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The latest mortgage perk for millennials: Reward points

  • Lenders are offering credit-card rewards to entice clients to take out mortgages.
  • The move comes as banks scramble to attract loyal customers, especially millennials, many of whom are buying homes for the first time.
  • Shop around for the mortgage with best rate and lowest closing costs, not the one with the most reward points.

Your mortgage may come with a bonus: credit-card reward points.

Chase recently announced it will give 100,000 reward points, worth up to $1,500, to existing credit-card customers who take out a home loan with the bank between now and Aug. 6.

The bank is not the first to offer credit-card perks in exchange for home loans. In the last year, Capital One offered cardholders earned air travel miles if they purchased property or refinanced their home with the bank, Wells Fargo gave out rebates to cardholders to use for its mortgages and home equity loans, and Quicken Loans doled out points for some of its borrowers.

However, the sheer size of the mortgage offer from Chase is new. "The 100,000 points is one of the most generous — and perhaps tops — that we've seen for financial products," said Greg McBride, chief financial analyst at Bankrate.com. "But it doesn't negate the need to shop around for the best deal or justify settling for an inferior loan that could cost far more in the long run."

Banks are spending more on credit-card rewards to build loyal customers for other parts of their businesses, said Nick Clements, co-founder of MagnifyMoney.com, a price-comparison website.

Millennials are a prime target. For example, at Chase, 36 percent of mortgages last year were taken out by borrowers who were under 35 years old or younger, up from 20 percent in 2015.

A recent MagnifyMoney analysis found that the six largest credit-card issuers spent $22.6 billion on rewards, more than double the $10.6 billion they paid in 2010. (See chart below.)

A mortgage is usually the biggest financial transaction anyone will make, Clements said, so borrowers should focus more on the rate and closing costs to select the best deal rather than how many reward points they will earn.

Keep in mind that credit-card rewards may be fleeting and are ever-changing, said Matt Schulz, a senior industry analyst at CreditCards.com. For example, when Chase Sapphire Reserve debuted last summer, the card initially offered a sign-up bonus worth $1,500 to people who spent $4,000 on the card in the first three months.

Earlier this year, Chase cut the generous sign-up bonuses for the card in half, and JPMorgan Chase CEO Jaime Dimon said the perks cost the bank at least $200 million to $300 million.

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