“There’s no free lunch.” This sage advice speaks to the fact that, ultimately, everything - and I mean everything - has a price, and nothing comes without a cost of some kind. And when it comes to those fantastic offers of a NO-FEE Refinance, please heed my warning - because there is no free lunch. 

UPDATE: The Wall Street Journal just published an article on this very topic. You can read it here.

Is your mortgage lender promising you a no-fee refinance if you get a loan from them now?  Don’t fall for this marketing ploy!  There are three problems with this offer.

1. The lender’s rates today are awful, and they just hope you don’t notice it. The no-fee refinance is simply a distraction, so you think, “Hey, that’s cool.” It’s not!  This offer is meaningless (see point 2 below). The lender hopes you don’t realize how bad their rates are today with the promise of something of dubious value in the future. It is a bit of a reverse bait-and-switch tactic.  

2. The promise of a no-fee refinance at some point in the future with no mention of what the rate would be or, more importantly, the competitiveness of the rate is meaningless. For example, two years from now, the no-fee refinance is offered to you at a 6.5% rate. This may sound good to you, but at the same time, another lender could provide you with a 5.75% rate with a $1,000 lender fee.  The lower rate would be a much better deal!  Without knowing how competitive that no-fee rate is, the offer means nothing. It is the same as offering you a free bag of air. The offer has NO value.  

3. The company promoting this marketing tactic has nothing worthwhile to offer you today.   They are desperate, and the longevity of their business may be at stake. Do you want to take the risk of working with a company that may not be around in a year or two? 

The promise of a no-fee refinance is simply a marketing ploy that is unfortunately all too common as mortgage companies lose money and are desperate for business.  As a consumer, you should shop for a competitive rate when purchasing a home today and again when it is time to refinance.

At A2Z Home Loans, we value integrity and communicate honestly with our clients. If you are being promised a free or no-fee refinance by your current mortgage lender, don’t fall for this bait-and-switch marketing tactic. Please call us for some straight talk and see how much we can save you today.