How to File a Homeowners Insurance Claim (After a Loss)

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If you have a mortgage, it’s very likely you also have an active homeowners insurance policy. Virtually all mortgage lenders require borrowers to carry home insurance, which helps protect the value of their investment — and yours.

You might not think much about your policy. The typical homeowner goes many years without filing a home insurance claim and some never have to. But it’s nice to know your policy is there when disaster strikes.

But insurance companies don’t just send you money when something goes wrong. That’s why it’s important to know what you should expect if and when the time comes to file a claim.

How to File a Homeowners Insurance Claim

Homeowners file home insurance claims for all sorts of reasons, from physical damage caused by storms or fires to monetary losses caused by theft or burglary to injuries sustained by guests on the premises. 

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The details of the claims process depend on what happened along with factors specific to the property insurance company. But if you follow this step-by-step guide, you can easily file and manage a homeowners insurance claim. 

1. File a Police Report (if Applicable)

If you have reason to believe you’re the victim of a crime, file a police report as soon as you become aware of it. Common crimes involving residential property include:

  • Vandalism
  • Arson
  • Burglaries and break-ins
  • Home invasions
  • Theft of personal property

To file the report, call your local police department’s nonemergency phone number or visit its website and look for an option to report a crime online. Only if the crime is still in progress or you believe there’s an ongoing threat to your safety should you call 911.

You must provide official identification, such as a driver’s license number, and may be required to visit the police station in person. Expect to meet a police officer or detective at your home as well, as they’ll need to document the damage. Get the name and badge number of every investigator on the case — the insurance company might need this information later.

Don’t clean anything until they tell you it’s OK to do so. And don’t be surprised if it takes them a few days to get to you, especially if you live in an area where property crime is relatively common.  

Don’t file a police report if your home sustained damage in a natural disaster such as a storm, wildfire, or flood. You should only involve the police if you’re the victim of a person or group of people acting maliciously or negligently.

2. Contact the Insurance Company

Next, contact the insurance company or your insurance agent to begin the claims process. 

Most insurance companies make it easy to file straightforward claims online. Expect to work through a claims representative or your insurance agent for more complicated or high-value claims. 

If you’ve set up an online account with your insurance company, log in and look for a Claims tab or button. It should point you in the right direction — either to the digital forms you’ll need to complete or submit or to a phone number you can call to start the process.

During your initial conversation with the insurance company representative, ask:

  • Whether the claim is likely to be covered by your policy based on your description
  • For a rough estimate of the claim value
  • By when you must file the claim
  • What they need from you to process the claim, including any repair cost estimates

3. Document the Damage

If you filed a police report, ask your contact at the police department if you can use the photos and notes they took at your property. 

If you didn’t file a police report or you have trouble getting photos and detailed notes from the department, do the following:

  • Take as many photos as possible of the damage
  • Make a detailed home inventory of damaged, destroyed, or missing items
  • Write up a detailed summary of what happened to the best of your recollection

Even after documenting the damage, don’t clean anything up or make any cosmetic repairs until an insurance company representative visits the property or tells you it’s OK to tidy up. Otherwise, they might not get a complete picture of the damage and might lowball your payout.

4. Make Temporary Repairs Only if Absolutely Necessary

There are two exceptions to the don’t-clean-up rule. If either applies, make temporary repairs as soon as you’ve finished documenting the damage.

First, if the property is unsafe due to structural damage or other hazards, hire an engineer to recommend repairs and a building contractor to execute them. You might need to relocate temporarily to a hotel or short-term rental until they complete the repairs.

Second, if not repairing the damage would make it worse, do whatever’s necessary to stabilize things. For example, if your roof is open because a tree limb crashed through it, remove the limb and replace that section of the roof before the next rainstorm — or at least fit a tarp over the hole so it doesn’t leak. Any amount of water coming into your home’s living area will cause further damage and increase your total repair costs.

Keep all invoices and receipts associated with these repairs, even if you do the work yourself. You can include them with your claim and may qualify for reimbursement.

5. Submit the Claim

Next, complete your insurance claim. Fill out a proof-of-loss form — the claim form — and provide:

  • Details about what caused the loss
  • The part or parts of your home damaged if it’s not a total loss
  • An inventory of the personal property damaged, destroyed, or stolen
  • The estimated value of the loss or damage
  • The police report if you have one
  • Photos or video of the damage
  • Receipts for costs incurred before the company approved your claim, including for emergency repairs and additional living expenses

If the claim has a liability component — say, a guest or worker sustained a serious injury on the property — include additional documentation like:

  • Any medical records related to the claim, such as itemized medical bills 
  • Any legal records or correspondence related to the claim, such as letters from attorneys representing people injured on the property
  • Contact information for third parties involved in the claim, such as health care providers and lawyers

Submit everything through your insurance company’s online claims portal, by fax, or by mail. If you still owe money on your mortgage, notify your mortgage servicing company of the claim. They might want to hold the payout in escrow while your home is being repaired and could be entitled to keep a portion of it. 

6. Prepare for the Insurance Adjuster Visit

Most home insurance claims require a site visit by an insurance claims adjuster. That’s the person who confirms the damage or loss occurred, determines how extensive it is, comes up with a more precise estimate of the value, and confirms it’s covered by your policy.

If the damage is confined to a single part of the home or property and is clearly visible from the outside, you might not need to be around when the adjuster arrives. But if they need to enter your home or inspect less obvious signs of damage, you must be on-site. They might ask you to be there anyway, as there’s a good chance they’ll want to interview you in person.

Before the adjuster arrives, do the following:

  • Write your story in note form to ensure you have clear, truthful answers during the interview
  • Organize photos and videos of the damage in case the adjuster misses anything 
  • Make notes of specific damaged items or parts of the home you definitely want the adjuster to see
  • Write down any questions you have about the process so you can ask them in person

7. Get Repair Estimates

Once the adjuster confirms the damage is covered and gives you an estimate of its value, get repair estimates from local contractors. Look for contractors that:

  • Are licensed in your home state for the type of work you need done
  • Are adequately bonded and insured — ask the contractor for their insurance company’s name and call them to ensure the contractor has a paid-up policy 
  • Accept payments from home insurance companies, as your insurer might insist on paying part of the settlement directly to the contractor
  • Have good reviews from previous clients and few or no complaints with customer protection organizations like the Better Business Bureau

Get at least three quotes for each repair job. Don’t automatically go with the lowest estimate — you want the job to get done right the first time. However, ensure the total value of all repair estimates is comfortably below the estimated settlement amount your adjuster gave you. If the cost of the job increases due to hidden damage or higher-than-expected costs for labor or materials, you could end up spending more than you get from your insurer.

8. Track the Claim & Follow Up

After submitting the claim, use your insurance company’s online claim tracking tool to monitor its progress. You should be able to access this tool through your online account. If you don’t have one, now is a good time to set one up. 

