Mortgage Refinance Guide

Most homeowners know very little about how mortgage brokers are compensated for their work.

They assume that the origination fee listed on their Good Faith Estimate is the broker’s commission for the home loan; however, what you don’t know about mortgage broker fees could cost you a lot of money.

Here are several tips and questions to ask potential brokers to help you find the right professional to refinance your home loan.

The mortgage industry in the United States has a dirty little secret known as Yield Spread Premium. Mortgage brokers are very good at explaining away this fee as “lender paid” compensation; in other words it’s not coming out of your pocket so don’t worry about it. The problem with Yield Spread Premium, which is a percentage of your loan amount created when the broker locks and closes your home loan with an above market interest rate, is that it really is costing you money…thousands of dollars in unnecessary finance charges every year that you’ll pay as long as you keep that loan

Yield Spread Premium is a Lie

Your mortgage broker pockets a commission from the lender for marking up your mortgage interest rate. Sure this is listed on the HUD-1 statement as a “broker rebate” but if your broker doesn’t tell you they’ve marked up your interest rate for cash it’s still a lie of omission. Your mortgage broker receives one percent of your loan amount for every quarter percent they overcharge you. This “rebate” is paid in addition to any origination fees or mortgage broker fees you’re already paying.

Mortgage Refinancing Done Right

Another problem faced by the majority of homeowners refinancing their mortgages is that they don’t know what a good deal looks like. The ideal transaction between a homeowner and a mortgage broker is a loan with zero Yield Spread Premium, no garbage fees, and a one percent origination fee. Think that this sounds too good to be true? It’s not if you know how to find the right mortgage broker to originate your loan.

Questions to Ask Your Mortgage Broker

Before you agree to anything with a mortgage broker there are several pointed questions you need to be asking:

Honest mortgage brokers willing to work for a one point origination fee do exist and finding a broker like this will save you thousands of dollars and countless headaches when refinancing your home. You can learn more about getting a wholesale mortgage rate while avoiding lender junk fees by registering for my free mortgage video tutorial.

When the Federal Reserve lowers short term interest rates mortgage refinancing becomes a hot topic for many homeowners. If you are considering refinancing your mortgage but are concerned about paying too much there are several things you need to know about shopping for a new home loan. Here are several tips to help you refinance your home loan without paying garbage fees or unnecessary markup of your mortgage rate.

Banks vs. Mortgage Brokers

The first thing you need to know is that you should never take out a mortgage from a bank or broker bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose their profit margins or markup of your mortgage rate. If you refinance your home loan with a bank you’ll never get a wholesale mortgage rate or anything close to it. The same is true of broker banks.

What’s a broker bank? This is basically a mortgage company or broker operating as a bank. Many mortgage companies and brokers changed their businesses when the law changed in order to take advantage of the same loopholes as banks. The only way to recognize if your mortgage company or broker is acting as a broker bank is to ask if they close on the mortgage in the name of the company or the wholesale lender. If the answer you get is that they close in their own company’s name you are dealing broker bank and cannot refinance with wholesale rates.

Mortgage Broker Secrets

The biggest secret your mortgage broker is keeping from you is called Yield Spread Premium. This is the industry term for the commission your mortgage broker receives for marking up your mortgage interest rate. Brokers do this because lenders pay one percent of you loan amount for every .25 percent they overcharge you…something they do without telling you. There are ways to recognize this markup of your mortgage rate, and it is possible to avoid paying it when refinancing.

How to Recognize Yield Spread Premium

Your first opportunity to spot Yield Spread premium is on the Good Faith Estimate; however, many brokers intentionally omit it from this document. If you can get your hands on the rate lock confirmation from the lender, Yield Spread Premium is clearly disclosed; however, many brokers falsify rate lock confirmation to omit this markup. The last chance you’ll have to spot this markup is on the HUD-1 statement. If Yield Spread Premium is included with your loan it will be listed on lines 810 or 811 of this document. You may see it called a “broker rebate” or YSP paid to broker but this dollar amount is the kickback your broker receives for overcharging you.

Yield Spread Premium Can Be Avoided

Homeowners who learn to recognize Yield Spread Premium can negotiate with potential mortgage brokers to avoid paying it. You can learn more about refinancing your home loan without paying too much by registering for our free mortgage tutorial.

