How to Refinance Your Mortgage for Free with Better and American Express

Refinancing your mortgage can save you thousands of dollars per year, and it’s easier to do than you might think. And cheaper: thanks to a promotion running between the Better mortgage company and American Express, you can get paid either $2,000 or $6,000 to refinance. This should offset your refinancing fees, making the move instantly profitable. What’s more, interest rates are at historic lows right now – but won’t be for much longer. Even if you think you’ve already got a reasonable rate, it only takes a few minutes to check whether you could be doing better.

This article will help you understand how refinancing works, where to look for low rates, and how to maximize the Better/Amex deal specifically.

I just refinanced my own mortgage, which was only six months old. I went from an already-great rate of 2.875 down to 2.375. I’ll save over $2,500 a year just in the next five years. Thanks to the promotion, I even made money in the process. If your current interest rate is higher, your own savings could be even greater.

Let’s dig in!

How does refinancing save you money?

Refinancing saves you money by lowering your interest rate and helping you build equity faster. Money spent on interest is lost forever, and a lower rate means less money lost.

Even a minor difference in interest rate has a massive impact. For example, if you have a $300,000 loan and knock half a percent off your interest rate, you’d save approximately $1,500 in just the first year ($300,000 x .5%). But there’s a second benefit as well: a lower interest rate causes more of your monthly payment to go towards the principal, building your equity in the house. That means when the time comes to sell, you’ll have more money coming back to you instead of going to the bank.

Tip: Remember that your monthly payment determines how big a check you write each month, but your interest rate determines how much of that money is “lost”.

The actual math to calculate your savings is complex, but the headline is simple: Refinancing will save you a massive amount of money every year.

What decisions do you make when you refinance?

When you refinance your mortgage, you can pick your new interest rate, loan term, whether to buy any points, and whether to cash out any equity. It’s helpful to know what these words mean because they will come up as you go through the refinancing process.

The simplest refinance scenario is to obtain a lower interest rate without changing the term, buying points, or cashing out.

Loan term refers to how long your new mortgage will last: 30-years, 15-years, or something else. You can keep the same loan term you have now, or you can change it. Shorter loan terms usually have lower interest rates, higher monthly payments, and less total interest paid. I have more to say about whether you should pay your mortgage off early later in this article. 

Buying points is an arrangement where you pay additional fees at closing to lower the interest rate even further. It’s a wager: if you keep the mortgage long enough, you’ll come out ahead because the money you save in interest will be greater than the upfront cost of the points. However, if you sell the house (or refinance again) too soon, points can wind up costing you money. You don’t have to buy any points. 

Tip: When comparing rates between two lenders, make sure each has the same number of points for a fair comparison. It’s common for lenders to advertise fantastic rates that turn out to be loaded with points.

Cashing out equity means taking out a new mortgage that is larger than your current mortgage. You’ll get this extra money from the lender, and it can be a strategic way to borrow money cheaply, especially for home improvement projects. However, cashing out equity will increase your monthly payment and typically come with a higher interest rate than a normal refi.

What factors determine your interest rates?

The basic information used to check interest rates are your loan amount, home value, credit score, and ZIP code. These details will vary from one person to the next, and people with different situations will be offered different rates.

Your ZIP code is obvious (and out of your control). Interest rates are broadly comparable in different parts of the country, but not all lenders operate in all states, leading to some variations in the best deals. Closing costs will also vary from state to state.

As with most loans, the better your credit score is, the lower your rates will be. You can improve your credit score over time, but there’s probably little you can do overnight to change it. 

Your new loan amount will be the same amount remaining on your current mortgage unless you’re doing a cash-out refinance. Different loan amounts will have different interest rates.

Finally, your estimated home value matters because your loan-to-value (LTV) ratio also affects interest rates. LTV is the percentage of the home’s value you’re borrowing. For example, a $400,000 loan on a $500,000 property has an LTV of 80%. Often, the lower your LTV is, the lower the interest rate will be. You can use websites like Zillow or Redfin to get a computer-generated guess of your property’s value. When you move forward with the refinance, you may be required to get an appraisal as well.

How do I find the best deal on interest rates?

The same person will find wildly different offers from different lenders. The best and worst interest rates can be over 1% apart. As discussed above, a minor change in rate makes a massive difference in your savings.

Traditional financial institutions, like major banks, often seem to have the worst rates. The best rates often come from online lenders, which have more streamlined operations and compete on efficiency.

