Home Mortgage Refinancing Guide

If you are like most homeowners seeking mortgage refinance information online you’re already familiar with discount points and how they affect your mortgage rates. What you may not know is that the mortgage industry has a little known dirty secret called Yield Spread Premium. Simply put, Yield Spread Premium is the opposite of a discount point. Someone…just not you…is getting cash from the lender for marking up your mortgage interest rate. Here are the basics you need to know to avoid paying too much when refinancing your home mortgage loan.

Mortgage Refinancing & Yield Spread Premium

It sounds like a scary term but Yield Spread Premium is a relatively simple concept to wrap your head around. The majority of homeowners today have never heard of Yield Spread Premium nor do they know that this markup of their mortgage rate was quietly slipped into their existing home loan. According to the government Yield Spread Premium is responsible for American homeowners overpaying nearly sixteen billion dollars this year alone.

How Yield Spread Premium Works

Here’s an example: suppose you are refinancing your mortgage for $250,000 and your mortgage broker tells you that you qualify for a mortgage rate of 6.5 percent. What you don’t know is that you actually qualify for a mortgage rate of 6.0%. The “spread” is the difference between what you got and what you could have had…in this example .5%.

The premium created in this example is a 2% commission for the mortgage broker for lying to you. In this example the mortgage broker walked away with a $5,000 payday from the mortgage lender for overcharging you. This is in addition to any fees you paid to the broker for loan origination. 99.99% of homeowners have mortgage loans with higher than necessary mortgage rates. Most likely you’re already paying thousands of dollars too much for your existing mortgage loan.

Yield Spread Premium Can Be Avoided

You can refinance your existing home loan without this unnecessary markup of your mortgage rate. Homeowners who learn to recognize and avoid Yield Spread Premium are able to take advantage of the wholesale nature of mortgage rates and save thousands of dollars every year pay a mortgage. The free online videos available on this website will show you an easy-to-follow method of refinancing your mortgage without this markup of your interest rate and how to avoid lender junk fees. When you register for the videos you’ll also receive a list of recommended mortgage brokers in your area to get you on the right track to refinancing without paying too much for next mortgage loan.

If you are shopping for mortgage rates you might be wondering if and when you should lock your mortgage rate. Lock at the wrong time and you risk mortgage rates going down.

Lock for too short a period of time and you might not have time to close on the mortgage before the lock expires. Here are the basics you need to know about mortgage rate lock to avoid common mistakes when refinancing your loan.

A common misconception for many homeowners is that if you lock your rate and mortgage rates go down, your rate will also drop to the new level. Unless it’s in your contract this simply isn’t true. Many people think you should lock your mortgage rate as soon as possible and then if rates go down you can “relock” to the lower mortgage rate. Once you lock your mortgage rate in writing, your rate is locked..period.

Always Lock Your Mortgage Rate in Writing

When you decide to lock your mortgage rate you must tell your broker to execute the mortgage rate lock and get the confirmation agreement in writing. If you don’t have it in writing you never locked you mortgage rate. Next, make sure the proof you get from your mortgage broker is actual proof from the lender. The mortgage broker will receive a faxed confirmation, although it could be emailed or a online form from the wholesale lender that details the terms of your rate lock. This document will include the type of mortgage, interest rate, points, and most importantly when the lock expires.

How Long Should I Lock My Mortgage Rate?

If your mortgage rate lock expires before you have a chance to close on your loan the lender does not have to honor the rate you were promised and will probably raise it. Once your rate lock expires it is not in the lender’s interest to give you the lowest rate since they have already hedged funds for your loan.

Suppose for instance you lock your mortgage rate for 30 days at 5.5%. You miss your closing date and the rates while you were locked when up to 6.25%. This means you’ll be stuck with a rate of 6.25% because the lender will always give you the higher rate. Even if rates go down you’ll be stuck with your old rate because it is the higher of the two.

Should You Float Your Mortgage Rate?

Floating your mortgage rate means you choose not to lock. There is no obligation on your part or the lenders to commit to a specific mortgage rate. If rates are going down you’ll be in a good position to catch the lower rate; however, if mortgage rates are on the rise you have no protection from the market. Floating your mortgage rate is a risk you take…you might come out ahead but you might lose big.

Watch Out For Yield Spread Premium

The lender’s rate lock confirmation is the first opportunity you’ll have to catch Yield Spread Premium (YSP) on your loan. If you’re not already familiar with YSP this is the mortgage broker’s markup of your interest rate for a commission. If you want the lowest possible mortgage rate when refinancing you’ll need to ensure your loan does not include this markup. You can learn more about avoiding Yield Spread Premium when locking your mortgage rate by registering for the free video tutorial on this website.

Refinancing your home loan allows you to take advantage of low mortgage rates as well as change the terms of your existing mortgage loan.

Before you decide to refinance your existing mortgage it is important to determine how long it will take you to recoup the expenses of refinancing your home loan. Here are several tips to help you decide if mortgage refinancing is right for you.

The process of refinancing is simply taking the balance you owe on your existing mortgage and paying it off with a new mortgage. You may have the opportunity to borrow against your home’s existing equity and get cash back in the process. Keep in mind that there are fees that you will be required to pay and there could be a penalty for paying off your existing loan early. You should examine your existing mortgage contract for a prepayment penalty prior to applying for a new mortgage loan.

