Mortgage Refinancing - Avoid The Traps, Get Expert Advice » mortgage brokers

Home Loan Refinancing Secrets

Robert — Sun, 22 Aug 2010 15:27:21 +0000

If you’re considering home loan refinancing there are several things you’ll want to know to avoid overpaying for your mortgage loan. Did you know that all of the mortgage rate quotes you get online or from your local bank or broker include hidden markup? This is the reason almost all of your neighbors are throwing away thousands of dollars every year for no good reason. Here are several of my best home loan refinancing tips that blow the doors off your lender’s dirty little secret.

Home Loan Refinancing Pitfalls

Most financial gurus categorize home loans as retail products and this is somewhat true; however, you don’t have to accept retail markup of your home loan. With the exception of banks (we’ll talk about the problems with bank originated home loan refinancing in a moment) home loans come from wholesale lenders and are arranged by brokers and mortgage companies that act as retailers. At least this is what they’d like you to believe. The truth is you’re already paying that mortgage company or broker a perfectly reasonable origination fee for arranging your home loan and any markup of your interest rate when home loan refinancing to collect a commission from the lender is not only unnecessary but drives up your monthly payment by as much as $1200 a year.

How does this unnecessary markup of your interest rate work? Loan originators like your mortgage broker collect a fee known as Yield Spread Premium from wholesale lenders for locking and closing your home loan refinancing with a higher than necessary interest rate. This is the mortgage industry’s dirty little secret. Brokers and other loan originators have an incentive for overcharging you and this kickback can be quite expensive. Question your broker about Yield Spread Premium and you’ll find them on the defensive, telling you not to worry about a fee that isn’t coming out of your pocket. What your broker isn’t telling you is why the lender pays them Yield Spread Premium and what it does to your monthly payments.

The Problem That is Yield Spread Premium

The Problem with Yield Spread Premium is what this markup does to your mortgage payment. Here’s an example to illustrate my point. Suppose your home loan refinancing is for $325,000 and the broker quotes you a mortgage rate of 6.0%. You agree to pay a 1.5% loan origination fee which means you’ll pay the broker $4,875 at closing for their work. First of all, don’t get me wrong, the broker deserves to get paid for their work; however, one percent is more than reasonable in this case. In this example the origination fee should not be more than $3,250. Where this example of home loan refinancing gets ugly is what your broker isn’t telling you about the mortgage rate. Your lender actually approved you for a 5.25% interest rate; however, the broker marked it up to six percent to collect a three percent commission from the lender.

That’s right, for every .25% that your mortgage broker overcharges you the lender pays them a kickback of one percent of your home loan refinancing amount. This is the industry’s dirty little secret and what the mortgage fat cats you see tooling around in their company hummers don’t want you to know about. Sure mortgage brokers are required to disclose the fee they receive on your HUD-1 due to the 2010 changes to the Real Estate Settlement Procedures Act; however, they all have clever ways of explaining this fee way.

What about banks you ask? Can’t you avoid all this home loan refinancing nonsense by getting a new mortgage from your bank? While it’s true there is no Yield Spread Premium involved with bank originated home loan refinancing for the simple reason that the bank funds your loan, banks still markup interest rates to boost their profits in a similar manner. Throw in the fact that your bank is exempt from the Real Estate Settlement Procedures Act and not required to tell you about their markup or profit margin on your loan and this more than ample reason to avoid the bank completely when it comes to home loan refinancing.

There is good news since you’ve found this website today. It is possible to pay a flat one percent origination fee for home loan refinancing and walk away from closing with a wholesale mortgage rate. My free Underground Mortgage Videos will show you how to get a wholesale mortgage rate while avoiding all the junk fees your neighbors overlooked with their home loans. Did I mention the videos are free, no strings attached?

You can learn more about wholesale home loan refinancing by checking out my free underground mortgage refinancing videos.

The mortgage videos are quick and easy to follow…here’s a sample to help you get started trimming as much as $1200 worth of fat from your next home loan.

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Can You Trust Your Mortgage Broker?

Robert — Wed, 05 Aug 2009 00:33:47 +0000

If you’re in the process of refinancing your home you’ll want the best deal for your next mortgage loan. Should you trust a mortgage broker with something as important as your home loan? It’s true that mortgage brokers have earned themselves a reputation for being sleazy used car salesmen; however, the short answer to the question of should you trust yours is “No”; however, that doesn’t mean you shouldn’t use one. Here are several tips to help you get the best deal for your next home loan without getting ripped off by your broker.

How Do Mortgage Brokers Get Paid?

