My Chase No-Cost Refinance Experience (It’s Not A Scam)

2012 May 31
by Kyle Bumpus
from → Credit And Debt, Real Estate

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.

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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.

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16 Responses
  1. 2012 August 1

    Indeed, there is no such thing as a free lunch. I know of someone who got a no-cost refinance, but ended up being required to pay next year’s taxes in advance- thousands of dollars with only a few days notice.

  2. 2012 August 15

    Its not a no closing cost, if they add the costs onto the note. Youre an idiot, and you were gypped

  3. 2012 August 15

    They didn’t add the costs onto the note, as I stated above, and I was not gypped.

  4. 2012 September 12
    vpttech permalink

    This also happened to one of my co-workers. Yes, it maybe wasn’t the lowest rate, but it was lower and at no cost. This also was a good way to make sure he remainde a Chase Customer.

  5. 2012 September 17
    marvado permalink

    do you have a number to call back and inquire if I’m eligible for a no-cost at Chase?

  6. 2012 September 17

    Unfortunately I don’t but don’t worry: if you’re eligible, they will contact you.

  7. 2012 October 10
    Karen permalink

    I have received several of these offers and I was concerned, it was a scam. I only have 5 years left on my current mortgage, which was originally a 15 year at a rate of 4.87%. Yesterday, Chase sent me a rate of 2.875%, which drops my payment down over $1100 a month. Should I take it or pay my house off in 5 years? The extra $1100 a month, would be nice to invest somewhere else.

  8. 2012 October 10

    If the refinance doesn’t include any closing costs, I’d go ahead and do it. You can still pay it off in 5 years if you want, but your monthly minimum will be much lower. If there are closing costs involved, you have to do the math.

  9. 2012 October 19
    Shirley permalink

    Going from a 6% to 3.25 30 yr loan and being retired on a limited income
    I signed up. The only thing I’m paying is 1,900$ into escrow.

    My only source of income in SS and I didn’t qualify a year ago. So if the
    government is paying commission, I guess I good to go.

  10. 2013 January 31
    Rhonda permalink

    I started doing this as I too was hesitant, but my experience has not been as simple as yours was. I have had to send mounds of paperwork and keep getting asked for more from underwriting. I found out that Chase is doing this as they will get reimbursed from the HARP program for the monies spent so it is a benefit to them to refinance as many as homes as they can http://money.cnn.com/2012/09/10/real_estate/chase-refinance-mortgage/index.html With the continued mounting paperwork I’ve had to turn in I don’t see it as a reward for my being up-to-date on my payments and being a good candidate. I’m truly very frustrated with the process and trust me when I say this, it is not as simple as it appears.

  11. 2013 February 1
    Heather permalink

    Chase sent me the same package in November 2012. I was skeptical especially since I tried for a modification for nearly a year after a layoff back in 2009 and Chase wouldn’t help me. I checked the internet. I followed the same procedure as Kyle. My second mortgage, PNC bank, agreed to subrogate for a fee. Chase is reimbursing me for that fee. I am closing today. The notary is coming to my workplace. I am only paying the interest and escrow for February which I would have to do normally when the month is not skipped so I don’t see that as a closing cost. My fixed mortage rate is being reduced from 5.75% to 4%. This is $200 a month off my total monthly payment. There are no prepayment penalties. I need this now more than ever since I had to take a lower paying job after the layoff 3 years ago. My original loan was 30 years and I had just paid 10 years on it. That’s the only downside I see is refinancing for another 30. However when I obtain a better paying job I fully intend to pay more principal and/or refinance for a shorter term down the road.

  12. 2013 February 12
    Tina permalink

    I wouldn’t call it a scam, but Chase is making a ton of money and not being very honest. I had a mortgage with them of about 360k at 4.75%. Got the no-fee letter saying they would refinance at 4.125 and pay all of the closing fees. I looked online and saw that most refinance rates were at about 3.675%. Talked to the guy and he said “well, you are going to save seven to ten thousand in closing costs, so that’s why the rate is what is it”. Then they sent me the truth in lending report saying that they would be paying 8.5 thousand in closing costs (1.2k origination fee, 3k county registration, 3.5k title, etc…) So I get to the closing and see the paperwork and it turns out that they didn’t need to pay the county registration, the title was only 1.6k, the origination fee was listed at 300, so they actually only covered about 2.5k in closing fees. Rates at risen at this point, so it still made sense for me to refi, as I didn’t have any costs – but I am very upset at how dishonest they were and will be filing a complaint with the regulatory authorities.

  13. 2013 February 13

    Tina, I don’t understand why you would be upset about this. You got the rate they quoted and didn’t have to pay any closing costs. Why do you care what they ended up paying? $8k in closing costs for a $360k loan sounds reasonable. Closing costs generally run 2-4% of the value of the loan, so $8k would fall on the lower end of that range. The fact that they only paid $2.5k means they got a deal. Good for them. It shouldn’t make a difference to you either way, though. You got exactly what you were promised.

  14. 2013 February 21
    Aria permalink

    Yes it is a SCAM: We did this with CHASE – WATCH the “Corporate Advance Fee” – you can NEVER pay extra principal over the life of this loan – it gets sucked into the ‘Corporate Advance” account that has NO BALANCE and cannot be explaned by ANYONE at Chase- It is a fund that goes to funds that CHASE has to shell out for the cost of the refinance but they can’t tell you how much those costs were or how much is left. I have made complaints with the attorney general and received no help what so ever. Chase has explained that its in the refinance contract agreement but it’s not. STAY AWAY FROM CHASE AT ALL COSTS!!!

  15. 2013 February 22

    My mortgage has no such “corporate advance fee.” Was yours a loan modification or was it a true refinance? Modifications often have things like this. Refinances do not. Basically what this means is they temporarily lent you money to cover some cost and then recouped it. While not exactly common, they aren’t extremely rare either. Modifications, of course, generally have somewhat unusual terms.

  16. 2013 March 4
    ZZtop permalink

    Agreed: no free lunch. It doesn’t matter who the lender is they will roll a closing cost into your new principal. It is your task to shop around and figure out if the “hidden” finance cost is cheaper that doing the refinance with a new lender.

    I went thru refinance of two properties, each one with different lenders, each one on different terms. In both cases the lenders inserted the closing costs in the “arithmetic” of paying off the 1st loan and opening the new “no-cost” loan with a principal value higher than the original loan. I’ll not bother you with the details on how they cooked up the numbers on each case.

    It is up to you to decide if it is worth. I refinanced in both cases because the deals were still better than moving to a new lender. The only hard part is to swallow your pride and agree that their numbers “prove” that it is a non-cost loan so you get the deal closed….

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