Always Read All of the Fine Print

I've been noticing at my bank a new promo offering "1% mortgage cash back".  My husband has enjoyed teasing me saying stuff like "why would anyone use you?"  And when he was at the bank branch, he asked a mortgage-teller if this was legit they replied something along the lines of "yeah, isn't this great!"

Today I received my monthly bank statement and sure enough, stuffed inside was an advertisement for the "1% mortgage cash back.  The bold print states that "you will receive 1% of your principal and interest payment back each year!"

But it's the fine print you need to read…by the way, the fine print takes up about 30% of this add…you really have to read everything word by word.  In the middle of the print, I found what I was looking for:

"There is a $500 calendar year cap on the principal reduction and cash back amount…"  and by the way, you must have (or get) a checking account with this bank in order to get up to $500.

And it get's better…when I priced out a refinance scenario based on excellent credit, a $400,000 loan amount and a home valued at $500,000; I was quoted 0.25% higher in rate than what I would offer today on a 30 year fixed rate (4.625%/APR 4.777).   Serious.   That bank is making pretty darn good change on that extra quarter point in interest while giving the consumer back a maximum of $500 per year.

In my opinion, this is a terrible way to potentially trick consumers into thinking they're getting back much more than $500.  To me, 1% of your mortgage sounds like 1% of your loan amount and with this promo, it's not.

A quarter point interest rate difference on a $400,000 loan amount will pay you about $60 per month or $720 a year!  Not to mention interest paid over the life of the loan.

My advice, work with someone who can offer you a more competitive ratedon't chase a bad gimmick from a bank.