If you want to avoid getting ripped off by a mortgage broker you’ll need to understand how they get paid. There are two ways mortgage brokers get paid for their work. First, they can charge you an origination fee, also called origination points for arranging your loan. This fee often varies from one mortgage broker to the next; however, a reasonable fee to pay for mortgage loan origination is one point, or one percent of your loan amount. Anything above one percent is simply paying too much…

The second way mortgage brokers get paid for their work is a fee from the lender. You might think that it’s better for the lender to pay the fee since it’s not coming out of your pocket; however, you have to ask yourself why the lender would pay this fee in the first place? What’s in it for them? That’s exactly the question you need to be asking anytime someone offers to pay a fee for you…in this case the lender is paying the broker a fee for marking up your mortgage rate. You get a higher than necessary mortgage rate that drives up your monthly payment and your mortgage broker gets a commission from the lender. Not a good deal if you ask me.

Mortgage Yield Spread Premium

The fee generated by this unnecessary markup of your mortgage interest rate is known as Yield Spread Premium. Here’s a simple example to illustrate how it works. Suppose you are refinancing your home for $315,000 and your mortgage broker quotes you an interest rate of 6.75 percent. The broker charges you an origination fee of one percent which is a reasonable fee to pay for the mortgage broker’s services; however, what your broker isn’t telling you is that you qualified for a 6.25 percent mortgage rate and they marked it up to get two points from the lender. This sleight of hand with your mortgage rate triples their commission in this example.

In this example the lender pays your mortgage broker one point for every .25 percent they overcharge you, but what does this mean for your mortgage payment? Plug the numbers into a simple mortgage calculator and you’ll see that your payment on a 30 year fixed rate mortgage for $315,000 at 6.75 percent will be $2,043 per month. If you had gotten the mortgage rate you deserve at 6.25 percent your monthly payment would be $1,939. That’s a difference of $1,248 you’re throwing away every year because your mortgage broker ripped you off!

You Can Avoid Yield Spread Premium

Don’t get me wrong, not all mortgage brokers are scum…they tuck their kids in at night just like everyone else. The question of finding the best mortgage loan when refinancing isn’t about shopping for the best lender or even the lowest mortgage rate, it’s all about finding the right person to arrange your next home loan. So who’s the right person? I can tell you the right mortgage broker for the job isn’t going to be the one with a full page ad in the phone book. Forget the mortgage broker with a company hummer splattered with their face and or logo. (I guarantee that mortgage broker is ripping people off)

If you want the best deals look for a small time, self-employed mortgage broker. Find one working from home? Even better…why then is a small time mortgage broker better? These brokers don’t work out of posh offices or hire an expensive sales staff to push their overpriced home loans. They don’t have the overhead and will be much more willing or able to negotiate the kind of deal you’re looking for when refinancing your home loan.

What Is a Good Deal For Your Next Mortgage?

I’ve been talking about getting the best deal when refinancing your mortgage, but how would you know a good deal if you found one? Sure getting a great rate is important, but you don’t want to pay too much at closing for that rate. Fortunately for you there’s an easy way to ask for a good deal and follow up to make sure you get it. What you want when refinancing your home is what’s called a par mortgage rate. Par means you don’t pay discount points to qualify and there is no Yield Spread Premium created by your loan. Par is essentially a wholesale mortgage rate. How do you get a par mortgage rate? Just ask for it…tell your mortgage broker you’re willing to pay a reasonable loan origination fee for arranging your loan but will not accept any mortgage that includes Yield Spread Premium. Ask for a par mortgage rate.

You can learn more about keeping your mortgage broker honest, avoiding junk fees and unnecessary markup by registering for my free Underground Mortgage Refinancing Videos. Here’s a sample of what you’ll get when you register today:

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Mortgage Brokers Have a Dirty Little Secret

Robert — Mon, 06 Apr 2009 16:49:47 +0000

Did you know your mortgage broker has a dirty little secret? Most professions have a few skeletons in the closet but this one could cost you thousands of dollars every year that you have a home loan unnecessarily.

In fact, this “secret” is so bad that the Secretary of Housing and Urban development said it will be responsible for fleecing American homeowners out of sixteen billion dollars this year alone. What is it? Read the following mortgage tips to help you avoid paying too much for your next home loan.

Mortgage Brokers Compensation

Mortgage brokers should be paid for their work like anyone else; however, like a used car salesman they have ways of padding their commission at your expense. You can expect any mortgage brokers you work with to charge you an origination fee for their services. This origination fee will be clearly marked on your Good Faith Estimate and HUD-1 statement; however, there is a hidden mortgage broker fee you need to be aware of before refinancing your home mortgage.

