Chase announced recently that its Sapphire, Sapphire Preferred, and Sapphire Reserve cardholders would be eligible for 100,000 Chase Ultimate Rewards points if they obtained a mortgage with Chase bank by Aug. 6, 2017.  The offer was available only for current cardholders and only for a new purchase, not a refinance. It was not the first offer of its kind -- Capital One also made an offer of free mileage last year, and Wells Fargo has offered rebates for mortgage loans in the past -- but it was a generous offer, with rewards points worth around 2.1 cents per point. 

While getting points or other rewards for taking out a mortgage loan seems attractive if you're thinking about buying a home anyway, there are three big reasons why it's unwise to go with a particular mortgage lender just to earn miles or other credit card rewards. 

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1. A mortgage should be carefully researched

Chase made its announcement in May and stipulated that cardholders who want the points would have to apply by the deadline on Aug. 6. This is a very limited amount of time to do your research into the mortgage terms offered by different lenders. Most incentive deals that mortgage lenders offer have deadlines, which puts artificial time pressure on you. 

Your mortgage will likely be the biggest debt you carry during your lifetime. You need time to carefully compare the different fees, interest rates, mortgage points, and other terms various lenders will offer you. The process shouldn't be rushed, and you shouldn't try to move faster than you're comfortable with just so you don't miss out on credit card points, airline miles, or other incentives. 

2. Rewards points will be spent quickly -- but you'll be stuck with this mortgage for years

Your credit card points will be spent within a matter of months, while airlines miles earned for taking out a loan last only a trip or two. A mortgage is an obligation lasting 15 to 30 years.

If you buy a house before you're ready because you don't want to miss out on a mortgage incentive, you'll be stuck with a real estate commission, transfer tax, and a host of other expensive costs if you need to sell the home. Unless you have all of your ducks on a row -- like a 20% down payment at the ready, as well as an emergency fund to cover maintenance and repairs -- you could also end up having to pay for private mortgage insurance or fall into debt if something unexpected happens.

If you jump into a loan too fast, you may also feel the need to refinance a few years down the road in order to get better terms. Refinancing is a costly process, as you have to pay for a new appraisal and the closing costs of the new loan. Getting out of one mortgage loan and into another is also a time-consuming process that requires you to produce lots of paperwork.

3. Banks usually make back their money somewhere

Shockingly, banks and other mortgage lenders don't make a profit by handing out free money. If a bank is giving you something, like credit card points or miles, it must make up for that cost somewhere. When you earn credit card points by charging purchases, banks make up that money by charging fees to the merchants to process the card. But if you're getting points for opening a mortgage, then you're the one who will be paying for the rewards. 

Banks may make up the cost by charging a slightly higher mortgage loan rate -- Chase's rates as of late May were 3.875% for a 30-year fixed-rate loan, while Bankrate had some lenders offering rates as low as 3.750% -- or they may charge more than other lenders for various costs like the credit check, home appraisal, loan origination fee, or underwriting fee. 

Even a small difference in interest can make a big difference in payments. A $200,000 loan at 3.750% would cost you $926 per month, and the total loan cost would be $333,443. By comparison, the same $200,000 mortgage at a 3.875% interest rate would come with payments of $940 per month, and the total cost of the loan would be $338,571. That tiny difference in the interest rate would cost you an extra $5,000 over the life of the loan -- and odds are the rewards you earned wouldn't come close to that value.

Don't cheat yourself out of thousands of dollars by falling for a gimmick. Wait until you're ready to buy a home, carefully research different lenders with good reputations, and choose the best overall deal. If you just happen to get a reward from that lender, that bonus will be icing on the cake. 

 

Christy Bieber has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.