Home Mortgage Refinancing Guide

If you are considering refinancing your mortgage but are concerned about overpaying for the new loan there are steps you can take to avoid paying too much.

Despite a faltering economy it is possible to refinance your home loan, lower your monthly payment and even put cash in your pocket in the process. Here are several tips to help you refinance your home loan without paying lender junk fees or markup of your mortgage rate.

The Sky Is Not Falling

Despite what you see in the news there are mortgage loans available to qualified homeowners. The credit crisis when it comes to mortgage loans mainly applies to homeowners who are upside down with their loans, meaning that they owe more than their home is worth. If you fall into this category you will have to come up with the cash to pay your mortgage below your home’s value before a lender will approve you to refinance.

If you have suitable equity in your home, are employed, and have decent credit you will have no problem refinancing your mortgage. There are a number of things you need to know to avoid paying too much in the process, the first of which is Yield Spread Premium.

Yield Spread Premium Defined

Many homeowners have never heard of Yield Spread Premium and do not understand how the person arranging their mortgage loan is compensated for their work. Most often the person who arranges your home loan is a mortgage broker. This person works for a commission by reselling loans offered by various lenders. Brokers are compensated by charging you a loan origination fee and with Yield Spread Premium paid by the lender.

Yield Spread Premium is simply a percentage of your loan amount created when the mortgage broker locks and closes your home loan with an above market mortgage rate. Above market means you are agreeing to a mortgage rate that is higher than the lender approved you meaning your monthly payment will also be higher than it should be. Mortgage brokers do this because lenders pay them a commission of one percent of your loan amount for every quarter percent they markup up your interest rate. You might be wondering why you should care about a fee paid by the lender so here is an example of how Yield Spread Premium raises your monthly payment amount.

Yield Spread Premium in Action

Suppose you are refinancing your home and the balance of your existing mortgage is $250,000. Your mortgage broker quotes you a rate of 6.75% and charges you a two percent origination fee. Like most homeowners you agree to the terms, sign on the dotted line and go on your merry way. What really happened behind the scenes with this loan?

What your mortgage broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate and they marked it up to get a commission from the lender. In this example the lender pays three percent for the .75% mortgage broker markup. Why do lenders pay this much? Consider what that additional .75% does to your monthly payment.

If you had gotten the mortgage rate you deserve at 6% on a $250,000 home loan your monthly payment on a 30 year fixed rate loan would be about $1490. Since your broker overcharged you the payment you’ll have for the duration of this fixed rate loan will be $1620 per month. That’s $130 extra that you’re paying every single month you keep this loan just to give your mortgage broker a bonus. Over the course of a year you’re flushing $1,560 of your hard earned money away.

Remember that two percent loan origination fee your mortgage broker charged you to refinance the loan? That two percent netted them $5,000 for a couple hours work out of your pocket. Add in the three percent the lender paid for overcharging you and this one loan paid the broker $12,500 for taking advantage of you.

What You Can Do About Yield Spread Premium

Homeowners who learn to recognize mortgage broker tricks like Yield Spread Premium are able to take advantage of the wholesale nature of mortgage rates and save thousands of dollars. You don’t have to be a financial guru to get wholesale mortgage rate, you just need to invest a couple hours of your time learning how mortgage brokers operate. Find the right mortgage broker to arrange your next home loan and you can not only avoid Yield Spread Premium but the other junk fees lenders and brokers slip past unsuspecting homeowners.

You can learn more about refinancing your home without Yield Spread Premium and other junk fees by registering for the free mortgage videos found on this website. Register today and as an added bonus you’ll get a list of recommended mortgage brokers in your area that work for flat origination fees without creating Yield Spread Premium. Register today, the mortgage videos are yours free with no obligation. If you have any questions about the sign up process click the chat button on the left hand side of your screen to chat with Robert.

Good Luck!
Robert

Adjustable rate mortgages were an extremely popular home loan during the mortgage boom. These loans offered lower monthly payments and easy qualification compared to fixed rate mortgages. The boom ended and many homeowners facing adjustments in their loans could no longer afford their payments and could not refinance their loans.

If you are in a similar situation with your adjustable rate mortgage here are a few tips to help you refinance the loan with a mortgage payment you can afford.

Adjustable Rate Mortgage Refinance Tips

Before setting out to refinance your Adjustable Rate Mortgage loan here are several tips to help you avoid potential pitfalls along the way.

Get Started Early

Refinancing before your ARM adjusts and your payment goes up is the best way to go. Getting started 3 to 6 months before your fixed rate period expires could save you from potential headaches if you run into snags getting approved. Put of refinancing too long and you could find yourself with a mortgage payment you cannot afford.

Avoid Another Adjustable Rate Mortgage

If you’re refinancing your existing ARM think twice before getting a similar loan. Fixed rate mortgage rates are still at historically low levels and offer stable monthly payments that you don’t have to worry about. Refinance with another Adjustable Rate Mortgage and you could find yourself in the same uncomfortable situation five to seven years down the road.

Negotiate with the Right Mortgage Broker

Saving money on your next mortgage loan comes down to finding the right person to arrange your loan. Most homeowners overpay because they do not understand the mortgage rate quotes they receive are almost always marked up to give the broker a commission. Find the right broker and you can refinancing your Adjustable Rate Mortgage for a flat one percent origination fee without paying any commission based markup of your mortgage rate. Keep in mind that this markup can raise your monthly payment amount by hundreds of dollars every month; that’s thousands of dollars you’re paying unnecessarily every year!

You can learn more about refinancing your Adjustable Rate Mortgage without paying too much and avoiding common pitfalls by registering for the free mortgage videos found on this website.

