Chase Bank offers one the ability to earn up to 50,000 United MilagePlus miles by getting a mortage. The amount of miles one recieves for obtaining a mortgage from Chase various by loan size, in a three tier level.
The property tied to the mortgage must be a one to four unit property. To get earn the miles, the mortgage must be a "first trust" mortgage and not a Home Equity Line of Credit or Loan.
The Southwest offer is exactly the same as the United offer above. The only difference is the phone number that one must call. Southwest's dedicated phone number is 1-866-550-9870. If you would like more information on the Southwest offer, please go to this website.
Again, mortgage loan applications submitted through a Chase branch or a Chase mortgage branch office are not eligible for miles. You must submit your application through the phone number above.
The American Airlines offer involves Wells Fargo Home Mortgage. One can earn 1,000 AAdvantage miles for every $10,000 financed on a new purchase, refinance and home equity loans or lines of credit.
Information about the program can be found here.
To particpate in this offer, you must call and close your loan through 1-866-324-8127. Like the United and Southwest offers, one can not earn miles by obtainign a mortgage through a Wells Fargo Branch or Wells Fago Home Mortgage office.
The most important part of earning miles under this offer starts at the begining. According to the rules:
To be eligible for miles, you must state your intention of applying through the
American Airlines AAdvantage Mileage promotion and request to earn miles at
time of application. Wells Fargo Home Mortgage requires the AAdvantage
number in its system at application. This program is not retroactive. If the
AAdvantage number is not provided at application, AAdvantage miles will not be
awarded.
Unlike the United and Southwest offers, one can earn miles for home equity line of credit and home equity loans. According to the rules:
For new home equity transactions, miles are based only on the initial amount
advanced on the closing date (funding may occur upon expiration of any applicable
rescission period), not on the total line of credit amount (unless fully advanced on the
closing date) or on future advances.
If I was going to try to earn miles through the Home Equity Line of Credit program, I would advance the entire amount of the line of credit, even if I did not need it. Shortly after closing, I would pay back the amount of money, I didn't need. Yes, one would incur a small amount of interest payments, but I think the additional amount of miles earned would offset that extra burden.
Allow six weeks after your funding date for AAdvantage miles to post to your account.
What to Watch For?
I have been thinking for a long time: how can the banks afford to give out these miles for mortgages. My best guess is that by forcing you to work with the phone staff, they are saving money that they would have to spend on commission for loan officers. However, could these mortgages for miles come with increase mortgage rates or fees.
To the average consumer, the difference between a 3.750% rate and 3.875% rate is minor. However, over a $100,000 mortgage, an 1/8 (.125%) point equals $125 more a year or $3,750 over a 30 year mortgage. Is 12,500 miles worth paying $3,750 more in interest payments?
I am not saying that participating in these programs will result in higher interest rates. All I am cautioning is for you to shop around the interest rate before locking it with a mortgage company or bank.
Then, I started thinking maybe the banks will increase your origination fee to cover the miles. Rental car companies charge a "frequent flyer fee," so the idea is not crazy. When talking to the phone representative, I would ask them if there is an additional fee for participating in this program. By law, they are required to disclose it to you within 3 business days of applying for a mortgage.
The way to see if a fee is being charged is to look at the Good Faith Estimate. This is a three page document that list the fees and costs associated with obtaining a mortgage. The area to pay particular attention to is on page two:
Particular, Section 1 and 2. See below:
The section "Our Origination Charge" is the fee that you pay the bank/mortgage company for getting the mortgage for them. Typically, the charge is under $1,000 unless there are no charges in the title company section. Asking for two Good Faith Estimate, one that earns miles and another one that does not. I may be making a big deal over nothing, but its easy for fees to be snuck in.
When getting a mortgage, due diligence is important.
Conclusion
If you are in the market to refinance your mortgage, these offers can be great. On the other hand, if you are in the market for a purchase mortgage, I would avoid this offer. When working with a 1-800 number mortgage staff, a different person will be working with you, each time you call.
Working with the telephone staff for refinancing is fine, but mortgages for purchases are different animals. Purchase mortgages involve appraisal and financing contingencies and you need a person in your corner to make sure those contingencies are met. Phone staff won't have the time to ensure those contingencies are met.
Refinancing your mortgage or getting a new mortgage just to earn points can be expensive and dangerous. However, if you are in the market for a new mortgage or have a high interest rate, this is a great way to pick up a free flight or two.
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I think you're underselling the impact of the different rates which these offers may present and the long-term costs of those. Paying ANYTHING more then the absolute best interest rate available - with the miles or without - means you're overpaying for the miles.
ReplyDeleteI don't disagree with you that this is a bad deal. With my professional career, I always give my customers spreadsheets with the cost over the life of the loan. One should always look at the long-term cost of mortgages rather than the short term benefits (miles, lender credit).
DeleteWhen I bought re-financed my home, I researched the bank miles option. All I can say is that the 2 cents a point deals that are out there looks like a steal, vs the bank 'ripoffs' of getting miles. People really need to sit down with a calculator (or online calculator) and do the math.
ReplyDeletedhammer53
Dhammer53 - thank you for your personal experience. As a person without a house, I could not test out to see if they came with higher rates. I agree that people should sit down and calculate the cost of mortgages that come with miles.
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