Oh, no! Mortgages offering frequent flyer miles are back

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There are a lot of things you should consider when refinancing a mortgage -- interest rate, length of the loan, closing costs.

Something trivial like earning frequent flyer miles shouldn’t sway your thinking on a decision as big as this.

Yet a new promotion Chase Bank and Southwest Airlines have cooked up is trying to do just that.

To be honest, the whole thing gives me the creeps because I haven’t seen this kind of come-on since the bad old days of the housing bubble and all of the reckless lending that drove it.

Here’s what one website (no, not this one) said back in 2006, just before everything started falling apart:

You can build miles by buying a home. All major airline and hotel programs have national programs to earn you a lot of miles for mortgages. And guess what? Some if (sic) the nation’s leading mortgage lenders: Countrywide, Washington Mutual Home Loans, Chase Home Finance, CitiMortgage and Wachovia Corporate Mortgage Services participate in these programs.

Of course, that list of “leading mortgage lenders” turned out to be a rogues' gallery of the industry’s worst players.

Do we really want to go back to the kind of marketing that tries to persuade borrowers to make a major financial decision for all the wrong reasons?

“I don’t know if I got the best deal, honey, but the bonus frequent flyer miles will get us to Cincinnati this weekend!”

This sounds like a bad idea to me, and it isn’t even that lucrative.

If you refinance or take out a home loan through Chase, you get Southwest Airlines Rapid Rewards Points as a bonus.

How many points you get depends on the size of your mortgage-to-be:

PlasticIQ has calculated that each Rapid Rewards Point is equal to 1.67 cents.

That makes 12,500 points worth about $208 toward a Southwest flight.

The maximum 50,000 points comes to $835.

Now let’s say you take out a 30-year, fixed-rate loan at 4% from Chase. (That’s not what you’re promised in the promotion, but it’s the best interest rate Chase is currently offering on this type of loan.)

And let’s say you’d forgone a 3.875% home loan with no closing costs or lender fees from another lender to get those Southwest points.

Chase doesn’t say how much closing costs and lender fees might be on its loan -- you’d have to call for that.

But it’s not much of a stretch to say those costs, which typically start at $2,000 to $3,000, would more than offset the value of the Southwest points.

You’d also be paying $7 more per month for every $100,000 borrowed. On a $200,000 loan, you'd cover the $208 bonus in less than 15 months.

After that, you’re paying more than you need to for years to come.

So, come on Chase and Southwest. We don’t need marketing like this.