Many homeowners wonder if taking out a new mortgage during the holidays is a good idea. If you’re considering refinancing this holiday season, there are a number of very good opportunities available for savvy homeowners. Here are several tips to help you make an informed decision if refinancing this holiday season is right for you.

Mortgage Rates This Holiday Season

Despite the credit crunch in the United States wholesale mortgage rates are currently hovering at 5.875% for a 30 year, fixed rate mortgage. This is an excellent opportunity to refinance if you are still paying on a higher rate mortgage loan. Keep in mind that this is a wholesale mortgage rate and the rate quoted by your mortgage broker will include Yield Spread Premium. Your goal when taking out a mortgage is to avoid paying this unnecessary and controversial markup.

Reasons For Refinancing Your Mortgage

The most common reason for refinancing during the holidays is to borrow cash against the equity in your home. While borrowing cash for the holidays might not be the best use of your home’s equity, it is after all your equity. You can use the cash you get back at closing for any reason that you see fit. Other reasons for refinancing include consolidating your first and second mortgages to get one monthly payment and consolidating your higher interest credit card debt.

Refinancing With a Wholesale Mortgage Rate

Homeowners who avoid the unnecessary retail markup of their mortgage rate can save thousands of dollars in finance charges. Avoiding this markup known as Yield Spread Premium is easier than you think; the hardest part is learning how to recognize it in your loan documents. The Annual Percentage Rate provided by the lender tells you nothing about Yield Spread Premium and many brokers conveniently leave this fee off the Good Faith Estimate.

How can you find out if your loan includes Yield Spread Premium? Ask your mortgage broker to see the rate sheet from the wholesale lender behind your loan. Don’t accept a rate sheet printed on your mortgage broker’s company letterhead, it needs to come from the wholesale lender. Tell your mortgage broker that you understand Yield Spread Premium and will not consider loan offers that include lender paid fees.

Beware Garbage Fees

In addition to avoiding Yield Spread Premium when refinancing there are a number of garbage fees you need to be aware of. Carefully review your Good Faith Estimate for any fee that resembles an application fee, rate lock fee, broker courier fee, or loan processing fee. These are garbage fees added by your mortgage broker that have absolutely nothing to do with lender approving your loan. If you find fees like this on your Good Faith Estimate you should call your mortgage broker out and negotiate to have them removed or pay a lesser amount.

Reconciling Your Good Faith Estimate

The Good Faith Estimate you receive is one of the least understood mortgage documents. When your mortgage company or broker quotes you an interest rate they typically provide you a copy of the Good Faith Estimate. This document estimates your closing costs and fees for obtaining the loan. The Good Faith Estimate you receive is only as good to you as the person preparing it is honest. In many cases mortgage brokers fabricate these documents so you’ll commit to the loan. Once this happens you can be sure that bait and switch will get you more expensive loan.

You can avoid this by reconciling your Good Faith Estimate with the HUD-1 statement before signing the loan contract. While the Good Faith Estimate is supposed to approximate your costs, the HUD-1 is the final list of what these fees actually are. Never sign your loan contract without reconciling your Good Faith Estimate against the HUD-1. If you find any discrepancies whatsoever you should have a heart-to-heart discussion with your mortgage broker before you sign anything.

You can learn more about refinancing your mortgage without paying garbage fees and retail markup of your mortgage rate by registering for a free Mortgage DVD.

Mortgage refinancing offers many advantages and potential savings; however, there are a number of risks and expenses that you should keep in mind. If you are refinancing because your existing mortgage has an adjustable interest rate you can minimize your risks by choosing a mortgage with a fixed interest rate; however, anytime you take out a new mortgage you run the risk of overpaying for the new loan. Here are several tips to help you protect yourself from lender abuses when refinancing your mortgage.

The main objective for many homeowners when refinancing is to obtain a loan with a lower mortgage rate and better terms. A lower monthly payment isn’t the objective for every homeowner; some people refinance their mortgages with a higher monthly payment in order to pay down their mortgages more quickly. Regardless of your objective for the new mortgage there are steps you can take to ensure your mortgage broker and lender are not taking advantage of you when refinancing.