Closing costs are the fees you will be required to pay when refinancing and you will encounter many of the same fees you paid when you first purchased your home. There are banks boasting about their “no fee, no closing cost” mortgage loans; however, you should know that you are trading a higher mortgage rate which will drive up your payment amount for these closing costs.

What About Mortgage Points?

Paying “discount” points on your new mortgage allows you a way to buy down your mortgage rate. One point is the equivalent of one percent of your mortgage amount paid at closing. Suppose for instance you are required to pay two points on a $150,000 mortgage, this means you will have to fork over $4,500 at closing to get the interest rate promised to you. Should you pay discount points when refinancing? In most cases no. Mortgage rates are at historically low levels and for most homeowners it doesn’t make sense paying for a mortgage rate that another lender would be willing to give you.

Types and Term Length of Mortgage Loans

Refinancing your home loan gives you the opportunity to change the term length and type of mortgage rate for your loan. Mortgage rates come in three basic varieties: fixed, adjustable, and hybrid. Hybrid mortgage loans are a combination of fixed and adjustable rate mortgages and are best suited for homeowners who only plan on keeping their homes for a short while and want to minimize their risk of payment shock from an Adjustable Rate Mortgage.

Refinancing your existing mortgage means choosing the right type of interest rate, term length, and loan originator for the new loan. Most homeowners overlook the importance of choosing the right person to arrange the new loan as this person sets their fee and commission based markup of your mortgage rate. Choosing the right mortgage broker will make or break your new home loan and could save you thousands of dollars every year you keep the loan.

You can learn more about refinancing your residential mortgage without overpaying by registering for the free mortgage videos featured on this site.

If you’re searching for information on the Internet to help you refinance your home loan, you’re probably concerned about paying too much for the new mortgage. Most homeowners understand how mortgage rates affect their monthly payment amount but not many know their mortgage rates are marked up to give a commission to the broker.

Here are several tips to help you avoid this unnecessary markup of your mortgage rate while avoiding lender junk fees.

The commission based markup of your mortgage rate is known as Yield Spread Premium (YSP). Simply put, YSP is a percentage of your loan amount paid by the lender when your mortgage broker locks and closes your mortgage with a higher than necessary mortgage rate. Lenders pay a commission to brokers for overcharging homeowners because these loans bring a premium profit when sold to investors on the secondary mortgage market.

Here’s a simple example of Yield Spread Premium. Suppose you’re refinancing your home for $150,000 and the broker tells you the lender approved your loan at 6.75%. You agree to pay the broker a 3% origination fee for their services and walk away with a monthly payment of $972 per month. What your mortgage broker didn’t tell you is that the lender actually approved your for a 6.0% mortgage rate which would have saved you $75 per month…that’s $900 per year you’re throwing away because your mortgage broker lied to you. In this example a lie of omission is still a lie right?

Refinance My Home Loan Today

Yield Spread Premium sounds like a scary technical term, but that’s really all there is to it. The HUD Secretary was quoted saying American homeowners will overpay almost sixteen billion dollars this year alone and Yield Spread Premium is responsible. It is possible however to refinance your home loan without paying this unnecessary markup. There are honest mortgage brokers out there willing to work for a flat origination fee of one percent without inflating your mortgage rate. The free videos available on this website will not only show you how to find this person but how to avoid lender junk fees. When you register for the refinancing videos you’ll also get a list of recommended mortgage brokers in your area to help get you on the right track.

If you’re considering refinancing your home mortgage you may be concerned about how to refinance without getting ripped off. According the Secretary of Housing and Urban development homeowners in the United States overpay nearly sixteen billion dollars every year in the form of junk fees and unnecessary mortgage rate markup.

Here are several tips to help you refinancing your mortgage without paying too much for your next home loan.

Beware Yield Spread Premium

There is one mortgage “secret” you need to know about in order to prevent yourself from being ripped off by your mortgage Broker. Mortgage lenders pay brokers to markup your mortgage rate with a commission known as “Yield Spread Premium.” Simply put, Yield Spread Premium is a percentage of your mortgage amount created when the mortgage broker locks and closes your loan with a higher than necessary mortgage rate. This means you could have refinanced your mortgage for less…in most cases much less.

How Yield Spread Premium Drives Up Your Payment Amount

Suppose you need to refinance your Adjustable Rate Mortgage because the lender will soon reset the loan and raise your payment amount. You need $250,000 to pay off the old mortgage including the prepayment penalty from your former lender. Your mortgage broker tells you that you qualify for a 6.5% mortgage rate and will “only” charge you 2% for the origination fee.

What your mortgage broker isn’t telling you is that you qualified for a 5.5% mortgage rate and they’ve marked it up to 6.5%…that’s a full point just to get a commission from the lender. How does this markup affect your mortgage payment? Had you gotten the mortgage rate you qualified for your monthly payment on a 30-year fixed rate loan would have been only $1400. Since your broker ripped you off in this example your payment will be $1,580! That’s an extra $2,160 you’re paying unnecessarily every year you keep this mortgage.

How to Refinance Without Yield Spread Premium

It is possible to refinance your mortgage without paying this unnecessary markup of your mortgage rate. If you follow the system outlined in the free videos on this website you will be able to refinance your home loan paying a flat fee of 1.0% to the mortgage broker without any commission based markup of your mortgage rate. This allows you not only to take advantage of wholesale mortgage rates but the free videos show you how to avoid lender junk fees in the process, saving you thousands of dollars at closing. Register today, the mortgage videos are yours free with no obligation.