after living in the home for a certain period of time, while others may only need to be repaid when the property is sold.

•   Grant. With a grant, the money you receive is not expected to be repaid. However, there may be requirements for living in the home as a primary residence for a certain number of years for the grant to be forgiven.

•   Tax credit. Tax credits can reduce the amount of federal tax you owe if the local housing finance agency (HFA) issues you a mortgage credit certificate. This certificate can free up money for down payment and closing costs.

Some examples of DPA programs across the U.S. include:

•   Kentucky: Borrowers can receive up to $10,000 repayable over a 10-year period at 3.75% interest via the Kentucky Housing Corporation.

•   California: CalHFA has down payment assistance loans of up to the lesser of 3.5% of the purchase price or appraised value to qualifying homebuyers.

•   New York City: The HomeFirst Down Payment Assistance Program offers up to $100,000 for first-time homebuyers who qualify.

•   Montana: Borrowers can qualify for up to $15,000 in assistance for a down payment from Montana Housing. Repayment is either due when the home is sold or in the form of a 15-year loan.

•   Chenoa Fund: The Chenoa Fund is a nationwide down payment assistance program for creditworthy individuals on FHA loans up to 5% of the down payment needed for low- to moderate-income households. Both repayable and forgivable options are available.

In some areas, DPA programs can be hard to find or difficult to qualify for. Your lender can be an excellent resource if you need help buying a home with a small down payment. Discuss options with a representative and see what is available.

Negotiate for Lender Credits

Lenders want your business, especially in a high-rate environment. You can ask for credits to be applied to your closing costs. When your closing costs are covered by the lender, you can put more of your money toward your down payment.

Ask for Seller Concessions

When you negotiate the purchase of property, you can ask for seller concessions. These typically determine home’s purchase price and which closing costs the seller is willing to pay. Like lender credits, you can put more of your own money towards the down payment when a seller can cover some of your closing costs.

Ask for a Gift from Family

Of course, not every prospective homebuyer is blessed with a relative who has money in the bank they might give you or lend to you with generous repayment terms. But if you are in a spot and unable to come up with the funds otherwise, you might see if anyone is able and willing to help you out.

The Takeaway

While they may come with higher monthly mortgage payments, lower down payment mortgages can help borrowers buy homes sooner. Lowering your down payment requires a good amount of research on the part of the borrower, exploring different loans, programs, and other options to help you afford a property.

Even then, you may not find a perfect solution. That’s why it can be important to choose a mortgage partner who’s willing to be with you every step of the way.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much money to put down on a house in 2024?

Deciding on how much money to put down depends on your individual financial situation, the area in which you live, and programs you’re able to qualify for. While putting down 20% could save you the money you would pay towards PMI, you may be able to get into a house sooner by paying a lower down payment amount (from 0% to 3.5%). First-time homebuyers are currently putting down 8% on average.

How can I get my house down payment lowered?

To get your down payment lowered, you can try: financing with a zero-down loan (such as a USDA or VA loan), asking for seller concessions, negotiating for lender credits, and looking for down payment assistance programs.

Will mortgage interest rates go down 2024?

It is looking likely that mortgage interest rates will stabilize or decline. At the start of 2024, both the Mortgage Bankers Association and Fannie Mae were calling for rates to decline to the 6% to 6.5% range in the year ahead.

Does having a cosigner lower your down payment?

A cosigner can help you qualify for a mortgage, but it won’t change the requirements of the mortgage. Different loan programs will each have their own down payment requirements.

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

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

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

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
^{^}SoFi VA ARM: At the end of 60 months (5y/1y ARM), the interest rate and monthly payment adjust. At adjustment, the new mortgage rate will be based on the one-year Constant Maturity Treasury (CMT) rate, plus a margin of 2.00% subject to annual and lifetime adjustment caps.
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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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