Mortgage Brokers Secrets

The second way mortgage brokers get paid for their work is a hidden commission from the lender. This commission will never appear on your Good Faith Estimate and most brokers have clever ways of disguising it on your HUD-1 settlement statement. This secret commission from the mortgage lender is called Yield Spread Premium and if you agree to a mortgage with this hidden markup it can cost you thousands of dollars every year that you keep the loan.

Yield Spread Premium is Hidden Markup

Here’s how Yield Spread Premium works. Suppose you are refinancing your home for $250,000 and the mortgage broker quotes you an interest rate of six percent while charging you a two percent origination fee. On the surface six percent sounds like a good deal, even though the origination fee is double what you should be paying, you agree to the loan. This means you have to pay $5000 to the broker for loan origination, your home gets refinanced and everything went smoothly, right? Wrong… What your mortgage broker isn’t telling you is that you were approved for a mortgage rate of 5.25 percent, but they marked it up to get Yield Spread Premium from the lender.

Yield Spread Premium is a percentage of your loan amount created when mortgage brokers lock and close loans with higher than necessary interest rates. You get stuck with a payment based on an interest rate higher than you deserve just to create a commission for the broker. A commission paid in addition to the loan origination fees your mortgage broker is already probably overcharging you…

Hidden Mortgage Markup

How does this hidden markup of your mortgage rate affect your monthly payment amount? In the previous example Yield Spread Premium adds a hundred dollars a month to the payment for a thirty year fixed rate mortgage. That’s $1200 a year you’re throwing down the drain due to your mortgage broker’s deception! Most mortgage brokers don’t talk about Yield Spread Premium and many become angry and defensive when questioned about the markup. Can you blame them? Yield Spread Premium effectively doubles even triples their compensation on the loan… at your expense of course.

You Can Avoid Overpaying for Your Next Mortgage

You don’t have to be a financial guru to get a good deal on your next home mortgage loan. Tell potential mortgage brokers that you will not accept any loan that includes Yield Spread Premium and that you’re willing to pay a one percent origination fee for their services. There are honest mortgage brokers out there willing to work for a one percent origination fee without marking up your mortgage rate and I can send you a list of them in your area.

There are other mortgage junk fees that you need to keep an eye out for: mortgage broker courier fees and rate lock fees are examples of junk fees you should never agree to pay when refinancing your home loan. Before closing on the new loan make sure you get a copy of the HUD-1 settlement statement and go through it with a fine-toothed comb; don’t rely on the Good Faith Estimate to look for these junk fees as this document is little more than a marketing tool used to lure homeowners into overpriced loans.

What About Bank Mortgage Loans?

Can’t you avoid all of this markup and trickery by mortgage brokers simply by refinancing with a bank mortgage loan? While it’s true that your bank doesn’t charge Yield Spread Premium on their loans because your loan is funded with the bank’s money; however, banks have another kind of markup called Service Release Premium that accomplishes the same thing. Also, your bank doesn’t have to disclose Service Release Premium to you because of a loophole in the Real Estate Settlement Procedures Act. You’ll never get as a good a deal from your bank as you could from an honest mortgage broker that hasn’t included Yield Spread Premium on your loan.

What is a Good Mortgage Rate Anyway?

Refinancing your home loan and dealing with mortgage brokers and lenders can be overwhelming. How do you know a good deal when you spot one? The ideal mortgage rate when refinancing your home is what’s known as a par mortgage rate. “Par Mortgage Rates” are ones that don’t cost you discount points to get or create any commission for the Mortgage Company or broker. You’ll never get a par mortgage rate from any bank or credit union and can only get this from the right mortgage broker.

To learn more about refinancing your home loan with the lowest mortgage rate without junk fees or mortgage broker markup register for my Underground Mortgage Videos. You’ll have immediate online access to the mortgage videos as well as a list of mortgage brokers in your area that do not mark up mortgage rates for a commission without downloading anything to your PC or Mac.

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How to Refinance a Mortgage

Robert — Sun, 14 Sep 2008 23:14:39 +0000

If you are considering taking advantage of lower mortgage rates to get a lower mortgage payment and are looking for information on how to refinance a mortgage, here are several tips to help get you started.

You should know that mortgage brokers are the key to getting a good deal when refinancing; however, you should also know that these people earn their living by commission.

The home loan that gets your mortgage broker the largest commission is probably not going to be the best loan for you.

