There's No Such Thing as Free Mortgage Refinancing

You can't refinance your mortgage for free. Sorry.

— -- The next time you see an ad to refinance your mortgage for “free” or with “no closing costs,” run the other way. The Federal Trade Commission has just fined a mortgage lead generator company half a million dollars for making claims like that. The FTC says the company broke not one, not two, but three laws and rules by marketing mortgages refinances this way.

The defendants are certainly not alone. I see similar ads everywhere—from online to on telephone poles. The wording varies but they are all making the same false promise of a mortgage or refi with no closing costs. It’s a lie. How to they get away with it? Two ways:

In scenario one, instead of giving you the best possible mortgage interest rate for which you qualify, they charge you a higher rate. That means you’re paying extra every single month for 30 years. Trust me, closing costs are actually a better deal.

In scenario two, they tack the closing costs onto the amount of principal you owe. You still end up paying the closing fees, you just pay them at the end instead of the beginning —AND you pay interest on them for 30 years. Yuck.

“An ad that says you can refinance your mortgage for free is clearly deceptive if you have to pay money at some point before you sign on the dotted line,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “Lead generators need to understand that federal laws governing truth in advertising apply to them as well as everybody else.”

For more information about obtaining a mortgage fair and square, Check out the Federal Trade Commission’s resources for home owners here.

Opinions expressed in this column are solely those of the author.

Elisabeth Leamy is a 20-year consumer advocate for programs including "Good Morning America" and "The Dr. Oz Show." She is the author of “Save BIG” and “The Savvy Consumer.” Elisabeth is also a professional speaker, delivering talks nationwide on saving money, media relations and career success. Elisabeth receives her best story tips from readers, so please connect with her via Facebook, Twitter or her website to share your ideas.