Follow up with the claims department if you don’t see any progress on your claim for several weeks. Most states require insurers to approve or deny claims within a certain period after filing, typically 30 to 40 days.

Respond promptly if the insurance company contacts you by phone, email, or snail mail. They might need more information to process your claim, and failing to respond could delay processing or even result in a denial.

9. Review the Settlement Offer

If your home insurance claim is approved, your insurance company will present you with a settlement offer. This is a proposed payout based on the assessed value of the damage and the cost of repairs necessary to bring the property back to its previous condition.

If you feel the first settlement offer is fair, tell the insurance company you accept it and prepare to receive the payout. If you believe the offer is too low, you can contest it. 

Your chances of getting a higher offer will be much better if you can provide repair estimates from licensed contractors and show that the insurer’s offer isn’t enough to cover the rebuilding costs.

If the insurer continues to lowball your settlement offer, you can hire a public adjuster. This is an independent insurance adjuster whose job is getting you the best possible settlement, not saving the insurance company money. They negotiate with the insurance company on your behalf and advocate for a higher payout.

But a public adjuster doesn’t come cheap. They’ll most likely charge a percentage of the total insurance payout — typically between 15% and 30%, with the proportion declining as claim value increases. For bigger claims where the insurance company’s initial offer was insultingly low, you’ll probably recover this cost and then some. For smaller claims, hiring a public adjuster might not be worth it.

10. Receive the Payout & Make Repairs

Once you’ve accepted the settlement offer, figure out how the insurance company plans to pay it.

For simple claims that involve straightforward repairs, expect the insurance company to cut you a check or execute an electronic transfer for the full balance of the payout. It’s your responsibility to put that money toward repairs and other expenses stemming from the incident.

If your claim is larger or requires complicated repairs, you won’t receive a lump sum for the full payout. 

If you paid for temporary repairs or paid out of pocket to live somewhere else because your house was unsafe, expect a direct payment for part of the claim value. The insurer might even issue this payment before your claim is officially approved.

If you still have a mortgage, the lender is entitled to a portion of your payout. Expect them to hold their portion in an escrow account you or the repair contractor can draw on to pay for repairs as needed. If you live in a condo or co-op, your community manager or homeowners’ association may do the same.

Alternatively, your lender or homeowners association may simply review and approve the proposed settlement amount, clearing the insurance company to send it to you. If that’s the case, you won’t need to go through an escrow account.

The insurer should also send you a portion of the payout directly. You can use it to cover repair costs without going through the escrow account or getting lender approval.

Ensure you understand how the insurer plans to divide your payout and when you can expect each installment. You don’t want contractors to add late payment fees to your already-hefty repair bills or place a lien on your house because you didn’t have enough money to pay them.

What to Do If Your Homeowners Insurance Claim Is Denied

What happens if the insurance company denies your claim? You have options. 

Start by reviewing your claim and insurance policy. It’s possible you missed an exclusion in your policy that clearly rules out the type of claim you made. If that’s the case, the denial is probably legitimate, and you might not have recourse.

If your insurer sent a letter or digital message explaining why it denied your claim, read it carefully. The message should explain the company’s reasoning in plain English and offer clues as to what you can do to get the company to reconsider. If you’re unclear on anything in this letter, call the insurance company’s claims department and ask them to review your file.

If your homeowners insurance policy covers the issue that prompted the claim, it’s possible the insurer denied it because you didn’t provide clear evidence of damage or loss. More or better photos and videos of the damage or more supporting documentation related to a liability claim might be enough to get the insurer to reconsider.

Home Insurance Claim FAQs

If you still have questions about filing a home insurance claim and working through the home insurance claims process, this quick list of frequently asked questions can help.

How Long Does the Home Insurance Claims Process Take?

It depends on how complicated the claim is. Many states require home insurance companies to approve or deny claims within a certain period, often 30 to 60 days. Simple claims can take just a few days to approve.

Insurers typically make the first payment within 30 to 60 days of approving a claim. Depending on the amount of repair work required, further payments might not come for weeks or months. The last payment for a total rebuild might not come for a year or two.

Does Home Insurance Cover Temporary Living Expenses?

Yes, provided your policy specifically says they are. Look for references to “loss-of-use coverage” or “Coverage D,” depending on the insurer. 

Most policies include loss of use coverage. If you’re unsure your policy covers temporary living expenses, review your policy documents or call your insurance company to confirm. 

If you don’t have it yet and don’t want to pay out of pocket for temporary housing, consider adding it before you actually need it. Doing so will raise your premiums a bit, but you’ll be protected if your house becomes uninhabitable for a time. 

Will Filing a Claim Affect My Home Insurance Rate?

Probably. It’s possible your policy allows you a mulligan — that is, it ignores the first claim on the policy when recalculating your rates. Check your policy documents to see if you’re so fortunate.

Otherwise, expect your premium to increase after you file a claim. How much depends on the type of claim you file and your previous claims history.

Insurers are more forgiving of one-off claims and weather-related claims homeowners can’t control. They’re less forgiving of claims related to burglary, theft, and property damage caused by guests. 

They especially frown on liability claims arising from unsafe conditions at your property. In fact, it’s common for insurers to drop homeowners who file liability claims. And your premiums may increase by more for subsequent claims than for the first one made on your policy.

Can I Keep Any Leftover Payout Funds After I Make Repairs?

Often, yes. But some caveats apply:

  • Restrictions Written Into the Policy. Many home insurance policies don’t expressly prohibit homeowners from keeping unused settlement funds. But some do. If yours does, you must return the balance to the insurer once an inspector approves the repairs.
  • Contingent on Inspection. For bigger jobs, expect an adjuster to verify the work is proper and complete. If they suspect you skimped so you could pocket the payout, they may require you to do more work or simply ask for the unused funds back.
  • Funds Withheld or Held in Escrow. You’re not entitled to keep any portion of the payout held in escrow by your lender or withheld by the insurance company pending completion of repair work. If you don’t end up needing those funds, don’t expect to see them.

Final Word

Filing a home insurance claim takes time and can cause considerable frustration. However, it’s often the best way to reduce the financial burden of damage or losses caused by storms, burglars, or unruly guests. If you don’t have an umbrella insurance policy, a home insurance claim might be your best — and perhaps only — protection from a potentially ruinous lawsuit.

However, you shouldn’t file a home insurance claim lightly. Doing so is likely to raise your premiums. Depending on the type of claim, your insurer might even choose not to renew coverage. That could force you to scramble to find backup coverage, likely at a higher cost than before.

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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.


Can You Roll Your Student Loans Into Your Mortgage?

It’s possible to roll student loans into a mortgage using a cash-out refinance. In order to to do this, you’ll already need to have enough equity in your home. While this could potentially help you secure a lower interest rate, it’s not the right choice for everyone. Read on for more information on situations when it may make sense to roll your student loan into a mortgage and other strategies to pay off student loan debt.

