Home Mortgage Refinancing Guide

Remember those old commercials “I’m not going to pay a lot for this muffler!” This is the attitude people should adopt with their mortgage companies when it comes to refinancing a home loan. Unfortunately saying it and actually doing this are two entirely different things…unless you learn how mortgage companies make their money. Here are the basics you need to know so you can look your mortgage broker squarely in the face and say “I’m not going to pay a lot for this mortgage!”

Mortgage Secrets Revealed

The last thing your mortgage broker wants you to know is how he or she makes their money. I’m going to spill the beans that nearly every mortgage originator in the country hopes you don’t know…where their money comes from.

Mortgage brokers and other businesses that arrange mortgage loans for people make money from two sources. First, they can charge you a fee known as a loan origination fee for their part in arranging your loan. This loan origination fee can range from anywhere from one percent to as much as five percent of your loan amount. One percent is a reasonable amount to pay for the mortgage broker’s part in arraigning your home loan.

The second way your mortgage broker receives a commission for your loan is with a fee paid by the lender. This fee comes from something known to brokers as Yield Spread Premium. In the simplest definition, Yield Spread Premium is a percentage of your loan amount created when the broker locks and closes your home loan with an above market mortgage rate. The percentage created is their commission for overcharging you.

That’s right, you could have refinanced with a lower mortgage rate but the broker or mortgage company marked your rate up to get a kickback from the lender. Think your mortgage broker would ever tell you they’re doing this? Guess again…most loan originators have clever tricks to disguise Yield Spread Premium in your loan documents. Add in the fact that most people have never heard of Yield Spread Premium and it’s no wonder that according to the Secretary of Housing and Urban Development homeowners in the United States overpay nearly sixteen billion dollars every year.

There is good news since you’re reading this blog post today. Now that you know what Yield Spread Premium is you’ve got a leg up over 90% of homeowners and most of the mortgage brokers in this country. All you have to do is find the right broker to arrange your loan…one willing to work for a loan origination fee of one percent without creating Yield Spread Premium on the loan.

You can learn how to do this for yourself by registering for the free videos found on this website. When you register you’ll get a list of recommended mortgage brokers in your area and access to a free video tutorial that will show you how to refinance without paying junk fees on your loan.

Your mortgage closing costs are the fees you pay up front when taking out or refinancing a mortgage loan. These costs include origination fees, title fees, discount points, appraisals, underwriting and processing fees. Basically any fee paid to the originator or a third party company involved with the closing your loan is considered a closing cost.

There are other fees that you’ll pay at closing including prepaid interest, escrows, and administrative fees that don’t really fall into the category of “closing costs.” You’ve probably heard about junk fees and want to avoid paying unnecessary closing costs when taking out or refinancing your mortgage.

Here are the basics you need to know about closing costs to help you avoid paying too much for your next mortgage loan.

The most common way to pay your closing costs when you purchase a new home is to write a check at the title company during closing. If you are refinancing it is common to roll these fees into the new loan as part of your mortgage. A less known way of paying closing costs is to agree to a higher mortgage rate in exchange for the cash to pay these expenses. This is actually how lenders like Bank of America offer so called “no fee” mortgage loans. The problem is you’ll never know how much these lenders pocket after paying your closing costs in exchange for that higher mortgage rate.

Whenever you take out a mortgage loan you can expect to pay thousands of dollars in closing costs if you are buying or refinancing; don’t fall for the “flat fee” you see from companies like Ditech or “no cost” mortgage loans from Bank of America…it’s a gimmick designed to get you in the door.

Mortgage Junk Fees

There are a number of fees you’ll encounter that serve no purpose and are headed straight for your mortgage company’s pocket. Courier fees, loan processing fees, affiliate fees, administration fees, document review fees, notary fees, all serve one purpose: to get as much money out of you as possible.

You can avoid garbage fees when taking out a mortgage to purchase your home or refinance an existing loan. According to the Secretary of Housing and Urban Development homeowners in the United States overpay nearly sixteen billion dollars every year. To learn more about avoiding mortgage junk fees and the unnecessary markup of your mortgage rate register for the free videos found on this site.