At the time of writing, two sites that reliably offer low interest rates (without requiring sign-up or a credit check) are Bankrate and Nerdwallet. I’ll link to them below when I talk about the Better/Amex promotion. You might also find competitive rates on LenderFi or AimLoan. Finally, some brokerage firms like Schwab offer lower rates to high-net-worth individuals. If you have significant assets, it’s worth a look.

Tip: Remember to check points when comparing rates. Points can make one rate appear better than another.

Understanding closing costs: Which ones matter?

There are three types of closing costs: points (or credits), prepaids (taxes and insurance), and fees (legal costs, appraisal, and other lender fees).

When you refinance, you may receive a loan estimate that looks alarmingly expensive. It’s important to understand where the money is going. Points are an optional expense you’re choosing to add on, explained above. Prepaids represent money you owe anyway. Fees are the money you don’t get back.

Let’s make this clear with an example: Imagine you get a Loan Estimate that says you owe $10,000 in closing costs. There are $0 in points, $2,000 in fees, and $8,000 in prepaid tax and insurance. Also, your current loan’s escrow account has $7,000 in it. You will need to write a check for $10,000 to the new lender, but you will get a refund of $7,000 from the old one after you close, leaving you out of pocket $3,000. $2,000 of that disappears in fees. The extra $1,000 goes into the new escrow account, which pays bills you owe anyway.

Fees are the true cost of doing a refinance

As we’ll see below, the Better / American Express deal may provide you with a $2,000 or $6,000 credit that offsets these fees, in which case you instantly come out ahead with your refinance. Otherwise, there is a breakeven period: you’ve spent money on closing fees, but you’ll start saving money with the better interest rate. After some time has passed, you’ll come out ahead.

The Better / American Express Deal

Editorial note: I am not receiving any commissions for this recommendation. 

At this point in the article, I want to focus on the lending company Better. I used this company to refinance my mortgage and am helping friends do the same.

I found their rates to be among the lowest, and the $2,000 or $6,000 American Express credit is highly compelling because it means it’s possible to close the mortgage with immediate profit. 

I also found Better to be efficient, responsive to questions, and fast to close. Finally, they waive appraisal under certain circumstances, which saves some money and hassle (mine was waived, my friend’s was not).

The steps below describe how to squeeze the best possible rate out of Better and take advantage of the deal.

Tip: Please read this entire guide before applying because there’s an optimal process to follow.

Step 1: Understand the $2,000 / $6,000 American Express credit

Better has a partnership with American Express. They provide either $2,000 (for a conventional loan) or $6,000 (for a jumbo loan) as a statement credit shortly after the refinance closes. This credit should more than offset closing costs in most situations.

The details of the deal are here. To qualify, you or a co-borrower must have a personal American Express card. If you already have a card, you’re in luck.

If you don’t currently have a card, you will need to apply for an American Express card. They offer everything from basic, no annual fee cards to premium cards with fees, benefits, and sign-up bonuses.

You will want to have strong credit to open a credit card just before refinancing a mortgage. Be aware that doing so will cause some back-and-forth with the underwriters as they try to understand why you’ve opened the card (it’s best to be honest that you opened it to take advantage of the promotion). Wait until you’re ready to lock your rate to apply. 

If you are unwilling or unable to open an American Express card, that’s ok. The steps ahead can still guide you in searching for low interest rates that might lead to a profitable refinance even without the $2,000 or $6,000 credit.

Step 2: Check your rates on Bankrate and Nerdwallet

Two sites that will give you insight into Better’s rates (and other lenders’) without requiring an application or credit check are Bankrate and Nerdwallet. You’ll need to enter your loan amount, house value, credit score, and ZIP code. 

Note: Do not begin an application process through these sites at this time.

Nerdwallet will show you a single rate for each lender without points.

Bankrate will have multiple rates per lender with different points, and you can filter their search results to control the number of points shown.

At this time, you should be comparing the advertised rates (without points) to your current interest rate. Ideally, you want to be able to lower your interest rate by at least half a percent without points. You might want to change your loan term, add points, or cash out, but evaluating whether that’s right for your situation is beyond the scope of this article.

At this point, you’ll be in one of three situations:

Situation 1: You are not finding lower interest rates than you have now. In this case, refinancing might not make sense at this time. You can check the other lenders I mention earlier in the article to be sure.

Situation 2: You’ve found a lower rate, and it’s with Better. In this case, continue with the following steps.

Situation 3: You’ve found a lower rate, and it’s not with Better. It may make sense to proceed with the other lender. However, remember that Better offers the $2,000/$6,000 credit. If the other lender’s rate is only slightly lower than Better’s, you might still come out ahead selecting Better.