One of the risks you encounter when refinancing your mortgage is the markup your broker adds to your interest rate to get a commission from the lender. This markup of your mortgage interest rate is called Yield Spread Premium and according to the Department of Housing and Urban Development is responsible for homeowners in the United States overpaying billions of dollars each year.

Yield Spread Premium can be avoided when refinancing your mortgage. You’ll be required to pay an origination fee for your mortgage broker’s services; a reasonable amount to pay for refinancing your mortgage is one percent of the loan amount. Because you’re paying this fee any commission from the lender is not only completely unnecessary but is taking advantage of you. Talk to potential mortgage brokers before entering an agreement and explain that you understand how Yield Spread Premium works and will not tolerate this unnecessary markup with refinancing.

There are other risks from hidden fees and penalties when refinancing your mortgage. Make sure your existing mortgage does not include a prepayment penalty; lenders frequently include hefty penalties to discourage their borrowers from refinancing the loan. These penalties are unnecessary and can be as high as six months of interest on your original loan balance. If you’re unsure whether or not your existing mortgage includes a prepayment penalty contact your lender prior to applying for a new loan.

You can learn more about minimizing your risks when refinancing and other costly pitfalls to avoid with a free six-part video tutorial. The videos walk you through the entire process of refinancing without paying too much and are broken up into the following sections:

Part One: Mortgage Refinancing Introduction

Part Two: Refinancing in the Mortgage Marketplace

Part Three: How Your Credit Affects Your Mortgage

Part Four: Dirty Little Mortgage Secrets You Need to Know

Part Five: Refinancing Your Mortgage on the Internet

Part Six: Refinancing Your Mortgage Step-by-Step

These videos are yours free with no cost or obligation. Get your copy today; it’s fast, easy and free. Click Here to Register Now.

Unless you’ve been living under a rock you’ve probably heard about the recent credit crisis in the United States. Spurned by the collapse of the sub-prime or bad credit mortgage industry, and depending on which news channel you’ve been watching, you might have heard that there is no money for mortgage loans, that credit card companies are cutting people off, and oh yes…forget about that car loan. While it’s true that the sub-prime mortgage industry has imploded and that bad credit lenders are filing for bankruptcy right and left, regrettably laying people off, the homeowners affected by this crisis are mainly those with poor credit.

You may have also heard that European investors downgraded the credit ratings of US mortgage companies making it more difficult for these companies to fund their loans. Again, the companies affected here are sub-prime mortgage lenders. While it’s true that Europeans perceive Americans as fat, stupid, gun-toting criminals that don’t pay their bills (just ask Jeremy Clarkson, host of Top Gear…he’ll tell you) the majority of what you’re hearing in the news can be attributed to these sub-prime mortgage lenders that you see dropping like flies. Americans are certainly not stupid and most of us do pay our bills on time. As for the rest…well, I digress.

The mortgage industry is still alive and kicking in the United States; if you are a homeowner with good credit in need of a mortgage you can find the funding you need. Mortgage lenders as a rule are greedy bastards, so you can expect to see them exploit this “crisis” to make a buck. Headline News reported this morning that mortgage lenders are raising interest rates and imposing “strict” loan terms to “keep pace with the current economic environment.” This is corporate speak for taking advantage of people to make a buck.

This “credit crisis” or shall we say excuse for raising mortgage rates and imposing unfavorable loan terms on the hard-working American homeowner, is why doing your homework and comparison shopping is critical if you are in the market for a new loan or to refinance your existing mortgage. Again, if you have poor credit or a jumbo mortgage you’ll probably have to wait for blue skies to come again; however, if you have good credit and a chunk of equity in your home, refinancing with good rates and loan conditions is still possible.

Yield Spread Premium hasn’t gone away and lenders will still try and sell you an outrageous mortgage to improve their bottom line. This can be avoided by learning how to recognize their greedy bag of tricks, starting with the unnecessary markup of your mortgage interest rate. You can learn more about refinancing your mortgage without being taken advantage of with my video toolkit. For free access to the videos, training materials, and support staff click on the DVD image you see at the top of this page. There is no obligation to you now or in the future…really, no strings attached.