My Chase No-Cost Refinance Experience (It’s Not A Scam)
About two months ago, I received a Fed Ex letter in the mail from Chase, the bank that serviced my home mortgage at the time. In it, Chase offered to do a no-cost refinance of my remaining mortgage balance at a rate almost 2% lower with absolutely no closing costs and, they claimed, no hassle. Naturally, I was skeptical and I obviously wasn’t the only one: a quick Google search turned up dozens of pages of forum posts wondering the same thing, many of them outright calling it a “Chase refinance scam.” Fortunately for me, I also found quite a few Chase refinance reviews that convinced me, somewhat reluctantly, to proceed. I’m glad I did.
The Chase No-Cost Refinance Is Not A Scam
As it turns out, the Chase no cost refinance pitch is part of a government program where the government pays a commission to mortgage holders in exchange for giving borrowers a lower rate. A few minutes on Google didn’t turn up the exact details of the deal, but it appears only mortgages owned behind the scenes by Fannie Mae are eligible. Also, Chase isn’t the only bank doing them, although they are the most prominent. I have no idea why I received the offer and others didn’t. There must be something about my mortgage behind the scenes that matches some specific set of criteria. Read more from Clark Howard, if you care.
It’s true what they claim: I paid no closing costs whatsoever. No appraisal fee, no title insurance, no nothing. The only thing I had to account for was the amount paid into my escrow account for property insurance. What Chase did was take my escrow balance and apply it toward the principal of my previous loan. Since property taxes still have to be paid this year, however, I had to cover this balance somehow. You can either roll it into the new loan (effectively a break-even proposition since they had already paid down the previous loan by the same amount) or bring cash to closing, which is probably your best bet if you can swing it. It was only a few hundred dollars in any case and since this is escrow money, it can’t be rightfully called a closing cost.
As for the claim of being hassle-free, Chase really delivered on that front. I spent about 30 minutes on the phone with my Chase refinance guy who was based out of Arizona. He gave me his full name and mortgage license number, which I promptly googled to make sure he was legit. He asked me a long list of qualifying questions; questions like “is this property your primary residence” and “do you intend to live there as our primary residence for at least a year,” etc. Once it was clear I qualified, he went over the specifics of the proposed loan and emailed me a bunch of documentation. Those of you who have ever taken out a mortgage know how much documentation is involved, but my Chase rep told me he only needed three signed pages from me, giving me the exact page numbers. Additionally, he needed proof my property was insured. He then ran my credit right over the phone(check out annualcreditreport.com for a free copy of your own credit report). All I had to do then was fax in the requested documentation the next day. On closing day, Chase sent the closing attorney to my office. I had him meet me on my lunch break and the whole process took a bit less than 30 minutes, leaving plenty of time for me to eat my lunch. Altogether, it took less than an hour and a half of my time from start to finish.
So yeah, this offer is legit. You might want to Google your mortgage broker’s name and license number if you are the suspicious type, but the offer certainly isn’t too good to be true. If you are really paranoid, you could even call the Chase customer service number from the website and ask about the package you received. They should be able to connect you to the proper office, presumably after a few relays.
Well, It’s Not REALLY A No-Cost Refinance
Of course, there’s no such thing as a free lunch. This no-cost refinance offer came with a catch: a higher interest rate. I ended up getting a rate about 0.4% higher than prevailing rates. Not worth it, you say? It was for me, and here’s why. My mortgage balance was only about $71,000 at this point. The difference between paying what I eventually got (0.4% over the prevailing rate) and going rates would have amounted to a relatively small amount of money, less than $50 per month. Under normal conditions it would still be worth going with the lower rate: after all, $50 a month is $50 a month. But in this case, the fact that I didn’t have to pay any closing costs (or even roll them into the new loan) sealed the deal. At $50 per month, it would have taken me YEARS to earn back the closing costs of a traditional loan. Since I’m pretty sure I won’t still be living in this property 5 years from now, a traditional refinance didn’t make sense. It was a better deal for me to take the no-hassle Chase option.
Does taking this or a similar offer make sense for you? Maybe. Just be sure you understand how much of a rate premium you’re paying and do the break-even math yourself. It may make sense to pay closing costs in your situation, especially if you plan to live in your home for a long time. Either way, I couldn’t be happier with my Chase refinance offer experience.
Do you know your credit score? Is it high enough to get the best rate on your refinance? Get your credit score from all three credit bureaus from Equifax.