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Expert Mortgage Refinancing Advice
For Virginia Homeowners

Best Refinance Companies

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What is the best refinance for me?

Are you looking for the best refinance companies for your next home loan? Did you know that nearly all of them include hidden markup in your mortgage rate intended to boost their profits at your expense? In fact, this hidden markup is so bad that the Secretary of Housing and Urban Development said your neighbors in the United States would lose sixteen billion dollars this year alone because of it. Here are several tips to help you avoid hidden markup and junk fees that the so-called best refinance companies try to slip past you.

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Who Are The Best Refinance Companies Online?

The internet is an excellent tool for digging up dirt on even the best refinance companies. The problem with using the internet is the overwhelming amount of bad mortgage advice available. (Much of which is spread by mortgage companies) Take for example the two percent rule of mortgage refinancing. This particular nugget of bad mortgage advice states that you should not refinance your home unless your new mortgage rate is at least two percent lower than your existing interest rate. If this were good advice most people would never refinance; however, even refinancing a half point lower can save you as much as a hundred dollars a month, and in this economy a hundred bucks can be a windfall you don’t want to pass up.

Why can’t you trust these best refinance companies with your next home loan? The problem with nearly every one of the so-called “best refinance companies” is that they charge you a mortgage origination fee for the work they do refinancing your home AND mark up your mortgage rate for compensation from the lender. This lender paid compensation is explained away when questioned by telling you “that fee isn’t coming out of your pocket, you don’t have to worry about it.” What these best refinance companies fail to tell you is that this hidden markup of your mortgage rate for the lender fee known as Yield Spread Premium drives your monthly payment up unnecessarily, and that money does come out of your pocket.

Yield Spread Premium Definition

Don’t worry if you’ve never heard of Yield Spread Premium because it’s not something your best refinance companies are going to want to discuss with you. Simply put, Yield Spread Premium is a fee paid to the person arranging your home loan for locking and closing with a higher than necessary mortgage rate. Both the lender and your broker know the mortgage rate you’ve qualified for when refinancing; however, the loan originator (mortgage broker or company) marks this rate up to collect Yield Spread Premium from your lender.

You might thing you can avoid all of this hidden markup nonsense when refinancing by taking out a home loan from your bank; however, just like the best refinance companies your bank marks up mortgage rates for a profit known as Service Release Premium. Just like the Yield Spread Premium charged by your best refinance company, the bank boosts profits with Service Release Premium when your home loan is sold to investors on the secondary market. Bottom line: You can’t avoid hidden markup refinancing your home loan with a bank or one of these so-called best mortgage companies.

You Can Refinance With Wholesale Rates

If shopping for a new home loan from the best refinance companies is a bad idea how can you find the lowest mortgage rates without hidden markup or junk fees? Despite what many mortgage brokers will tell you it is possible to refinance your home with wholesale mortgage rates paying a flat origination fee of one percent. This wholesale mortgage rate ensures there is no Yield Spread Premium on your home loan and that you’re not paying unnecessary discount points or junk fees.

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{ 4 comments… read them below or add one }

Benjamin Popp January 11, 2013 at 12:01 pm

You’re incorrect about lenders being able to keep the YSP that is illegal now do your homework!

Reply

Robert Regehr January 11, 2013 at 2:33 pm

Actually they can use YSP to pay the origination fee and closing costs. That’s what a no-fee refinance is…what changed is the can’t keep yield spread premium AND charge a loan origination fee. Look at page 2 of your Good Faith Estimate…it’s there.

Reply

BG February 2, 2013 at 11:00 am

Hi Robert: great article. You use simple English which is good because the ones reading are usually not in the profession! My question to you (I apologize is off topic) is it better to refi with the bigger well known companies like chase, Bank of America, Wells Fargo, etc. than to go for companies like umqua, discover home loans, voyage, etc or online banks?

Reply

Fh May 6, 2013 at 6:24 pm

Is it better to refi with the original company of your mortgage like Wells Fargo or go with quicken loans?

Reply

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