Many homeowners favor fixed rate mortgage loans because they need a monthly payment that will not change over the life of their loan. While it’s true that Adjustable Rate Mortgages are typically lower there is the risk of payment shock. Here are several tips to help you choose the right mortgage while minimizing your risk.

How to Choose The Right Mortgage Loan

The decision when choosing the type of mortgage for your home can be easily made based on the amount of time you will be staying in your home. When the economy is bad choosing a Fixed Rate Mortgage is a safe bet that can hedge you from economic uncertainty.

Mortgage rates are nearly impossible to predict and no one can say with any degree of certainty what they will be in several years. If you only plan on keeping your home for five to seven years you could benefit from the lower rates offered by Adjustable Rate Mortgage loans.

Here are some of the benefits of fixed mortgage loans versus adjustable rate mortgage loans.

Fixed Rate Mortgage Loans:

• Predictable mortgage payments
• Fixed interest rates are still at historically low levels
• Won’t have to refinance when rates go up
• Fixed Mortgage Rates are nearly at the same levels as Adjustable Rate Loans

Adjustable Rate Mortgage Loans:

• Mortgage Rates are just lower than fixed rate loans
• Hybrid loans have fixed rate periods lasting as long as seven years
• Some loans offer ultra-low introductory rats
• Ideal for homeowners only planning to stay for a short while

There are other reasons for choosing one type of loan over another but the safest bet is to base your decision on the amount of time you will be keeping your home. If you are only going to be with your home for the short term, you cans save yourself some money by choosing an Adjustable Rate Mortgage loan.

You can learn more about your options when refinancing, including costly mistakes to avoid by registering for the free refinancing videos on this website.

If you are considering refinancing your home mortgage the interest rate you receive is probably your number one concern for the new loan. What you might not know about that mortgage rate is that the quotes you receive are often padded to give your mortgage company a commission. Here are refinancing tips to help you avoid this padding of your mortgage rate and save you thousands of dollars in the process.

The Best Rates Come From Mortgage Brokers

It’s true; you’ll never get a wholesale mortgage rate from your bank or that “e” site. You have to find the right person to arrange your loan and negotiate with them to avoid paying the unnecessary markup of your mortgage rate. This is easier than you think…you just need to understand how mortgage brokers are compensated for arranging your loan and then learn which buttons to push.

Mortgage brokers are simply reselling loans from wholesale lenders for a commission. Brokers receive compensation in two ways. The first is the origination fee you pay at closing. This fee can range from anywhere from zero to as high as 4%. You might think that a zero origination fee mortgage is the way to go; however, you’ll soon see that this type of loan results in much higher mortgage rate and monthly
payment.

The second way your mortgage broker is compensated is with a commission paid by the lender. Mortgage lenders pay a fee known as Yield Spread Premium when your mortgage broker locks and closes your home loan with an above market mortgage rate. You get a higher rate than you could have and the lender doubles, often triples your brokers commission on your loan…most often without your knowledge or consent.

Here’s an example of how this unnecessary mortgage rate will cost you thousands of dollars. Suppose you’ve decided to refinance your home for $300,000. Your mortgage broker quotes you an interest of 7.0% because you’ll be taking cash back on the loan to pay off some old debts. What you don’t know is that you were approved for a mortgage rate of 6.25% but the broker marked your rate up for a commission. You got suckered into paying .75% too much for your new loan and the broker walked away with the one percent origination fee you pay plus a whopping three percent from the lender for overcharging you.

What does this mean for your monthly payment? On a $300,000 thirty year mortgage with a fixed 7% mortgage rate your monthly payment will be about $2,000 per month. The same loan with the 6.25% mortgage rate that you deserve would have a monthly payment of only $1840. That’s almost $200 per month, a whopping $1,920 per year you’re overpaying for the loan.

You Can Save Thousands of Dollars on Your Next Mortgage Loan

There is good news for any homeowner willing to invest a few minutes learning how to refinance without overpaying. It is possible to refinance your home mortgage paying only a one percent origination fee without markup of your mortgage rate for Yield Spread Premium. Learn how to do this and you and your family will have access to wholesale mortgage rates for every home you buy and every loan you refinance. You can learn more about doing this for yourself by registering for the free mortgage videos found on this website.

Locking in your mortgage rate is when the lender backing your mortgage secures the money for your loan at a specific interest rate, term length, and dollar amount. A typical rate lock period is for thirty days but it is possible to lock your interest rate for more or even less time. Keep in mind that the longer you lock your rate, the more it will cost you when all is said and done with your loan.

The process of mortgage rate locking starts between you and your mortgage broker or loan officer. When you choose to lock in your mortgage rate the broker or loan officer contacts the wholesale lender to lock the rate. If you are dealing with a loan officer from Wells Fargo bank for example, they will lock the rate with Wells Fargo Mortgage. If you are working with a mortgage broker they will lock with the wholesale lender they are arranging your loan with. That wholesale lender will then secure money for your loan from the secondary mortgage market.

Keep in mind that even though you’ve locked your mortgage rate and the lender has reserved funds for the loan you are not yet obligated to take out this loan. (See your three day rescission rights for more on this)

Once the wholesale lender confirms your loan from the secondary mortgage market, a written lock confirmation is issued by the lender and sent to your mortgage broker or loan officer. This rate lock shows everything about your loan including any Yield Spread Premium or commission being paid to the broker for marking up your mortgage rate. If you do not receive written confirmation of your rate lock then you have not locked your mortgage rate. Verbal rate locks are meaningless and could cost you a higher rate on your loan.

You can learn more about locking in your mortgage rate and other tips to avoid paying too much for your next mortgage by registering for the free video tutorial on this site.