Paying Your Student Loans

Paying off one loan with another is a standard form of debt reshuffling or consolidation. When it comes to student loans, though, your options may seem limited. It is, however, possible to roll student loan debt into a new mortgage through a cash-out refinance loan — as long as you have sufficient equity in your home.

But just because you can, it doesn’t mean you should. Here are some tips on how to consolidate student loans into a mortgage — and whether it may be the right move for you.

Rolling Student Loans Into a Mortgage

A cash-out refinance is a type of mortgage loan that enables you to turn a portion of your home’s equity into cash. Simply refinance your existing mortgage for more than what you currently owe into a new loan with new terms and keep the difference.

Once you have the cash in hand, and as long as there are no loan conditions to pay off specific debt with the cashout, you can do whatever you want with it, including paying off your student loans.

You may need to do the legwork of determining how much you need to add to the new proposed loan and may be responsible for ordering the final payoff. If it is not a condition of the new mortgage loan, the lender would normally not request escrow to order the payoff and pay the loan in full at loan closing. If you would like escrow to perform this service for you, just let them know.

Once you’ve completed the loan consolidation process, you may still have the same amount of debt as you did before (possibly more if you added any applicable closing costs to your new loan). You’ll just be paying it all in one monthly payment, based on your new mortgage terms.

If you want to refinance student loans into a mortgage, it could be beneficial in some situations. However, it’s important to understand the benefits and drawbacks of doing so and also to compare the benefits of this option with other alternatives.

One such drawback is that you may no longer be eligible for federal student loan benefits , such as the ability to pursue federal student loan forgiveness or federal student loan repayment plans. This includes income-driven repayment plans, where your monthly student loan repayment changes according to your income.

Pros and Cons of Rolling Student Loans into a Mortgage

Depending on your debt situation and your credit profile, consolidating student loans and your mortgage into new terms could be a smart idea or a terrible one. Here are some of the pros and cons to consider.

Pros of Rolling Student Loans into Mortgage

•   It could lower your interest rate: If you pay a higher interest rate on your student loans and current mortgage vs. a new Cash-Out Refi, consolidating may help reduce how much you pay in overall interest.

•   It could lower your monthly payment: If you qualify for a lower interest rate and choose a longer repayment period with the new loan, it may significantly lower the total amount you pay each month for your mortgage and student loans combined. Keep in mind that extending the life of the loan may mean you pay more in interest in the long-term.

•   It simplifies your finances: Having a single monthly payment might make your finances easier to manage. The fewer monthly payments you have to keep track of, the better. If you have multiple student loans, rolling them into your mortgage can make your life easier.

Cons of Rolling Student Loans into Mortgage

•   You could end up paying more interest over time: Stretching a 10-year student loan repayment term to up to 30 years could end up costing you more in interest, even if the interest rate is lower. Also, if you have paid down a 30 year mortgage for a few years and originate a new 30 year mortgage, you will be extending your existing loan term and may be paying additional interest over the life of the loan.

•   You may not be eligible: To qualify for a cash-out refinance loan, you typically need to have at least 20% equity left over after the new loan amount on the cash-out refinance. Even if you do have more than 20% equity right now, the difference might not be enough to pay your student loan in full.

•   You may pay closing costs: Depending upon the rate and term you choose, you may have applicable closing costs. FannieMae offers a program for student loan cash-out refinance loans. Consider getting a quote for this program and compare the rate and fees of this program to a standard cash-out refi.

•   You may be reducing the amount of available equity in your home: Taking cash out of your home can reduce the amount of available equity in your home. Market value fluctuations can also impact the amount of available equity.

3 Alternatives to Rolling Student Loans into a Mortgage

Before you seriously consider consolidating student loans into a mortgage, it’s important to know what other options you may have for paying down your debt faster.

1. Refinancing Your Student Loans

Whether you have federal or private student loans, you can refinance your student loans with a private lender like SoFi. Depending on your credit, income, and financial profile, you may qualify for a lower interest rate, monthly payment, or both.

You can also gain some flexibility by choosing a longer or shorter repayment term. Keep in mind that refinancing federal student loans means they’ll no longer be eligible for any federal programs or borrower protections, such as income-driven repayment plans.

2. Seeking Repayment Assistance

Employers are increasingly offering student loan repayment assistance as an employee benefit. Well-known companies that provide this repayment benefit include Aetna, Fidelity, PricewaterhouseCoopers, SoFi, and more. If your current employer doesn’t offer student loan repayment assistance, consider finding a job that does when you are next seeking employment.

3. Apply for Student Loan Forgiveness or Grants

Depending on your career path, you may qualify for student loan forgiveness or grant programs. Examples of these programs include (but are not limited to):

•   Health care

•   Veterinary medicine

•   Law

•   Military

•   STEM

If you’re working in one of these fields or a similar one, check to see if there are forgiveness or grant programs for which you may qualify. As previously mentioned, a cash-out refi may make you ineligible to participate in these programs. Check on any possible loss of benefits before considering a refinance of these loans.

Deciding If Rolling Student Loans into a Mortgage Is Right for You

Using a cash-out refinance to consolidate student loans and a mortgage into one affordable monthly payment sounds appealing, especially if you can get a lower interest rate than what you’re currently paying. But it’s crucial to consider all of the costs involved before you make a decision.

A lower interest rate, for instance, doesn’t necessarily mean you’ll pay less interest over the life of the loan. Work with a mortgage loan officer or run an amortization schedule in order to do the math.

Also, keep closing costs in mind. Closing costs can vary depending upon the loan scenario and is tied to factors such as the interest rate you choose, your credit score, loan type, property type, and more.

And paying closing costs is not a given. For instance, you can choose to take a higher interest rate (if it is still lower than what you currently have) and use the lender rebate money built into that higher rate to cover some or all of your applicable closing costs. When the time comes to lock in your rate, speak with your chosen lender about various loan programs and the estimated closing costs tied to each rate and term option.

Finally, take a look at some of the other options out there and determine whether you could potentially save more money in interest with them. The more time you spend researching, the better your chances of settling on the option that is most affordable overall.

Can You Buy a House With Student Loans?

While existing debt can impact whether you’re approved for a loan, or the interest rate and loan terms if you are approved, it’s still possible to buy a house with student loan debt. When you apply for a mortgage, the lender will review your complete financial picture including your debt obligations, which might include student loans, credit card debt, or a car loan.

Debt-to-income ratio is one important consideration for lenders. This is a measurement of how much debt one has in comparison to how much money you earn and lenders rely on this metric to inform whether or not you’d be able to make the monthly payments on a new loan, considering your existing debt. Generally speaking, lenders are unlikely to approve anyone for a mortgage with a debt-to-income ratio higher than 43%, though lenders may be more inclined to lend to someone with a debt-to-income ratio lower at or less than 36%.

Beyond debt-to-income ratio, lenders will also evaluate factors such as the borrower’s credit score.

Before applying, do some number crunching to see what a mortgage might cost and how it will impact your overall debt-to-income ratio. This might be helpful in understanding the mortgage rates you may be eligible for.

