From the Junk Mail Bag: Refi with Lender Paid Closing Cost

If you’ve been reading my blog for a while, you know one of my pet peeves is misleading junk mail that mortgage companies will blast out to attempt to generate business.

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This envelope, caught my eye with the big OPEN followed by “refinance with lender paid closing cost”.  Sounds great, right? You can refinance now, get a sweet low rate and not have to pay closing cost because the lender is going to pay for closing cost.

Guess what? It’s not true. All mortgages have closing cost associated with them, such as appraisals (sometimes they may be not be required due to the program, such as an FHA streamline refi or a HARP refi), title and escrow fees. And the lender does NOT pay for these fees. The borrower does. Please don’t think the lender is being generous and covering this cost for you or that you’re negotiating an amazing deal.

Home owners typically have a couple options for paying for closing cost with a refinance.

  • bringing funds at closing to pay for closing costs.
  • financing the closing cost by increasing the loan amount to cover closing cost.
  • increasing the interest rate to generate a rebate credit to go towards closing cost.

On the back of the letter that was inside the envelope, the lender discloses that the INTEREST RATE  MAY BE 0.25% HIGHER  in order to have the lender paid closing cost.

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So if the borrower has a rate that is 0.25% higher in order to have the lender pay the closing cost – is the lender really paying the closing cost? Absolutely not. The borrower has the higher payment to make – not the lender.

Don’t get me wrong. I have nothing against rebate pricing. I think it’s great and I often include quotes illustrating rebate pricing for my clients… but I’ll never refer to it as “lender paid”.  It’s paid by the consumer one way or the other.

This lender from Bellevue also advertises a “special rate” but you must take action by the end of February…guess what? Rates change constantly and unless you’ve locked in a rate, it’s going to change. By the end of February, rates may be higher or lower…highly unlikely it will be the exact same rate and apr on February 29, 2016.

PS: I wonder why a mortgage company has to resort to tactics like this in order to drum up business? I would bet a company or mortgage originator who has to stoop to this type of marketing probably has very little (to no) returning clients or referral business and therefore, must rely on mass mailers like this.

By the way, I do not do mass mailings to strangers and I do not buy “leads”. My clients find me from reading my blog, are referred to me and return to me. 🙂  If I can help you with your refi or purchase of a home located anywhere in Washington state, please contact me.


  1. Lauren Sands says

    Both of my refinances since starting at Mortgage Master had Wells Fargo as their servicer. Both of them had received mailers from Wells Fargo about a ‘no cost’ refi that they could take advantage of…the laughable, and unsurprising part is that when they went to talk to someone at Wells about it, the LO’s were clueless about the program the flyer referred to. I explained to both clients, exactly what you did here, that there’s no such thing as a no cost refi!

    • It’s amazing how many LO’s refuse to accept that when a rate is higher, the borrower is paying for the closing cost – even if it’s just a few dollars more per month. Bottom line, it is the consumers choice on how their loan is priced, however, Loan Officers should not try to promote a “no cost” transaction as something they are paying for and the consumer is not.

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