Every once in a while I’ll see a mortgage program advertised on TV and examine the product to see if it makes any sense for homeowners.
The latest I’ve seen is the Ditech “Real Life Plan”, which is a combination of a “low rate” 30-year fixed mortgage, a “no lender fee home equity line”, and a “free Ditech Equity Rewards” MasterCard.
The first mortgage is a 30-year fixed mortgage as advertised, which is typically a smart choice for many homeowners in a rising interest rate environment.
Within the small print is an example rate of 5.75% with two mortgage points for a loan amount between $250,001 and $417,000, and a minimum credit score requirement of 731.
The cost of two percentage points is a red flag, as well as the requirement to have a minimum credit score of 731 and a conforming loan amount to secure the 5.75% mortgage rate.
If you’ve got a stellar credit score and a conforming loan amount, you can take your loan just about anywhere and probably pay less than two points to get a comparable or possibly lower rate.
The second mortgage is a home equity line of credit, also known as a Heloc, which is described as having no mortgage lender fees, though it may be subject to other third-party fees, such as appraisal fees.
It should be noted that most second mortgages when closed in conjunction with a first mortgage have few fees if any, so this isn’t much of a revelation.
The third and final piece of this loan program is the “Ditech Equity Rewards” MasterCard, which is simply a no annual fee platinum credit card with cash rewards that go towards paying off your mortgage principal.
I find it amusing that Ditech lists the credit card as “free”, as if it’s a bonus gift for signing on to the program.
For most homeowners, another credit card will be more of a burden than anything else, and a manual extra payment of $25-$50 will accomplish the same thing as the rewards program.
To sum it up, the combination the “Ditech Real Life Plan” offers is probably not necessary for most homeowners, nor does it seem to add any notable value.
See my review of the Quicken Secure Advantage Loan as well.