Beware of Low-Rate Ads: What You Need to Know Before Refinancing

If you’ve been seeing ads promising incredibly low mortgage rates, you’re not alone. As market conditions shift, lenders and advertisers flood the internet, radio, and TV with messages that make refinancing sound like a no-brainer. While refinancing can be a great financial move, it’s important to approach these offers with caution and understand what’s really being advertised. Here’s what you need to watch for when considering a refinance.

1. The Bait-and-Switch Tactic

Many low-rate ads highlight an ultra-low interest rate that seems too good to be true—and often, it is. These rates may only apply to a specific type of borrower, such as those with perfect credit, a low loan-to-value (LTV) ratio, or those willing to pay points upfront. Once you inquire, you might find out that the rate offered to you is significantly higher.

2. Hidden Costs and Fees

A low rate doesn’t always mean a better deal. Many advertised rates require you to pay discount points (a fee paid upfront to lower the interest rate), which can negate the savings. Also, be aware of excessive closing costs that can make the refinance more expensive than it’s worth. Always ask for a Loan Estimate to see the true cost of refinancing.

3. Short-Term Teaser Rates

Some advertised rates apply only to adjustable-rate mortgages (ARMs), which start with a low fixed rate for a short period before adjusting. If you’re not prepared for potential rate increases, you could end up with much higher payments down the line.

4. The Fine Print on Loan Terms

That low-rate ad might be for a 15-year loan rather than a 30-year, which means your monthly payment could be much higher. Always check whether the term of the loan aligns with your financial goals before assuming it’s a good deal.

5. Timing Matters

Refinancing at the right time can save you thousands, but rates fluctuate daily based on market conditions, inflation, and Federal Reserve policies. Just because you saw a low rate advertised yesterday doesn’t mean it will still be available today.

How to Protect Yourself

• Work with a trusted mortgage professional who can provide a personalized rate quote based on your financial situation.

• Compare Loan Estimates from multiple lenders to ensure you're getting a fair deal.

• Understand the total cost of refinancing, including fees, points, and long-term savings.

• Ask questions—if a deal seems too good to be true, make sure you know all the details before committing.

Final Thoughts

Refinancing can be a smart financial move, but only when it’s done for the right reasons and under the right terms. If you’re thinking about refinancing, be sure to look beyond the ads and get the full picture. If you’d like a personalized assessment of whether refinancing makes sense for you, reach out—I’d be happy to help you navigate the process and find the best option for your situation.