In addition to traditional home loans there are programs available for first-time home buyers that might make buying a home with student loan debt more achievable.

Refinancing Student Loans With SoFi

If you are interested in consolidating your student loan debt at a lower interest rate but don’t want to roll them into your mortgage, you may instead want to consider student loan refinancing. With SoFi student loan refinancing, you can refinance your private or federal loans (or both!) with no application fees, origination fees, or prepayment penalties. And you still get the benefit of consolidating your loans to one payment, with a new (and potentially better) interest rate and loan terms. Keep in mind that refinancing any federal loans will eliminate them from federal programs and borrower protections such as income-driven repayment plans or deferment options.

The Takeaway

When paying down student loan debt faster, there’s no one-size-fits-all solution. The more information you gather about your options, the easier it will be to eliminate your debt as quickly as possible.

If you’re interested in refinancing your student loans, consider SoFi. Student loan refinancing at SoFi has no fees and as a SoFi member, borrowers qualify for perks such as career coaching, community events, and more.

Learn more about SoFi student loan refinancing.


Is it a good idea to roll your student loans into a mortgage?

Evaluate all loan details carefully before rolling your student loans into a mortgage. Factors such as closing costs, loan term, any additional fees, and interest rate can all influence how much it will cost to borrow money over the life of a loan. In some cases, it may be possible to qualify for a lower interest rate when borrowing a mortgage. In other cases, extending the repayment of your student loans over a 30-year period with your mortgage may make it more expensive. If you have any questions on your personal financial situation, consider speaking with a qualified financial professional or mortgage loan officer who can offer a personalized assessment.

Can student loans be included in a mortgage?

Student loans can be included in a mortgage if you have enough equity in your home. Rolling student loans into a mortgage generally requires the borrower to take out a cash-out refinance loan, which allows you to turn a portion of your home’s equity into cash. Once you have the cashout in hand, you can pay off your existing student loans.

Terms may vary by lender. There are certain programs, such as Fannie Mae’s Student Loan CashOut Refi that specialize in this type of borrowing.

How much of student loans is counted for a mortgage?

Student loans are evaluated as a part of your overall debt-to-income ratio. In general, lenders avoid lending to borrowers with a debt-to-income ratio greater than 43%.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see

SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

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.
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.
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.


How Much Do You Get Paid to Donate Sperm? We’ve Got All the Answers

Let’s talk about how to make money by selling your sperm. Like, how this actually works.

Popular media sends a strong message: Selling your sperm is a lucrative and simple way to make money when you’re low on cash.

There’s no need to feel weird about sperm donation, despite the many jokes about the process. Sperm banks support thousands of families who struggle with infertility and parents who want to conceive without a partner.

In a span of 30 years, an estimated 120,000 to 150,000 babies were born of anonymous donor insemination, according to an unpublished study by the American Association of Tissue Banks, reported by Cryogenic Laboratories. That’s 4,000 to 5,000 births per year that happened because of sperm donors.

But the process isn’t nearly as simple or fun as the gags might imply.

Don’t expect to pop into your local sperm bank, make a contribution and walk out with a check that afternoon.

Here’s everything you need to know about the process and requirements to donate sperm to figure out whether it’s the right move for you.

How Much Do You Get Paid to Donate Sperm?

The phrase is a little confusing — sperm donation isn’t a charitable act.

You do, in fact, earn money. (Not nearly as much as its counterpart, egg donation, but it won’t take nearly the toll on your body, either.)

Like everything else about becoming a sperm donor, the amount of money you make varies depending on the sperm bank or donation center you work with.

Here are some examples of compensation models:

  • Donors through the Seattle Sperm Bank can earn $100 per approved donation.
  • Donors through the Sperm Bank of California earn $140 per approved sample, with most donors earning between $500 and $700 per month.
  • Donors through the international sperm bank chain Cryos earn per ejaculate delivered, with an increased rate for each approved batch, plus another fee for each batch release — up to $80 cash and a $10 gift card per donation.

Sperm banks also offer free fertility test results, physical exams and blood testing as long as you remain a donor, and some even provide a free annual physical after you stop donating.

Some clinics have more complicated contracts that require you to keep up steady visits and provide regular donations if a recipient chooses you as their donor. That arrangement could affect when you’re paid.

“Just to make sure you follow through (with your visits), your paychecks are kept in escrow by the sperm bank until the end of the contract,” Cracked contributor Sean Berkley wrote about his sperm donation experience in 2011.

Many sperm banks now pay monthly or per visit, however. Like any other side hustle, get details on compensation before you sign any contracts or make any commitments.

3 Things to Consider Before Selling Your Sperm

Take some time to understand all the information before you set your sights on sperm donation as your next side hustle. You might be surprised by the details of the three main requirements, limitations and choices.

  • Donor qualifications
  • Donor offspring limits
  • Anonymous vs. open identity donation

Do You Qualify for Sperm Donation?

Each sperm bank has its own list of physical requirements for donors, but they’re all fairly similar.

Most donation centers require donors to be:

  • At least 5’7” tall and up to 6’6”.
  • Between 18 and 40 years old (none accept donations from minors).
  • Height and weight proportional.
  • In good overall health, based on general physical health screenings and fertility tests.
  • College graduates, enrolled in college or military veterans. Some banks pay more if you have a doctorate degree or attended an Ivy League school (because recipients pay more for those donor qualities).
  • A non-smoker and non–drug user.
  • Able to provide a biological family medical history.

Even if you meet a clinic’s basic requirements, you’re not guaranteed to be accepted.

Sperm banks are for-profit organizations, and like any business, they aim to provide what the market demands.

That means your sperm might be subject to the same kinds of biases you encounter among people face-to-face. In addition to the explicit requirements listed above, you could be denied because of supply and demand at a clinic based on things like your skin color, hair color and eye color.

Based on FDA regulation, potential donors are denied if they’ve ever had sex with “another man” within five years. (The regulation doesn’t address potential nonbinary or transgender women donors.)

You could also be denied for genetic health issues, such as blood clotting disorders.

Some sperm banks will tell you why your application is denied, but some might not. You might want to know that information before you apply, so you’re not left wondering.

Donor Offspring Limits

Donation centers are regularly updating policies and practices to address ethical questions that come up about sperm donation and assisted reproduction.

Every few years, it seems, a news story reveals another serial sperm donor with hundreds of offspring. Check the details, though — in many of these cases, the donor worked with the recipient privately (a.k.a. a “known donor”), not through a donation center.

Most donation centers set a limit on the number of births or recipients per donor.

The U.S. Food and Drug Administration (FDA), which regulates sperm donation (and other organ and tissue donation), doesn’t set a legal offspring limit. Instead, the American Society for Reproductive Medicine (ASRM) sets guidelines for the industry and recommends a limit of 10 births per population of 800,000 (roughly the size of Seattle).

