Mortgage Refinance Guide

If you’re considering a “no cost” or “no fee” mortgage loan for your home loan there are several things you need to know about these loans to avoid paying too much. Whenever lenders talk about “no fee” mortgage loans they are always trading off a higher mortgage rate in exchange for lender fees paid at closing. Here are several tips to help you avoid falling for the “no closing cost” lie with your home mortgage loan.

What are no cost mortgage loans? No closing costs loans are simply a gimmick to get your business. There will always be third party closing costs that cannot be waived…if your lender is “waiving” these costs they may be paying them for you; however, they will mark up your mortgage rate to cover the cost.

When you take out a mortgage the person arranging your loan typically slips .50 to .75 percent markup of your interest rate to get a commission. If you take out a no cost mortgage you will have this markup plus as much as a full point markup from the lender. This higher mortgage interest rate can result in paying hundreds of dollars extra each month that you keep the loan. This is true of both the mortgage lenders and banks you see offering “no closing cost mortgages” as well as the “flat fee” loans.

Suppose you take out a $350,000 mortgage to purchase your home. The mortgage rate you qualify for paying your closing costs is 6%; however you elect to take a 6.75% mortgage to avoid paying closing costs. Your monthly mortgage payment at 6.75% on a 30 year fixed rate loan will be $2,270 per month. If you paid the closing costs upfront your monthly payment at 6% would have only been $2098. That’s an extra $2,064 you’ll pay every year you keep the loan.

In five years this “no fee” mortgage has cost you a whopping $10,320…money you’d still have in your pocket had you elected to pay your closing costs up front. You can learn more about saving money on you home loan while avoiding unnecessary markup of your mortgage rate and garbage fees with my free video tutorial.

You might be asking yourself “What the heck is a Broker Bank?” Most people have never heard of broker banks…in fact, prior to 1999 they didn’t exist. Here are the basics that every homeowner needs to know about Mortgage Broker Banks when refinancing a home loan.

Before the Real Estate Settlement Procedures Act was amended to require mortgage brokers to disclose their profit margins made from locking and closing mortgages with above market rates, banks were losing a large portion of their profits to mortgage brokers.

The Banking Lobby decided to do something about this and spent millions of dollars lobbying Congress to have the disclosure laws changed; their goal was to gain an unfair advantage in the marketplace by requiring mortgage brokers to disclose the commission based markup of your mortgage interest rate.

What is a Broker Bank?

The banking lobby succeeded in having the law changed and of course banks are exempt from this new disclosure legislation. This change in the Real Estate Settlement Procedures Act sent mortgage brokers scrambling to take advantage of the same loophole exploited by banks. All a mortgage broker had to do was fund their own loans like a bank which would allow them to close in the name of their company instead of a wholesale lender…hence the Broker Bank was born.

The only reason a mortgage company or broker would choose to operate as a broker bank is to hide their markup of your mortgage interest rate. If you refinance your home with a bank or broker bank you’ll never know mortgage rate you could have had with an honest lender.

How to Recognize a Broker Bank

Banks are easy to spot; however, when it comes to recognizing broker banks things can get a little fuzzy unless you know what to look for. First of all, broker banks love to brag about doing their loans “in house.” The best way to find out if your mortgage broker is acting as a broker bank is to ask if they close in the name of the wholesale lender. If the answer you get is “no” and they are closing in their own companies name then you know with 100% certainty that they are a broker bank and cannot be trusted with your mortgage.

Beware Bank Wholesale Divisions

One of my readers emailed me that she was working with a broker for a loan through Wachovia. Her broker convinced her that this was okay because the lender wasn’t Wachovia directly, but their “wholesale division” known as Vertice. The problem with this logic is that the bank controls their wholesale division and the rate sheets provided to mortgage brokers from Vertice include the markup. On top of this the banks salespeople do not have the authority to negotiate for lower rates. Banks have enormous overhead they must cover and rely on overcharging to make a profit. This is true of every bank originated mortgage loan on the market today.

Do you think my reader paid too much for her mortgage refinancing with Wachovia? Absolutely…she never signed up for the free mortgage videos I offer and will pay thousands of dollars too much. It always amazes me why people don’t take advantage of a free product that will not only save them thousands of dollars in unnecessary finance charges but show them how to avoid garbage fees as well. Similar products sell for hundreds of dollars and don’t offer half as much insider mortgage scoop that I give away free every day. I guess the old saying is true…you can lead a horse (in some cases a goat) to water, but you can’t make her drink.

If you’d like to learn how to refinance your mortgage with a wholesale rate without paying lender and broker garbage fees, register for my free video tutorial.

Wells Fargo Mortgage is a division of Wells Fargo Bank, one of the largest banks created following a merger with Norwest bank and is currently the second largest mortgage lender behind Countrywide home loans. Are you considering refinancing with Wells Fargo Mortgage or do you already have a mortgage from Wells Fargo? Here are several tips you need to know about bank originated mortgage loans to avoid paying too much for your home loan.

