I’ve noticed a trend lately where more mortgage lenders are offering so-called discounts.
While it’s still not as common as what you see in other industries, it’s happening more frequently.
For example, Chase has run numerous mortgage rate sales of late.
And the nation’s top lender, UWM, constantly runs pricing specials for its mortgage broker partners to pass onto customers.
But do any of these mortgage discounts really matter or are you better off just finding the best rate and fees without any gimmicks?
Mortgage Discounts Are Becoming More of a Thing
Recently, it seems like more and more lenders are offering discounts.
One of the latest I wrote about was Rocket and Redfin’s $20k credit for existing customers (and smaller deals for new customers).
And as noted, Chase seems to run a so-called mortgage rate sale every other month lately.
Then there’s Robinhood’s partnership with Sage Home Loans and their seemingly massive 0.75% rate discount.
Betterment rolled out a similar 0.75% rate discount later via a partnership with Rate, formerly known a Guaranteed Rate.
There’s also Pennymac, which offers 1% off the note rate for the first 12 payments as a sort of discount when you buy a home (it’s a temporary buydown).
Ultimately, mortgage companies are getting more creative to differentiate themselves because mortgages have become a commodity.
They’re basically all the same! Boring old 30-year fixed-rate mortgages you can get anywhere.
But Mortgage Discounts Are Only as Good as the Final Price You Pay
I’m kind of torn on the whole mortgage discount thing.
On the one hand, I like that lenders are getting creative and offering specials to drive business, especially today with mortgage rates no longer dirt cheap.
This is no different than any other type of company having a sale, whether it’s the grocery store or your favorite clothing shop.
But mortgages are a lot more complex, which is why you don’t see discounts as often.
In fact, a lot of mortgage companies don’t even advertise their rates or fees to begin with.
Part of the reason is either because they aren’t as competitive as other companies.
Or they realize mortgage rates are subject to daily changes, and loan scenarios can vary widely.
So trying to show your prices on a daily basis can be a fool’s errand. Or just not all that useful.
Anyway, it occurred to me that discounts are only as good as the final price.
Again, this is no different than your clothing shop having a sale or there being a Black Friday deal.
It doesn’t really matter what the discount is if the price isn’t any lower than it normally would be, or could be elsewhere.
This is typically how I qualify mortgage discount discounts whenever I talk about them.
Is This the Best Price You Can Get? It Might Be Cheaper Without a Discount!
I always say is that all-in price the best you can get? Once EVERYTHING has been factored in?
Or is there another lender out there who isn’t offering any discounts, but still beating the rest of the competition?
Because ultimately that’s what matters, right?
If a lender is willing to give me the lowest interest rate out there with the lowest fees as well, I could care less if there’s any so-called discount.
Who cares if there’s a discount if it ends up being more expensive?
Even if you get a big lender credit for using the preferred lender or preferred real estate broker, does it actually benefit you if you’re all-in price is still higher?
I would argue that it wouldn’t and that it could be a pain having to work with certain companies to ensure you get your discount.
So when shopping mortgage rates, sure, you can inquire about discounts. Why not?
But the bottom line is that the final rate and total closing costs are all that matter, often reflected in the mortgage APR.
Someone could offer you a $10,000 discount and you could still wind up with a higher rate and/or closing costs.
So take a hard look at any discounts offered, factor them into the overall price, and still compare their offer with other lenders.
Yes, it’s cliché, but most people still only get one quote and call a day.
There is a lot of mortgage rate dispersion these days, meaning lenders offer a wider array of different rates and fees.
If you only speak to one lender, you’ll never know what else is out there.
And if you’re lured to one lender because of a discount, it may actually end up costing you.