Many donation centers set limits well below the ASRM guideline — around 25 families in the U.S. per donor is a common maximum.

Anonymous vs. Open Identity Donation

The FDA requires clinics to keep some donor information for medical purposes, but it doesn’t regulate anonymity. You’ll make that choice based on the clinic you choose.

Ask the donation center about its policies, and be crystal clear about your options and long-term obligations before you donate. Donor arrangements include:

  • Anonymous: Neither the donor nor the recipient get identifying information about each other. You likely won’t even know whether a recipient conceived using your sperm.
  • Semi-open: You and the recipient get some information about each other, but not identifying details or contact information. The clinic is usually a go-between to pass correspondence between you and the recipient. You might learn whether the recipient had a baby using your sperm and even get baby photos. Or you might just stay open to possible contact in the future from the child once they’re an adult.
  • Open: You and the recipient have each other’s contact information and communicate directly, maybe even meeting in person. Ideally, you and the recipient determine together how much ongoing communication you’ll have and whether or not you’ll have contact with the child. But the child could always decide to contact you on their own sometime in the future.

Here’s the catch: Technology, as it often does without trying, has thrown a bit of a wrench in this situation.

Increasingly accessible family-tree DNA testing has made some curious (or unsuspecting!) donor-conceived children privy to their genetic roots — even when donors and recipients agreed to anonymity.

Many countries, including the U.K., have removed the option for anonymity in recent years by legislating a donor-born child’s right to find their biological father (i.e. the source of their donor sperm) after they turn 18.

COVID Considerations for Sperm Donation

Sperm donation centers are medical facilities and are subject to recommendations and mandates from the U.S. Centers for Disease Control and Prevention (CDC), and state and local health agencies.

Stay up to date with those recommendations so you know what to expect regarding mask requirements, social distancing, capacity restrictions and other measures the centers might take to prevent the spread of COVID-19.

Is Vaccination Required to Donate Sperm?

The FDA hasn’t added a vaccine requirement for sperm donation, and it doesn’t require COVID-19 screening, either, because it doesn’t classify COVID as a relevant disease in reproductive tissue donation. That’s because respiratory viruses aren’t transmittable through reproductive tissues like sperm.

As private facilities, some sperm donation centers might have their own requirements in place to protect their staff and participants. Some centers might request or require proof of vaccination, or require COVID screening, for example, from people who enter the clinics.

The CDC recommends COVID-19 vaccination for everyone at least 5 years old, including people who are trying to get pregnant — including those who provide the sperm. It notes there’s no evidence that the vaccine affects fertility, and in the vast majority of cases, antibodies aren’t transmitted to reproductive tissue.

Rumors about Sperm and Vaccinations

Recent rumors have suggested “unvaccinated sperm” could be worth a lot of money in the near future, but they’re just that: rumors.

Most important to note here is that all sperm is “unvaccinated sperm,” because vaccines don’t affect reproductive tissues, according to the FDA. Because vaccines don’t affect DNA, sperm or fertility, there won’t be a difference between sperm from donors who received a vaccine and those who didn’t, so you probably won’t see a soaring unvaccinated sperm price.

And because potential vaccination requirements would be related to staff health in clinics and not to the screening process for sperm donors, it’s not likely sperm donation centers will even record whether a donor was vaccinated — so recipients won’t have the option to use that as a criteria.

We can’t say how niche perceptions of the COVID-19 vaccine will affect one-to-one sperm donations with known donors. Misinformation about the vaccine’s effects could mean some families will look for unvaccinated sperm donors outside of donation centers.

The Sperm Donation Process

Every donation center dictates its own process for sperm donors, but they’re pretty similar and many parts of the process are regulated by the FDA. After you find a sperm bank, you should expect to be pre-screened, to have a physical exam and share your family medical history, provide a sample and sign a contract.

1. Find a Sperm Bank

Track down a sperm bank that’s close to you through this National Directory of Sperm Cryobanks.

Most centers require donors to live within 25 miles or about an hour of the clinic, because if you’re chosen to be a donor, you’ll be visiting the facility regularly.

A legitimate organization will be registered with the FDA. Enter the clinic’s name in this FDA directory to make sure it’s registered.

2. Get Pre-Screened

All applicants start by going through a pre-screening over the phone or through an online application. Here’s an example application for Cryos.

The pre-screening confirms:

  • Your eligibility to work (and be paid) in the U.S.
  • Some medical history, including potential sexually transmitted infections, mental illness, allergies and drug use.
  • Your height, hair color, eye color and ethnicity.

3. Provide Detailed Family History & Get a Physical Exam

If you pass the initial screening, you’ll be invited in for a thorough interview that takes a deep dive into your family tree.

Berkley says you should be prepared to provide “a detailed medical history for every parent, sibling, aunt, uncle, cousin and grandparent you have, as well as any children your siblings or cousins may have, going back four generations.”

That sounds like hyperbole, but this overview of the process from Phoenix Sperm Bank confirms the information you can expect to provide.

You’ll also get a physical exam that includes a blood test, urine test and DNA analysis, and screening for STIs including HIV. You won’t pay anything for this exam, and most clinics provide regular physicals as long as you’re a donor and possibly after.

4. Provide a Sample

If you pass the first two levels of the screening process, you’ll provide a semen sample for the clinic to test.

It’ll go through a fertility test for the kinds of things you’ve probably heard joked about on TV: sperm count and motility, and the overall health of the sperm.

In other words, what’s the likelihood this sperm can help conceive a baby?

Depending on the company, you might have to wait up to six months to find out whether your sperm passes this test. Semen samples are frozen and tested again after several months to make sure they can hold up in storage waiting for a buyer.

You don’t usually get paid for providing this sample, and the sperm bank won’t save it to sell to a recipient in the future.

5. Sign a Contract to Become a Sperm Donor

Eligible donor? Check. Healthy genetics? Check. Hearty sperm? Check!

You’ll be invited to become a sperm donor once you pass the full screening process, and you have to sign a contract with the donation center.

Depending on the clinic, the contract might include things like:

  • How often you’re expected to donate. Sperm banks prefer frequent donors, so your contract might require you to donate several times per month or even multiple times per week.
  • A requirement to abstain from sexual intercourse before donation. Presumably to ensure strong sperm samples, you could be asked not to have sex within a few days before donating sperm.
  • Payment terms. Your contract should spell out how much you’ll earn, and when and how you’ll be paid, plus any stipulations you have to meet.

6. Donate Regularly

You might be surprised to learn how often you’ll be expected to donate — but the rest of this part of the process is pretty much what all the TV and movies have prepared you to expect.

You can’t collect your semen from home and deliver it to the clinic. You have to visit the clinic and deposit your sample on site, in a private room and with access to pornography.

You’ll deposit the sample itself into a sterile container, and the sperm bank will freeze it until a recipient chooses your profile. Then it’s thawed and used for the artificial insemination process.

Are You Ready to Be a Sperm Donor?

