If you recall, Chase took over the troubled First Republic Bank back in May 2023.
Before First Republic went under, they were the leading jumbo home loan lender in the United States.
They catered to very wealthy landlords and businessmen. And ironically, it was the subprime mortgage that ultimately brought it down.
Today, Chase is the nation’s leading jumbo lender, with revenue of more than $8 billion in the first quarter of 2024, according to Mortgage Finance.
Like First Republic, they also attract high net worth individuals with loan amount discounts.
Up to 1% Mortgage Discount When You Bring Cash to the Bank
By 2023, Chase was the third largest loan originator in the country, according to HMDA data. And the largest producer of mortgage loans.
They were beaten by only two banks, United Wholesale Mortgage and Rocket Mortgage.
Their acquisition of the troubled First Republic made them grow, and put even more emphasis on jumbo loan lending to the bank.
In fact, they carry out some of the same principles, although they may have additional guidelines to avoid the same fate.
One of those practices is to offer mortgage discounts to their wealthiest customers, who are willing to park a lot of money in the bank.
A NYC-based bank called the “Relationship Pricing Program” offers home equity discounts of 0.125% and 1% based on new and existing bank balances.
This applies whether you are buying a home or refinancing an existing mortgage.
As seen in the chart, those who can raise $37,500 in new capital or investments can get a discount rate of 0.125%.
While that’s not a big deal, customers who can bring in $300,000 in new cash or investments can get a full 1.00% discount on their interest rate.
For example, if the mortgage rate offered is 6.5%, it would give you a rate of 5.5%. And that can be hard to beat for foreign lenders.
With a large loan amount, we are talking about saving something important.
Using a $1,500,000 loan, the difference would be about $965 per month. Or $11,580 a year.
They also offer a discount rate of up to 0.25% on existing bank balances (0.125% for $500k-$999k, 0.25% for $1M+).
How the Affiliate Pricing Program Works
To receive the interest rate discount, new funds must be deposited into the customer’s Chase account at least 10 calendar days before the scheduled closing date of the loan.
Note that certain accounts are not eligible, including business, deferred compensation, student, savings, 529b college savings, donor advised funds, elected retirement accounts, and non-vested RSUs.
So make sure that the new fees will count towards the discount.
Customers will be underwritten at the original value of the note before the discount, according to Inside Mortgage Finance.
In other words, it doesn’t appear that you can qualify for a lower rate, assuming you needed it.
Also note that funds paid into a customer’s deposit and/or investment accounts 14 calendar days or more prior to the completion of the loan application are not eligible for the new cash discount.
It is also possible to get a post-closing rate discount if the funds are received and paid within 30 days of the loan closing.
But it may be less than the discounts available before closing, and the customer must sign a rate change.
These customers will also not receive a refund of any interest already paid before the rate change takes effect.
And although new and existing balance discounts can be combined, the total discount cannot exceed 1%.
Finally, for adjustable rate loans, the rate discount will only apply during the first rate.
For example, the first five years on a 5/6 ARM, or the first seven years on a 7/6 ARM.
Good Deal or Not?
As with any of these types of deals, you need to compare what you can get elsewhere.
I always look at all mortgage costs. That includes both closing costs and the interest rate earned.
A discount means nothing if another bank or lender can offer a lower loan amount with fewer closing costs.
For example, a 1% discount on a 7% rate is 6%. If another lender gave me 5.875%, who cares if it’s a 1% discount?
And how much do I have to pay to get that interest rate? Points, initial fees, etc.?
So take the time to compare the offers, and also consider how much you can expect to earn while parking on a Chase account.
There are opportunity costs to consider here as well, which can cloud comparisons when expected returns are not guaranteed.
But if Chase blows the competition out of the water, it might be a no-brainer and all the more reason to use them against another mortgage company.
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the mortgage process. Follow me on Twitter for the latest.
Source link
