You may have noticed the TV commercials for the Chase “1 percent mortgage cash back” program – an exclusive offer that requires a Chase checking account and a good deal of research in mortgage rates and closing costs to see if it is worthwhile.
Chase announced the launch of mortgage cash back in August, but the promotion is timed now to coincide with the traditional pick up in home purchases and refinances in the spring.
Not to mention a creeping up of interest rates that may spur a new wave of customers hoping to take advantage of rates still well below 6 percent for those with good credit.
But is the Chase mortgage cash back program worthwhile?
Under the deal, Chase pays customers 1 percent of their total scheduled monthly principal and interest payment on each annual anniversary of the loan’s origination – as long as payments are made automatically and in full from their Chase checking account. The program works with a refinance too.
Customers can apply that annual payment directly to their mortgage principal or receive a cash deposit in their checking account.
Chase uses the following example. On a loan amount of $300,000 at 5.75 percent, the annual cash back savings is $210. Total savings: $6,303 in cash back, or $15,813 in principal pay-down.
But much depends on the loan origination or refinance terms. Based on 30-year fixed mortgage rates researched on the Chase site, even borrowers with good credit are looking at about 1.25 percent in additional cost in points, or $3,750 on a $300,000. Other lenders may offer less or no points at similar rates in the 5.1-5.4 percent range.
Depending on credit standing and other factors, a borrower may save money in the long run – but only if the Chase customer stays with the program for the full term of the mortgage. If the costumer refinances or originates a new loan through another lender in ten years, for example, the cash back amount on the mortgage would not cover the points assessed at closing.