Infertility isn’t an uncommon circumstance in the U.S. About 11% of women of reproductive age have experienced fertility problems, according to the National Institutes of Health. In addition, women who don’t have fertility issues also use sperm donors to get pregnant.

Sperm donation is one way to help them start the families they want, and the sperm banks all say the need for donors is high and growing.

The onboarding process is quite a bit more involved than most side gigs you’ll encounter, but the payoff is fair. If you’re accepted as a sperm donor, you could earn upward of $1,000 a month for a quick trip to the clinic about once a week.

Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine.




Five Steps to Changing Your Homeowners Insurance

Homeowners insurance may very well be the least sexy part of homeownership — but it is definitely a necessity, in part because your mortgage lender will likely require it.

Whether it’s a cozy micro-cabin or a rambling Colonial, your home is probably the single largest purchase you’ll ever make and your biggest physical asset. An investment like that is worth protecting.

That’s where homeowners insurance comes in; it gives you peace of mind that if you were to have major damage or get robbed (let’s hope not!), there would be funds to repair and restore your home.

So let’s say you’re convinced of the value of a homeowners insurance policy…but you think it’s time to make a change. Perhaps you’re not happy with your coverage or the premium, or maybe you’re moving to a new home and ready for a new policy. Maybe you’re just wondering what your rights are as far as switching goes.

Here’s what you need to know about switching your homeowners insurance policy, as well as a step-by-step guide to getting it done as quickly as possible and with a minimum of hassles.

Can I Switch Homeowners Insurance at Any Time?

Good news: yes! No matter what the reason may be, you’re allowed to change your homeowner’s insurance at any time, which is good, since shopping around for the right policy can save you a lot of money in some instances.

If you’re shopping for a new home as we speak, it can be a good idea to start looking at insurance before you sign the purchase agreement — so nice work on starting this research. And if you’re an existing homeowner looking to save money or simply find a new policy, you absolutely can do so whenever you like, but it’s important to follow the steps in order to ensure you don’t accidentally have a lapse in coverage.

Recommended: Homeowners Insurance Coverage Options to Know

When Should I Change My Homeowners Insurance?

There are certain events that should also trigger a review of your insurance, including paying off your mortgage (your rates may well go down) and adding a pool (your rates may go up). Also, you may find you are offered deals if you bundle your homeowners insurance with, say, your car insurance; that might be a savings you want to consider.

You never know what options might be available out there to help you save some money, and since homeowners insurance can easily cost more than $1,000 per year, it can be well worth shopping around.

Recommended: Is Homeowners Insurance Required to Buy a Home?

How Often Should I Change My Homeowners Insurance?

You’re really the only person who can answer this one — but in general, it’s a good idea to at least review your coverage annually.

However, it does take time and effort, and sometimes, a cheaper policy means less coverage, so it’s not always a good deal. Be sure you’re able to thoroughly review all the fine print and make sure you know what you’re getting.

Ready to change your homeowners insurance? Follow these steps in order to ensure you don’t accidentally sustain a loss in coverage!

Step One: Check the Terms and Conditions of Your Existing Policy

The first step toward changing your homeowners insurance policy is ensuring that you actually want to change it in the first place!

Take a look at your existing policy and see what your coverage is like, and also be sure to look closely to see if there are any specific terms about early termination. While you always have the right to change your homeowners insurance policy, there could be a fee involved. In many instances, you may have to wait a bit to receive a prorated refund for unused coverage.

Step Two: Think about Your Coverage Needs

Once you have a handle on what your current insurance covers, you can start shopping for new insurance in an informed way. You probably don’t want to “save money” by accidentally purchasing a less comprehensive plan. But do think about how your coverage needs may have shifted since you last purchased homeowners insurance. For example, the value of your home may have changed (lucky you if your once “up and coming” neighborhood is not officially a hot market). Or perhaps you’ve added on additional structures or outbuildings and need to bump up your policy to cover those.

Step Three: Research Different Insurance Companies

Now comes the labor-intensive part: Getting out there and looking around at other available insurance policies to see what’s on offer. Be sure to keep in mind your current premiums and deductibles as you shop around, as saving money is likely one of the main objectives of this exercise. Though sometimes, higher costs are worth it for better coverage. Make sure you are carefully comparing coverage limits, deductibles, and premiums to get the best policy for your needs. Also consider whether the policy is providing actual cash value or replacement value. You may want to opt for a slightly pricier “replacement value” so you have funds to go out and buy new versions of any lost or damaged items, versus getting a lower, depreciated amount.

In addition to the theoretical coverage you encounter, it’s a good idea to stick with insurers with a good reputation. All the coverage in the world doesn’t matter if it’s only on paper; you need to be able to get through to customer service and file a claim when and if the time comes! Fortunately, many online reviews are available that make this vetting process a lot easier. A few reputable sources for ratings: The Better Business Bureau and J.D. Power’s Customer Satisfaction Survey and Property Claims Satisfaction Study. You can also do some of the footwork yourself by calling around to get quotes, though this is time-intensive and you might want to simply use an online comparison tool instead.

Step Four: Start Your New Policy, Then Cancel Your Old One

Found a new insurance plan that suits your needs better than your current one? Great news — but here’s the really important part: You want to get that new policy started BEFORE you cancel your old one.

That’s because even a short lapse in coverage could jeopardize your valuable investment, as well as drive up premiums in the future. Once you’ve made the new insurance purchase call and have your new declarations page in hand, you are ready to make the old insurance cancellation call. Go ahead, and be sure to verify the following with your old insurer:

•   The cancellation date is on or after the new insurance policy’s start date.

•   The old insurance policy won’t be automatically renewed and is fully cancelled.

•   If you’re entitled to a prorated refund, find out how it will be issued and how long it will take to arrive.

Presto-chango and congratulations: You’ve got new homeowners insurance!

Step Five: Let Your Lender Know

The last step, but still a very important one, is to notify your mortgage lender about your homeowners insurance change. Most mortgage lenders require homeowners insurance, and they need to be kept up-to-date on who’s got your back should calamity strike. Additionally, if you still owe more than 80% the home value to your lender, they may still be paying the insurer for you through an escrow account — so you definitely want to make sure those payments are going to the right company.

The Takeaway

Homeowners insurance is an important but often expensive form of financial protection — it can help you cover the cost of repairing or rebuilding your home if you undergo a covered loss or damage. Since our homes are such valuable investments, they’re worth safeguarding… and most mortgage lenders require homeowners insurance in any case.

Sometimes, changing your policy can help you save money for comparable or better coverage. Reviewing and possibly rethinking your homeowners insurance is an important process, especially as your needs and lifestyle evolve. If you’ve added on to your home, put in a pool, bought a prized piece of art, or are enduring more punishing weather, all are signals that you should take a fresh look at your policy and make sure you’re well protected.

