Are you in the market for mortgage refinancing but aren’t sure how to get the best deal for your next home loan? Did you know that mortgage refinancing with a wholesale interest rate will cut as much as $1200 worth of hidden markup from your home loan every year? Despite what your mortgage broker tells you it is possible to pay a flat fee of one percent for loan origination and refinance your home with wholesale mortgage rates. Here are several of my best mortgage refinancing tips to help you slash that $1200 worth of fat from your next home loan.
Mortgage Refinancing to Lower Your Payments
According to the Secretary of Housing & Urban Development (HUD), homeowners in the United States (your friends and neighbors) will overpay sixteen billion dollars for their home loans this year because of hidden markup and junk fees. The fee you need to avoid when mortgage refinancing is called Yield Spread Premium. Don’t sweat it if you’ve never heard of Yield Spread Premium, your neighbors haven’t heard of it either which is why they’re overpaying for their home loans.
What is Mortgage Yield Spread Premium?
Simply put, Yield Spread Premium is a fee paid by mortgage lenders to any broker that locks and closes your home loan with a higher than necessary interest rate. The amount of the fee they receive depends on how much they markup up your interest rate. For every .25 percent that you unknowingly agree to overpay the broker receives one percent of your home loan as a kickback. Here’s an example to illustrate how Yield Spread Premium drives your monthly payments up unnecessarily and how much you can save by avoiding the hidden markup when mortgage refinancing.
Suppose for example you’re refinancing your home for $315,000 and your broker quotes you an interest rate of 6.5% charging you an origination fee of two percent. At closing you’ll be required to pay $6,300 for the broker’s part in arranging your mortgage refinancing. The first thing you need to know about the mortgage origination fee is that you never want to pay more than one percent of your home loan. In this example $3,150 is more than ample compensation for the broker’s work arranging your home loan. So what about the mortgage refinancing Yield Spread Premium in this example?
Yield Spread Premium in Action
What your broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate and they’ve marked it up to 6.5% to collect an extra 2% from your lender. That’s another $6,300 on top of the $6,300 you’re already overpaying this person for their work. What does this hidden markup do to your mortgage payments? Suppose you’re mortgage refinancing with a 30-year, fixed-rate mortgage of $315,000. At 6.5% your monthly payment will be $1,991. If you had the interest rate you deserve when mortgage refinancing at 6.0%, your monthly payment would be only $1,888. That’s a difference of $103 per month, a whopping $1,236 per year of your money that you’re throwing away because of this hidden markup.
You Can Get Wholesale Mortgage Rates
You don’t have to be a personal finance guru or have connections to get a wholesale mortgage rate, you just need to find the right person to arrange your home loan when mortgage refinancing. Who is the right person to arrange your next home loan? You won’t find the right broker with those large, nationwide brokerage houses; they simply have too much overhead to give you the kind of deal I’m describing here. Look for a small, self-employed local mortgage broker in your area and they’ll be much more likely to negotiate the kind of mortgage refinancing deal that I’m describing here.
You can learn more about getting a wholesale interest rate without paying junk fees by checking out my free Underground Mortgage Refinancing Videos.
Here’s a quick sample to get you started today by exposing the dirty secret your lender and broker would rather you didn’t know…
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