Step 3: Create an account with Better

Assuming you’re interested in taking a closer look at Better, now is the time to create an account with them. Rather than do so through Nerdwallet and Bankrate, begin from Better’s American Express promotion page.

You’ll need to provide some personal information and authorize a soft credit pull. Once you create your account, you will see your rate table on Better’s website. This table will show you interest rates over a variety of loan terms. Within each type of loan, you’ll see different offers involving points and credits.

Step 4: Squeeze the rate

It’s possible (likely, based on my sample size of three) that the rates you’re now looking at will be slightly worse than Bankrate’s or Nerdwallet’s. But you can ask Better to match the rates they’re advertising on these other sites. (By applying directly through Better rather than through Nerdwallet or Bankrate, you accomplished the goal of attaching the Amex promotion to your account.) 

What you’ll do is take a screenshot of the rate you want to match and email it to the contact person assigned to your account.

There’s a clever trick in deciding which rate to ask them to match. You want to find the greatest difference between the offers you see on Better’s website and the offers on Nerdwallet or Bankrate, including the rates with points on Bankrate. For example:

If Better’s website shows:

2.375% for $700 in points
2.25% for $4000 in points

And Nerdwallet’s website shows:

2.375% for $0 in points

And Bankrate’s webiste shows:

2.375% for $40 in points
2.25% for $3800 in points

The rate to match in this scenario is the Nerdwallet rate ($700 savings).

However, if instead Bankrate’s website shows:

2.375% for $40 in points
2.25% for $2500 in points

The rate to match in this scenario is Bankrate’s 2.25% rate. Why? Because the savings is $700 at 2.375% but $1,500 at 2.25%.

Let me be clear: I’m not saying you should choose that rate and pay points! I think most people should avoid points. But what will happen is, when you ask them to match a rate, it will re-price the entire rate table, creating a credit (cashback) on their 2.375% rate.

Step 5: Apply for the American Express card, if necessary

Assuming you’re happy and ready to lock your rate, this is the time to apply for an American Express card if you don’t have one already. You need to apply for the card before you lock your rate because Better will ask you to agree not to apply for additional credit once you do.

If you already have a personal American Express card, you can skip this step. 

Note that your card number needs to be in Better’s system by the time you close the mortgage, but you can proceed with the refinancing process while the card is on its way to you.

Step 6: Lock your rate and move through the process

Now it’s time to lock your rate, which will create a flurry of tasks and requests for documentation. I found I was able to blast through the initial onslaught of tasks in an hour or two. After that, check in every day to see if anything new has come up.

One of the tasks will be to give them your American Express card number so that you can earn the statement credit.

Step 7: Close your refi and get paid!

Assuming everything has gone smoothly, you’ll reach the point where you close your mortgage. 

Note that your loan estimate and closing disclosure will mention the Amex credit, but you receive it after the loan closes. For example, if you have $2,000 in closing costs and expect to earn a $2,000 credit, you’ll pay the closing costs first and get the credit later. In my case, the credit appeared on my account approximately twenty days after closing.

That’s the whole process. Before I wrap up the article, I wanted to discuss a few more quick questions.

Bonus: Should you pay off your mortgage early?

There are two schools of thought on this. Many people prefer to get out of debt quickly. This instinct is usually positive, and it’s unquestionably correct for most types of high-interest debt.

However, mortgage interest rates are so historically low that some people see opportunity in borrowing money cheaply (myself included). The stock market’s historical average return is about 10%, so if mortgage interest rates are around 2.5%, one can hope to come ahead by putting extra cash into the market rather than towards the mortgage. Of course, investment returns aren’t guaranteed. Each person will have individual financial circumstances and risk tolerances that may lead them to pick one approach over the other.

Bonus: Is refinancing worth the hassle?

It’s never pleasant to have your financial life under the microscope, and if you’re refinancing, you’ve been through the tedious mortgage process before. Yes, you’ll have to drudge up documentation, answer questions, and participate in a lengthy back-and-forth with the lender to refinance.

But there are two points to remember. First, a lot of money is at stake. Refinancing will only take a handful of hours of work in the grand scheme of things, yet it will save you thousands of dollars every year. Second, there’s a lot less on your plate and a lot less pressure when refinancing than there is when buying a house. 

Final Thoughts

I’ve helped a couple of friends through this process, finding loans that will save them tens of thousands of dollars. I asked them to consider donating a small portion of their savings to the ACLU. If this article helps you save money on your own refinance, please consider doing the same if you can afford it.

I hope this article helped answer some basic questions about refinancing your mortgage and gives you a clear strategy to take advantage of a great deal with Better and American Express. If you have any questions about the process, please reach out in the comments or on social media. Good luck!