SoFi Can Help Protect You Too

While homeowners insurance protects your most important physical asset, it doesn’t protect the most important thing you have: your life. If you have family members or dependents who depend on your income for their comfort and stability, looking into life insurance may be a good idea.

Life insurance can help ensure the ongoing comfort and support of your loved ones in the event that something happens to you. SoFi has teamed up with Ladder to offer competitive term life insurance plans that range from $100,000 to $8 million, and we don’t require medical testing for eligible applicants seeking up to $3 million in coverage — just fill out an online application and you’ll have your decision in minutes.

Photo credit: iStock/MonthiraYodtiwong

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.
Ladder policies are issued in New York by Allianz Life Insurance Company of New York, New York, NY (Policy form # MN-26) and in all other states and DC by Allianz Life Insurance Company of North America, Minneapolis, MN (Policy form # ICC20P-AZ100 and # P-AZ100). Only Allianz Life Insurance Company of New York is authorized to offer life insurance in the state of New York. Coverage and pricing is subject to eligibility and underwriting criteria. SoFi Agency and its affiliates do not guarantee the services of any insurance company. The California license number for SoFi Agency is 0L13077 and for Ladder is OK22568. Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other. Social Finance, Inc. (SoFi) and Social Finance Life Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderLifeTM policies. SoFi is compensated by Ladder for each issued term life policy. SoFi offers customers the opportunity to reach Ladder Insurance Services, LLC to obtain information about estate planning documents such as wills. Social Finance, Inc. (“SoFi”) will be paid a marketing fee by Ladder when customers make a purchase through this link. All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.


What Is Prepaid Interest? Here’s Why You Need to Pay the Mortgage Lender Ahead of Time

As the name implies, “prepaid interest” is money you owe to a bank or mortgage lender that is paid in advance of when it is actually due.

In terms of why it needs to be paid before the due date, there are several reasons, though it mostly boils down to the fact that mortgages are paid in arrears.

This means mortgage payments are due after the month ends, because interest must accrue (over time) before it can be paid.

This differs from rent, which is paid in advance of the month in which you occupy a rental unit.

If buying a home or refinancing an existing mortgage, prepaid interest will often be listed as a line item along with your other closing costs. Let’s learn why.

Prepaid Interest on a Home Purchase

Mortgages are generally due on the first of the month, though there is also typically a grace period to pay until the 15th.

Additionally, mortgage lenders don’t accept partial payments, so an entire month’s payment must be paid each month.

When you purchase a home, there’s a good chance you’ll close on a random day of the month, say the 10th or the 15th, or the 24th.

This means your mortgage will accrue interest for an odd number of days during that initial month.

Instead of asking you to pay that odd amount of interest as your first mortgage payment, you simply take care of it at closing.

By take care of it, I mean pay it in advance at a daily rate so you start with a clean slate once the loan funds.

Using one of our closing dates above, those who close on the 10th would owe 20-21 days of “per diem interest” at closing. Per diem simply means per day. It is also known as interim interest.

This ensures the lender is paid interest for the time you hold the loan and reside in the property, despite a full mortgage payment not being due yet.

However, as a result of that prepaid interest, your first mortgage payment is pushed out a month.

Remember, a full month of interest must accrue before a payment is generated.

So if your home loan closed on January 10th, you’d pay 21 days of prepaid interest at closing, but the first mortgage payment wouldn’t be due until Match 1st.

Why? Because you already paid the interest that would normally be included in your February 1st payment at closing.

And now you must wait until interest accrues throughout the month of February to pay that amount in March, along with a portion of the principal balance (the loan amount).

This is often referred to as “skipping a mortgage payment,” though it’s not really skipping, it’s deferring and paying the interest portion only.

Prepaid Interest on a Mortgage Refinance

prepaid interest

If you already own a property with a mortgage attached, interest accrues daily throughout the month.

Assuming you decide to refinance that loan by taking out a replacement loan, interest will be due on both the old loan and the new loan at closing.

Similar to a home purchase loan, the interest will be calculated by taking the mortgage interest rate and how many days each lender holds your loan.

This will be broken up between old lender and new lender, with interest before your closing date going to your old lender, and prepaid interest from closing date to month-end going to your new lender.

So if you close on January 20th, you’d pay 20 days of interest to your old lender and 11 days of interest to your new lender.

This way the full month’s interest is squared away when you close, and you can start fresh with no interest due.

Then after a month’s time, enough interest will have accrued to make a full payment, which will be due on March 1st.

For the record, the payment due on January 1st would cover interest for the month of December.

In terms of how that interest is paid, you’d owe daily interest to the old lender based on the current principal balance and mortgage rate.

For example, if your loan payoff was $250,000 and your mortgage rate 3.5%, daily interest would be roughly $24. That’s about $480 for 20 days.

On the new loan, you’d owe 11 days of interest based on the new loan amount and interest rate.

If we’re talking a rate and term refinance with a 3% interest rate, it’d be $20.55 a day for 11 days, or $226.

Together, you’d owe about $706 to both lenders for the month of January.

As you can see, interest is paid to both the old lender and the new lender at closing when it’s a mortgage refinance.

How to Calculate Prepaid Interest

While you shouldn’t have to calculate prepaid interest on your own, thanks to the escrow officer assigned to your loan, it’s good to know how it works.

You can also check their math and better understand how mortgage lending works.

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Let’s look at an example of prepaid Interest.

Loan amount: $200,000
Mortgage rate: 3%
Daily interest: $16.44

First, you take the mortgage rate and divide it by 365 (days) to determine the per diem interest amount.

For example, if the mortgage rate is 3%, it’d be .03%/365, or 0.00008219.

Next, you multiple that by the loan amount (we’ll pretend it’s $200,000) to get $16.44. I rounded it up from $16.438.

Finally, you multiple that amount by the days in which you’re required to pay per diem interest, which will be the total amount of prepaid interest due.

So if you need to pay it for 12 days, it’d be $197.28, and that would be included with your other closing costs, such as your loan origination fee, home appraisal, etc.

Tip: Prepaid interest isn’t a junk fee or an unnecessary add-on. It’s mostly unavoidable unless you close on the very last day of the month.

When Is the Best Time to Close Escrow?

  • Most home buyers choose to close at the end of the month
  • This can help keep closing costs down (including prepaid interest)
  • May also align better with your old rental lease if it renews on the first of the month
  • But if you close early in the month your first payment won’t be due for a long time

Ultimately, you don’t always get to pick when you close, whether it’s a home purchase or a refinance, but there are some considerations here.

If it’s a home purchase, closing late in the month means less prepaid interest will be due. And possibly less wasted rent will be paid out to your landlord.

For example, if you close on the 30th of the month and per diem interest is $50, you’d pay maybe $100.

And you wouldn’t have to pay another month’s rent assuming your lease renews on the first of the month.

Conversely, if you close on the 8th of the month you may owe roughly $1,150 in per diem interest at closing. This means higher closing costs, which could jeopardize your loan approval.