How to Refinance

Refinancing your home mortgage is not all that different from any other purchase you make. Mortgage loans are retail products meaning that there is a middleman that marks up your loan for a profit. You already know that buying consumer products wholesale can save you a bundle of cash; the same is true when it comes to your mortgage loan. Mortgage brokers have access to wholesale rate Find the right broker and you can get a wholesale rate when refinancing your home loan.

How Mortgage Brokers Are Paid

There are several ways mortgage brokers are compensated for arranging your mortgage loan. Your Broker can charge you origination fees at closing. Your broker could also markup up your mortgage rate for a commission from the wholesale lender behind your mortgage. Mortgage brokers also charge a number of fees considered to be “junk fees.” One example of a junk fee you might find on your Good Faith Estimate is a “Mortgage Broker Courier Fee.” This is a made-up fee headed straight for your broker’s pocket if you agree to pay it.

How to Refinance a Mortgage with a Wholesale Rate

You can get a wholesale mortgage rate for your loan by finding the right mortgage broker. The best brokers don’t work for large companies like Countrywide or for large mortgage web sites like Lending Tree. The best mortgage brokers are local and self employed. Find a self employed mortgage broker working out their home? Better still. The reason small time self employed mortgage brokers are better is because they do not employ a sales staff or in many cases pay for posh office spaces. You’re much more likely to negotiate a good deal from this type of broker simply because they can afford to do so.

Mortgage Terminology 101: Yield Spread Premium

The first term you need to know when learning how to refinance a mortgage is Yield Spread Premium. This is simply the fee paid by your lender because the broker marks up your mortgage rate. This markup is what makes mortgage rates retail. The lender rewards the broker with one percent of your mortgage rate for every quarter percent they markup up your interest rate. You won’t find Yield Spread Premium on your Good Faith Estimate and many brokers get defensive, even angry when you ask them about it.

There are two ways to find out if your mortgage broker is marking up your mortgage rate for Yield Spread Premium. The first place this markup is disclosed is on the rate lock confirmation from the lender. Ask your broker to see the original rate lock confirmation. If the broker refuses because it’s “confidential” from the lender you know that they are not being honest with you and are lying about your mortgage rate. Find another mortgage broker willing to show you the lenders rate lock confirmation.

The second opportunity you’ll have to spot Yield Spread Premium is on your HUD-1 Settlement Statement. Yield Spread Premium will be disclosed in section 800 on the HUD-1 around lines 810-811. Many brokers try and disguise their commission…it could be listed as Mortgage Broker Rebate or Yield Spread Premium paid to broker.

Where to Go from Here

Avoiding Yield Spread Premium is the most important aspect of getting a good deal for your home loan. You can learn more tips for saving money, including how to recognize junk fees, by registering for the free video tutorial on this site.

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How to Get a Wholesale Mortgage Lender

Robert — Mon, 25 Feb 2008 21:56:26 +0000

The first thing you should know about getting the best deal when refinancing your home loan is that you cannot bypass the middleman to get a wholesale rate. It doesn’t matter which wholesale lender you try and contact when refinancing…every lender has retail divisions that deal with the public. Here are the basics you need to know to qualify for a wholesale mortgage rate when refinancing your home loan.

You’ll Have to Use a Broker

If you want wholesale rates there’s no way around working with a mortgage broker. Banks and credit unions never offer their customers wholesale rates and the big Internet lenders you see are simply banks pretending to be something they’re not. So what is a mortgage broker?

Mortgage brokers are simply loan originators that do not fund the loans they close with their own money. They are basically salespeople reselling mortgage loans for wholesale lenders. Your mortgage broker gets paid by charging you an “origination fee” and from a “rebate” paid by the wholesale lender. Lenders reward mortgage brokers for marking up the interest rate you qualified and closing your loan with above market rates. This rebate paid by the lender is called Yield Spread Premium and you’ll need to avoid it if you want to refinance with a wholesale rate.

How Yield Spread Premium Works

Suppose the mortgage you are refinancing is for $300,000. Your mortgage broker locks and closes your loan with a mortgage rate of 6.5%; however, what the broker doesn’t tell you is that you qualified for 6.0% mortgage rate. Because your mortgage broker locks and closes your home loan .5% higher than necessary this creates 2% of Yield Spread Premium for the broker. Your mortgage broker pockets $9,000 in addition to the fees you’re already paying for overcharging you.

Finding the right mortgage broker to originate your home loan without lining their pockets with Yield Spread Premium is a skill you can easily learn. Give me an hour of your time and I’ll show you how to refinance your home with a wholesale mortgage rate without paying garbage fees with free videos…Register for yours today.

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