Wells Fargo mortgage has earned a reputation similar to Countrywide as a predatory lender. They hook their customers with a free checking account and then sock it to with ridiculous fees and overpriced mortgage and investment accounts. Consumer watch groups like ACORN are constantly charging Wells Fargo with predatory lending especially with their home loans targeted to people with poor credit and home equity loan offerings.

Wells Fargo has even had their home office picketed on several occasions by consumer activists. As a former Wells Fargo Customer I can tell you that I recently switched my checking account to Bank of America and have never been happier. For checking and savings accounts you can’t beat B of A’s free accounts. But what about mortgage loans?

What’s Wrong With Bank Originated Mortgage Loans?

There’s plenty wrong with bank mortgage loans that your banker isn’t telling you. The biggest issue you need to be aware of is called Service Release Premium. Simply put this bank premium is the difference between the mortgage rate you could have had and the one the bank gives you. There are two types of mortgage rates out there today…wholesale rates offered by wholesale lenders and mortgage rates that have been marked up by banks and other mortgage companies for profit.

Another important distinction about banks…they aren’t legally required to play by the same rulebook as other mortgage companies and brokers. Banks are exempt from a very important law that protects homeowners from predatory lending practices called the Real Estate Settlement Procedures Act (RESPA). The Banking Lobby spent millions of dollars bribing your elected officials (after all, that’s how Washington works now) to have the disclosure laws changed so that banks are not required to disclose their profit margin or markup on your loan. Mortgage brokers are now required to disclose their markup known as Yield Spread Premium on the Good Faith Estimate and HUD-1 Statement; however, banks are not required to comply with the same law.

With this in mind why would you even consider taking out a mortgage from a company that doesn’t have to play the rules? It’s not just Wells Fargo that uses this unfair practice to exploit homeowners; it’s every bank and credit union out there. Banks do this because they make the majority of their profit by selling their mortgage loans to investors. The bank knows that loans with above market interest rates bring them the most profits and this is how they run their businesses.

If you’re not yet convinced that bank originated mortgage loans are not the way to go, try comparing true wholesale rates offered by an honest mortgage broker to the rate sheets offered by your bank and you’ll see that Wells Fargo Mortgage is not the way to go when refinancing your home loan. If you’d like to learn more about refinancing your mortgage with a wholesale rate and finding an honest broker to help you, register for our free video tutorial.

If you’re looking for an online savings account, ING Direct’s Orange Savings account is the Cadillac of online accounts. Most banks are offering some type of online savings account today; however, very few offer the same features and the Orange account. Here are my experiences with ING and several tips to help you decide if the Orange online savings account is right for you.

Saving money can be extremely difficult for many people; according to financial advisor David Ramsey nearly 78% of all Americans live paycheck to paycheck. If this describes your finances you could be just one emergency away from a financial meltdown. The good news is that saving money is easier than you think. Tools like ING’s Orange online savings account make it very easy to stash money away from every paycheck that you’ll never miss.

ING was the first to offer the online savings account in 2000 allowing people who have outgrown their piggy banks to squirrel money away in a very liquid online savings account that earns a better return than those offered by banks or credit unions. One of the best features of ING’s Orange online savings account is the ease of access to your money; typically, your cash can be accessed in just a few business days. The best thing about the Orange online savings account is that there are no fees or minimum balances. There are also no tricks buried in the fine print that you’d find at a bank like Wells Fargo.

How can there be no fees or minimum balances? What’s the catch? There is no catch for you, but just because ING isn’t charging a fee for their online savings account don’t think they’re not making money from it. ING has almost ten times the amount of deposited funds than their nearest competitor.

Getting Started With an Online Savings Account

While I haven’t opened many accounts online, ING’s online savings account is the easiest account that I’ve ever opened. I do have many other accounts but I keep my ING online savings account just because it’s so easy to use and doesn’t cost me anything. Opening your Orange online savings account is easy; it takes about 5 minutes to complete the application. After you complete the application ING will make several test deposits to you checking account and once you confirm the amounts of those deposits, you’re ready to go.

Having referred a number of friends and family members to the Orange online savings account I can tell you that no one I know has ever had a problem with them. That includes cashing money out of the account which is handled by ACH direct deposit to your checking account. You can start your ING Orange online savings account by clicking here:

Once your account is active you’ll have access to all of the nifty features that come with your Orange online savings account.

Cool Interface The user interface is slick and easy to navigate. The buttons are clear and intuitive. Everything you need to do is just…easy.

Sub-Accounts This feature allows you to use multiple accounts, each with it’s own unique account number. This allows you to designate an account for a specific goal, like saving up for vacation.