The caveat is your first mortgage payment wouldn’t be due for about seven weeks, versus four weeks for the mortgage that closes on the 30th.

So you get extra time until that first payment is due, which can be nice. And it’s also possible to receive a lender credit that covers the prepaid interest anyway.

Many transactions are structured as no cost loans these days, meaning the lender covers closing costs via these credits and they aren’t paid out-of-pocket directly.

The home sellers may also provide seller concessions to cover these costs.

The flipside is that the interest you pay doesn’t actually go toward paying down your loan amount and is basically just extra interest.

If you close near month’s end, beware that lenders are often extremely busy so there could be delays or mistakes.

If you close very early in the month, such as on the 4th, your lender may provide a “credit” for those days of interest and make your first mortgage payment due less than 30 days later.

The downside is your first payment is due the following month, but the upside is you don’t pay any unnecessary interest.

Best Day to Close a Refinance

  • Generally favorable to close late in the month to avoid higher closing costs
  • But the very last week of the month can be extremely busy and cutting it close
  • Also consider the rescission period that tacks on 3 days to your closing date
  • Signing loan docs on a Wednesday or Thursday could help you avoid extra interest charges

When it comes to a refinance, the same logic basically holds, though you’re paying interest to the old lender and the new lender.

Those who are refinancing to a significantly lower interest rate will want to get it done ASAP to avoid paying the higher per diem rate of interest.

You could argue avoiding the end of the month due to how busy lenders are, and maybe shoot for the third week of the month to keep interim interest at bay.

That would still give you five weeks or so until the first payment is due on the new refinance loan.

And as noted, a lender credit could absorb the interest paid to the old lender and new.

If you time it absolutely perfectly, it might be possible to skip two payments if you close early in the month, though this isn’t for the faint of heart.

Also consider the right of rescission, if applicable, which pushes your loan closing out at least three days.

If you sign docs on a Monday, the lender won’t be able to fund until Friday, and there’s a decent chance you pay “double interest” through the weekend if the old loan isn’t paid off immediately.

To avoid this, even though it’s not a major cost, you’d ideally want to sign on say a Wednesday or Thursday, then fund on a Monday or Tuesday.

Simply put, the earlier in the month you close, the longer it will be until the first payment is due on the new loan.

Tip: If you pay discount points at closing, these are also considered prepaid interest because you’re paying money upfront for a lower mortgage rate during your loan term.

(photo: Abhi)


What Is Earnest Money?

Earnest money is a deposit a potential homebuyer places to signal to the seller that they have serious interest in a property. Also called a “good faith” deposit, this money benefits both the buyer and the seller during the homebuying process.

Purchasing a home involves a number of financial transactions, like saving for a down payment, securing a loan, and paying closing costs. Earnest money is another cost associated with buying a home, but it has the added role of protecting both buyers and sellers from some of the risks associated with a real estate transaction.

  • If the purchase falls through, earnest money helps sellers recoup time lost when the house was off the market.
  • If the contract terms are not met, earnest money is often refunded to the buyer.
  • If the purchase is successful, the earnest money deposit is applied toward the down payment for the home.

Read on to learn all about how earnest money works, how it benefits buyers and sellers, and what these deposits look like in different situations.

How Earnest Money Works

When a buyer is serious about purchasing a property, they use earnest money to signal their intent to purchase it. Although the deal is not finalized at this point, a significant earnest money deposit often prompts the seller to accept an offer, which changes the listing status to “under contract.”

While the amount of earnest money required varies, it frequently amounts to 1 to 3 percent of the total cost of the home. While earnest money is not always required, most sellers do prefer the deposit as a way of finding serious offers, and in competitive markets, a larger deposit provides the possibility of standing out in a crowded field of offers.

When a buyer places an earnest money deposit, the money goes into an escrow account, which means that a third party keeps the funds safe until an agreement is reached. After the house is closed on, the money is applied toward the down payment.

However, the real value of earnest money comes from the way it benefits both homebuyers and sellers.

When Is Earnest Money Refunded?

Earnest money deposits can be refunded in situations that don’t go according to plan, helping to protect homebuyers from several risks.

After the deposit is placed, a buyer and seller enter into a contract to begin the process of changing ownership. This contract describes several contingencies, which are conditions that have to be met before the contract is considered binding.

If any of these conditions are not met, then the contract falls through — and in several cases, the buyer will get their earnest money deposit refunded.


In the following situations, a homebuyer will have their earnest money refunded:

  • If the appraised value of the home is lower than the cost to purchase, the buyer can back out of the sale with their deposit.
  • If the home fails inspection, the buyer can leave the sale with their deposit or negotiate a lower price based on the cost of repairs.
  • If the buyer cannot secure a mortgage for the cost of the home, they are able to void the contract and reclaim their deposit.

That said, all of these situations are only covered if these contingencies are specifically laid out in the contract, so make sure to read carefully before signing. In any case, it’s very helpful for homebuyers to know that their deposit can be refunded in situations where the contract cannot be fulfilled by the seller.

Earnest money deposits also benefit sellers, who take on a risk when they begin contract negotiations with a buyer.

How Earnest Money Benefits Sellers

The most obvious way that earnest money benefits sellers is that it provides a clear signal about which buyers are serious. That said, there is an even more crucial way that earnest money deposits protect sellers during the course of a real estate sale.

After a potential buyer has put down an acceptable earnest money deposit, the seller will typically enter into negotiations. As a result, the listing for the home changes to “under contract,” which discourages other potential buyers.

If the buyer backs out of the sale, the seller has lost time that the house could have been shown to other buyers, and they may need to pay additional costs to re-list the house on the market. However, because the seller is given the earnest money deposit in this situation, they are able to recoup some of their losses.

While these deposits may at first seem burdensome, ultimately they are beneficial to everyone involved in the process of buying or selling a home.

Examples of Earnest Money Deposits

In order to truly understand how earnest money works, it can be helpful to imagine some of the main scenarios that occur after a deposit is placed.


After a buyer puts down an earnest money deposit and contract negotiations begin, there are three typical situations:

  1. The buyer backs out: If the buyer backs out of the sale, the seller retains the earnest money deposit.
  2. The contract conditions are not met: Conditions that are not met — like the home inspection contingency or the appraisal contingency — lead to a void contract, so the buyer can walk away with their earnest money.
  3. The sale closes: If the buyer and seller agree to terms and the sale closes, the buyer’s earnest money deposit is applied toward the down payment.

As you can see, earnest money deposits are positive for both buyers and sellers. Sellers benefit because buyers are more committed and financially invested, and buyers benefit because contingencies allow them to walk away from a situation that was not as it appeared. And if the sale closes, the earnest money is applied to the cost, leaving all parties satisfied.

Purchasing a home is an important financial milestone, and understanding earnest money is a great first step in the process of buying real estate. To make sure you’re on track, fine-tune your budget before preparing to buy a home. And once you’ve settled on the right place, don’t forget to consider additional costs like home improvements or home repairs.

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