I’ve noticed a trend lately where mortgage lenders are offering so-called rebates.
While it’s not as common as what you see in other industries, it does happen more often.
For example, Chase launched a number of mortgage sales late in the period.
And the country’s top lender, UWM, regularly runs price specials for its mortgage broker partners to pass on to customers.
But do any of these loan discounts really matter or are you better off getting the best rate and fees without any tricks?
Home Loan Rebates Are Getting Bigger
Recently, it seems that more and more lenders are offering discounts.
One of the most recent ones I wrote about was Rocket and Redfin’s $20k credit for existing customers (and small deals for new customers).
And as noted, Chase appears to be running its so-called mortgage rate every month lately.
Then there’s Robinhood’s partnership with Sage Home Loans and their seemingly hefty 0.75% discount.
Betterment has issued a similar rate discount of 0.75% over time in partnership with Rate, formerly known as Guaranteed Rate.
There is also Pennymac, which offers a 1% discount on the note value for the first 12 payments as a form of discount when buying a home (short-term purchase).
Finally, mortgage companies get more creative to differentiate themselves because loans are now assets.
They are all the same! Boring 30 year mortgages you can find anywhere.
But Mortgage Discounts Are Only As Good As The Final Price You Pay
I’m upset about the whole mortgage discount thing.
On the other hand, I like that lenders are getting smarter and offering business deals, especially today as loan rates are no longer cheap.
This is no different than any other type of auction company, whether it’s a grocery store or your favorite clothing store.
But the loan is very complicated, which is why you don’t see discounts often.
In fact, many mortgage companies don’t even advertise their rates or fees to begin with.
Part of the reason is because they are not as competitive as other companies.
Or they realize that loan rates are subject to daily changes, and loan conditions can vary greatly.
So trying to show your values every day can be a fool’s errand. But not all of them are useful.
However, it occurred to me that discounts are only as good as the final price.
Again, this isn’t like your average clothing store sale or Black Friday sale.
It doesn’t really matter what the discount is if the price isn’t lower than normal, or it could be somewhere else.
This is often how I qualify for mortgage discounts whenever I talk about them.
Is This The Best Price You Can Get? It Could Be Cheaper Without a Discount!
I always say is that the best price you can get? When EVERYTHING is included?
Or is there another lender out there that doesn’t offer any discounts, but still beats all the competition?
Because in the end that’s what matters, right?
If the lender is willing to give me a very low interest rate and very low fees, I could care less if there is a so-called discount.
Who cares if there is a discount if it ends up being more expensive?
Even if you get a great mortgage loan through your preferred lender or preferred realtor, is it really worth it if your overall price is still high?
I would argue that it won’t and can be a pain to work with certain companies to ensure you get your discount.
So when shopping for mortgage rates, of course, you can ask about discounts. Why not?
But the bottom line is that the final rate and the amount of closing costs are all that matter, usually reflected in the APR of the mortgage.
Someone can give you a $10,000 discount and you still get a higher price and/or closing costs.
So look closely at any discounts on offer, factor them into the total price, and compare their offers with other lenders.
Yes, it’s cliché, but most people still get one rate and call it a day.
There’s a lot of variation in mortgage rates these days, meaning lenders offer a wide range of rates and fees.
If you only talk to one lender, you won’t know what else is out there.
And if you’re lured to one lender because of a discount, it could actually end up costing you.