Refer a Friend Once you’re an ING customer you can refer your friends and put up to $250 in your pocket. ING pays a finder fee of $10 for up to 25 of your friends, coworkers, and family members.

Interest Paid at a Glance Your ING control panel shows how much interest was paid to your account this month. You can see exactly how much your money has earned.

Other cool features include automatic deposits from your checking account, the ability to link up to three external accounts, and downloading your transactions automatically into MS Money or Quicken. ING also allows you to set up accounts for children. If you’ve been looking for a way to stop living pay check to pay check or want to start saving for a rainy day or that upcoming vacation, ING’s Orange online savings account could be your answer.

If you’re considering taking out a mortgage to purchase your home or refinance your existing mortgage with a bank like Wells Fargo, here are several things to consider first. Refinancing with the wrong lender could not only cost you thousands of dollars but could lead to the loss of your home. Here are several tips to help you decide what kind of mortgage lender is right for you.

Wells Fargo mortgage is a fully owned subsidiary of Wells Fargo Bank. Today Wells Fargo is the second largest mortgage company in the United States just behind Countrywide. Wells Fargo bank and its mortgage subsidiary is a darling on Wall Street and a favorite pick of mutual fund managers and investors because of their incredible profit margins. I’ve never been a customer of Wells Fargo Mortgage; however, I had a checking account with Wells Fargo Bank and I can tell you I’ve never felt more nickeled and dimed since staying at the Luxor hotel in Las Vegas.

Wells Fargo’s profit margins are so high not only because of all the fees they charge with their so called free checking accounts, but from their overpriced mortgage loans and expensive investment accounts. Because of their consumer gouging business model Wells Fargo has received negative press from several consumer watch groups, including ACORN, charging the bank with predatory lending practices. If you’re considering taking out a mortgage from Wells Fargo, Bank of America or any other bank or Credit Union, here are several compelling reasons not to.

Banks and the Real Estate Settlement Procedures Act (RESPA)

RESPA is legislation in the United States that protects homeowners from predatory lending practices by requiring mortgage lenders to disclose their profit margins and markup. The Banking Lobby spent millions of dollars in the early 90s lobbying Congress to have the law changed, and they succeeded. Banks are now exempt from the Real Estate Settlement Procedures Act.

What does this mean for you? Your bank is not required to tell you anything more about their mortgage products than the Annual Percentage Rate (APR). While separate truth in lending legislation requires banks to disclose some form of APR for their mortgage products, there is no standard method for calculating the APR or requirements for what fees must be used in the calculations. This means your bank is free to calculate the APR however they like; this limitation in the law has turned the Annual Percentage Rate into more of a marketing tool for lenders than the consumer protection legislation it was intended to be.

Let’s get back to RESPA shall we? Because your bank is exempt from this legislation you’ll never know what the bank’s profit margin is on our loan. And just where does this profit come from? Many people think that once they close on a mortgage the bank kicks back and cashes their payment checks each month to make a profit from the interest paid on the loan. This simply isn’t true. Banks make the majority of their profits by selling mortgages to investors on the secondary market. Furthermore, the bank maximizes this profit by selling loans with above market mortgage rates.

Above Market Mortgage Rates and Service Release Premium

Your bank isn’t stupid…they know exactly what’s going on in the mortgage industry and what the wholesale mortgage rate is every day. Furthermore, the bank knows exactly what mortgage rate you qualify for based on a thorough examination of your financial details. (sixteen factors to be complete) The bank determines your mortgage rate and then marks up that rate to boost profits when the loan is sold. This markup of your mortgage rate is called Service Release Premium and is the reason you should never take out a mortgage from any bank. Period.

Not convinced? Don’t ask your banker. Most bank employees have never heard of Service Release Premium and couldn’t quote you a wholesale mortgage rate if their very lives depended on it. Bank employees will show you their daily rate sheets and swear on a stack of bibles that their rates are not marked up. The problem is that bank mortgage rate sheets have Service Release Premium built into them. The only way to recognize this is to compare your bank’s mortgage rates to those offered by wholesale mortgage lenders and you can easily spot their markup.

Can You Get Wholesale Mortgage Rates?

Do you simply call up a wholesale lender and ask for a wholesale mortgage rate? Unfortunately, no. Every wholesale lender out there has a retail division that deals with the public. If you contact one of these lenders you’ll be getting the same markup of your mortgage rate that the bank adds. Does this mean wholesale mortgage rates are out of reach of the average homeowner? Of course not!

How to get Wholesale Mortgage Rates

You can take out a mortgage with a wholesale rate and avoid lender garbage fees. In order to do this you need to find a mortgage broker willing to give you access to wholesale rates without overcharging you. These brokers do exist; however, you’ll need to learn how to negotiate with them to get the deal you want. You can learn more about negotiating with a mortgage broker for wholesale rates while avoiding junk fees by registering for a free mortgage video tutorial.