Mortgage ads comparing hypothetical and advertised payments

A claim such as “save $300 a month by refinancing” compares the advertised loan with a consumer's current or hypothetical payment. The new payment may apply only during an introductory period, so a consumer could mistake a temporary reduction for a long-term result. Regulation Z § 1026.24(i)(2) addresses these comparisons in advertisements for credit secured by a dwelling.

What counts as a comparison

The rule covers comparisons between actual or hypothetical credit payments or rates and a payment or simple annual rate available under the advertised product for less than the full loan term. A claim about how much a consumer may save is also a comparison, even if the ad does not show a side-by-side table. The rule applies across advertising media, including radio and television.

Disclose the advertised product's payment or rate schedule

The ad must include a clear and conspicuous comparison to the information required under § 1026.24(f)(2) and (3). For example, when an ad highlights an introductory payment that lasts for only part of the loan, the consumer must be able to see the applicable payments or rates and the periods for which each applies. A headline payment should not obscure a later, higher payment.

Extra rule for variable-rate loans

If the ad is for a variable-rate transaction and the advertised payment or simple annual rate is based on the index and margin used for later adjustments, the ad must state, equally prominently and close to the payment or rate, that it is subject to adjustment and when the first adjustment will occur. A buried footnote or distant landing page does not satisfy the close-proximity requirement for the stated trigger.

Example

An ad says, “Cut your payment by $400 per month,” based on a temporary introductory payment. That savings statement implies a comparison with the consumer's current payment. The ad must clearly compare the advertised payment information and applicable periods; if the product is adjustable, it must also state near the advertised payment that it can adjust and when the first adjustment occurs.

Exam sequence

1. Look for an explicit or implied comparison, including a savings claim.
2. Determine whether the compared advertised payment or rate lasts less than the full loan term.
3. Apply the clear-and-conspicuous comparison disclosure requirement.
4. For a variable-rate loan, check for an equally prominent nearby adjustment warning and first-adjustment timing.

Key takeaway

A savings headline can trigger the comparison rule. Show the loan's actual payment or rate periods clearly, and place any variable-rate adjustment warning beside the advertised term.