Mortgage Refinance Guide

If you are in the process of refinancing your mortgage, negotiating for mortgage rates can be very intimidating. You can greatly improve the odds of negotiating successfully by understanding how your mortgage rate is quoted. Here are the basics you need to know about mortgage rates to help you negotiate for a wholesale mortgage rate and save thousands of dollars when refinancing your mortgage.

What Are Wholesale Mortgage Rates?

Wholesale rates come directly from mortgage lenders and are generally not offered to the public. These loans are sold by third parties and include commission based retail markup. Loan originators are the mortgage companies, brokers, and websites you visit when shopping for a loan. These businesses make money by charging origination fees for their service and by markup up the wholesale rate your lender approved you. The good news is that commission based markup can be avoided if you know how to negotiate when refinancing your mortgage.

Commission Based Markup and Yield Spread Premium

Yield Spread Premium is the technical term for commission based markup of your mortgage interest rate. Your mortgage broker knows the interest rate that you were approved; however, they mark this rate up because the lender pays them a bonus of one percent of your mortgage amount for every .25% they get you to overpay. Most mortgage brokers will never admit that they are marking up your mortgage rate and many become angry and defensive when questioned about their markup.

How Do You Negotiate With Mortgage Brokers?

Negotiation can be intimidating for many homeowners. Fortunately, negotiating for wholesale mortgage rates is more like comparison shopping. If you get a mortgage broker that refuses to answer your question or agree to your terms you’ll simply move on to the next broker. Mortgage brokers are licensed by your State and are a dime a dozen. Spend a little time with your phone book and you should have no problem finding a broker willing to refinance your mortgage with a wholesale rate.

How to Get a Wholesale Mortgage Rate

You can avoid Yield Spread Premium when refinancing your mortgage by finding a mortgage broker willing to work for an origination fee alone without Yield Spread Premium. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and will not accept a mortgage that includes commission based markup. Tell your mortgage broker that you will pay a reasonable origination fee for their services. A reasonable fee for a mortgage broker’s work is one percent of the mortgage amount.

Once you’ve found a mortgage broker willing to work for an origination fee without charging you Yield Spread Premium you’ll need to pay close attention to your loan documents to ensure this person is being honest with you. Yield Spread Premium will appear on the lender’s rate lock confirmation, your HUD-1 statement, and possibly on the Good Faith Estimate (GFE). Yield Spread Premium should be disclosed on the Good Faith Estimate; however, many brokers omit this markup to make their loan offers more attractive. You’ll notice that the GFE and HUD-1 statement look very similar. If Yield Spread Premium is present with your loan you will find it around lines 810-812 of these documents.

Beware Mortgage Junk Fees

There are a number of garbage fees mortgage brokers try and slip past you when refinancing. If you find anything on your Good Faith Estimate or HUD-1 statement that resembles a rate lock fee, mortgage broker courier fee, processing fee, or application fees, these are garbage fees that you do not have to pay. Take the “rate lock fee” for example. Mortgage lenders never charge your broker a fee for locking in your interest rate. If you find this fee listed on any of your loan documents you can be sure it’s headed for your mortgage broker’s pocket.

You can learn more about refinancing with a wholesale mortgage rate with a free mortgage DVD.