Mortgage Refinance Guide

Refinancing your mortgage loan with the wrong broker will cost you thousands of dollars and in today’s economy could even result in the loss of your home.

Remember that mortgage brokers are salespeople and come in multiple shapes in sizes with their own personalities. How can you tell if your mortgage broker is a dud? Here are several tips to help you find the right person to refinance your home mortgage.

Beware Endless Chatter

Like any other salesperson the mortgage broker that talks but never listens to you is the wrong person for the job. Dishonest mortgage brokers use never ending banter to distract you from something they may be hiding in your loan contract. Trust your instincts…if your mortgage broker comes across as a sleazy sales type that talks your ear of endlessly without letting you get a word in you should probably find another broker.

Sloppy With Paperwork & Deadlines

Being punctual is essential when it comes to your mortgage loan. If your mortgage broker is sloppy with paperwork it could cost you money. If your mortgage broker tells they will call you at a certain time and does not keep their appointments consider this a bad sign and move on to another mortgage broker.

Inexperience Costs You

When shopping for a mortgage broker it’s always a good idea only to work with those who have ten years of experience or more. If your broker has to consult the underwriter or someone else in the office before responding to your questions consider it a lack of experience and move on. Don’t worry about hurting anyone’s feelings…you’re not looking to make friends, you want a better mortgage right?

Good Mortgage Brokers Aren’t Hard to Find

The ideal mortgage broker is one that has a minimum of ten years experience, is self employed, and does not employ a sales staff. Finding a mortgage broker that fits this profile working from home is even better. Why? Mortgage brokers with fancy offices and sales staffs have to pay for their plush offices and the salaries of their sales staff.

This means they are going to be much less likely to negotiate fees and things like Yield Spread Premium on your loan. Remember, you’re paying for that fancy office and the hummer parked outside. You can learn more about refinancing your mortgage without paying too much today by registering for our free video tutorial.

If you’re in the process of refinancing your home you can save yourself thousands of dollars by getting a wholesale mortgage rate. The problem for many homeowners is that that they don’t know how get wholesale rates; most mortgage brokers would simply laugh at you if you told them “give me a wholesale mortgage rate.” Here are several tips to help you negotiate with mortgage brokers and find the right person to arrange your home loan.

Not Every Mortgage Broker Will Negotiate

The problem with negotiating with a broker is that not all brokers are in a position where they can negotiate. If you’re speaking to a salesperson from a large brokerage house they will probably not have the authority to negotiate for the terms you’re looking for. The reason for this is that the owner of the brokerage will be splitting the commission with the salesperson meaning you’ll always pay more than you have to with a mortgage broker in this situation.

This is also true of mortgage brokers that employ their own salespeople. Suppose for instance, you’re charged a one percent origination fee for your home loan. Your broker pockets this fee and will most often pay the salesperson from the Yield Spread Premium on your loan. Loan offers that don’t have origination fees are making up the difference often by doubling the amount of Yield Spread Premium on your loan. If you want a wholesale mortgage rate and plan on keeping your home for a long time you’ll need to avoid Yield Spread Premium completely.

If you’re not already familiar with this retail markup of your mortgage rate for a commission here is an article about the basics of Yield Spread Premium.

Self Employed Mortgage Brokers Are Best

It’s always better to work with the owner of the company you are dealing with. A self-employed mortgage broker that has been working for ten years or longer is the perfect candidate for arranging your mortgage. Working out of their home? Even better. One reason why working with a self employed mortgage broker is better is that they simply don’t have the overhead expenses that come with posh offices and support staff. A self employed mortgage broker is more likely to negotiate with you and agree to your terms for the loan.

What To Ask For When Refinancing

If you plan on keeping your home for the duration you’ll want to pay a one percent origination fee without any Yield Spread Premium on the loan. Some mortgage brokers argue that paying the origination fee will only raise your closing costs; however, agreeing to a higher mortgage rate that includes Yield Premium will result in a mortgage payment that could be as much hundreds of dollars higher per month than it has to be.

You can learn more about finding the right mortgage broker to arrange your loan by registering for my free video tutorial. Register today and you’ll learn how to refinance with a wholesale mortgage rate without paying garbage fees to your lender or broker.

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.

With all the talk of interest rate cuts refinancing has become a hot topic for many homeowners. Here are the answers to several common questions regarding the current rate cuts and deciding if taking out a new mortgage is right for your situation.

When Does It Make Sense to Refinance a Mortgage?

Question: Is it true that you should not refinance unless your new mortgage rate is two percent lower than your existing rate?

Question: When should I apply to refinance my mortgage? Do the fees and hassles of refinancing outweigh the financial benefits?

Question: I am thinking about selling my house but could really use the lower rate now. If I refinance now and then decide to sell my home will I be hurting my chances of qualifying for another loan?

Answers:

Forget those rules that say you should never refinance unless your new mortgage rate is “this” much lower than your old rate; it’s best to decide if mortgage refinancing makes sense for you by evaluating the loan on a cost vs. savings basis. You can do this by calculating your break even point by dividing all of your fees and closing costs by the monthly savings from your new loan. Suppose for example that your new home loan has a payment $200 less than your old mortgage. If it cost you $3,500 to take out the new loan divide $3,500 by $200 and you’ll see that your break even point comes after 18 months. This is when you being to realize a savings from the new, lower mortgage payment.

If you plan on keeping your home long enough to reach this break even point and realize a savings, refinancing probably makes sense in your situation and will save you money. If you plan on selling before your break even point you could be losing money by refinancing. How can you evaluate your potential savings from refinancing? You’ll need to shop for rate quotes; however, the rate quotes you receive online or from a mortgage broker include commission based markup. If you want the absolute lowest mortgage rate possible you’ll need to get a wholesale rate. (more on wholesale rates later)

Which Term Length?

If you refinance with a 30 year mortgage you’ll be starting your loan amortization from scratch. What is amortization? It simply describes the process of repaying a mortgage loan over time. Mortgages are front loaded with interest so in the early years the majority of your payment is applied to interest and you build equity in your home at a very slow rate. This could be considered a disadvantage to refinancing, especially if you tap into your equity in the process. Another option is to choose a shorter term like 15 years. Your payments will be higher but you’ll build equity in your home at a faster rate and pay less to the lender in finance charges.

Refinancing now won’t hurt your chances of qualifying for another mortgage several months or a year from now if you sell your home. You just won’t be able to recoup all of the expenses you pay when taking out the new mortgage. Also, make sure your existing loan does not include a prepayment penalty, or if it does that you include this fee in your cost vs. savings analysis.

Is it too early to refinance my mortgage?

If you just purchased your home within the last year and have an interest rate 6 percent or higher, is refinancing worth it? There are no rules saying that you have to wait a certain amount of time before refinancing; you only need to calculate your break even point and make sure that you factor in the prepayment penalty if you have one.

What About Wholesale Mortgage Rates?

The mortgage industry has a dirty little secret that you need to be aware of. All rate quotes you receive online or from your broker include commission based markup. The problem with this markup is that you’re already paying the broker an origination fee for their services; in addition to this fee the broker marks up your mortgage rate for a commission without fully disclosing what they’re doing. The commission your broker receives for marking up your mortgage rate is called Yield Spread Premium and according to the Secretary of Housing and Urban development is the reason American homeowners will overpay nearly sixteen billion dollars for their home loans this year.

The good news for you today is that you can avoid Yield Spread Premium and refinance your home with a wholesale mortgage rate. Register for our free video tutorial and you’ll learn how to recognize Yield Spread Premium, negotiate to avoid paying it, and avoid lender junk fees when refinancing. Sign up today and get in while these videos are still a free offer.

You can’t turn on the television these days without hearing about how low mortgage rates are. Following a series of interest rate cuts by the Federal Reserve, mortgage rates are at their lowest levels since 2004… but how do you know if a new mortgage is right for your situation? Taking out a new mortgage loan costs money and here are several tips to help you decide if refinancing is right for your situation.

Determine Your Break Even Point

You may have heard an old wives tale known as the “Two Percent Rule” of mortgage refinancing. This “rule” states that you should not refinance your mortgage unless the new mortgage rate is exactly two percent lower than what you’re already paying. This rule is complete rubbish! The decision whether or not it makes sense to refinance is actually quite simple in most cases and can be answered with a single question.

“How Long Before I Save Money?”

The answer to this question is also fairly simple to calculate. Take the amount of money you save with a lower mortgage payment and divide your closing costs and fees by this savings. This will tell you how many months it will take to realize a savings from the new home loan; if this length of time is acceptable to you than it probably makes sense to refinance in your situation.

Here’s an example to illustrate the decision to refinance your mortgage. Suppose for instance taking out a new home loan lowers your mortgage from $1100 to $900. This is monthly savings of $200 and your closing costs, fees, and points total $4,000. Divide $4,000 by the $200 you’re saving and it will take you 20 months to recoup the expense of refinancing your mortgage.

Beware Markup & Junk Fees

Once you’ve decided to go forward with a new mortgage it’s important to do your homework and learn how mortgage rates are quoted if you want the lowest possible interest rate. Homeowners who do this are able to refinance with wholesale mortgage rates without paying unnecessary fees. You can learn more about wholesale mortgage rates by registering for a free video tutorial; register today while these videos are still a free offer.