Refinancing Home Mortgage, Avoid the Traps, Get Expert Advice » Mortgage

Refinance Fees

Robert — Sat, 13 Dec 2008 21:20:31 +0000

If you are in the process of refinancing your home mortgage one of your concerns is undoubtedly paying too much in refinance fees for the new mortgage loan.

How do you know which fees are garbage headed straight for your mortgage brokers pocket and which ones are absolutely necessary? Here are several tips to help you avoid paying too much for your next home loan.

Refinance Fees 101

The first thing you need to know about the fees you’ll be charged when refinancing isn’t exactly a fee; however, it is the single reason most homeowners overpay for their loans. Did you know that the person arranging your loan marks up your mortgage rate for a commission? This is almost always done without your knowledge or consent. The commission generated by this markup is known as Yield Spread Premium and is a percentage of your loan created when the broker locks and closes your loan with a higher than market interest rate. Lenders reward mortgage brokers with a commission because loans with higher than market rates bring in higher profits when sold to investors on the secondary mortgage market.

The fact that you know about Yield Spread Premium gives you a huge advantage over most homeowners. Avoiding this unnecessary markup isn’t as tricky as you might think…once you know how to recognize the markup in your loan documents you can find mortgage brokers willing to work for a flat origination fee as low as one percent of your loan amount.

How to Spot Mortgage Rate Markup

The first opportunity you’ll have to spot this unnecessary markup of your mortgage interest rate does not come with the Good Faith Estimate as you might think but from the lender’s rate lock confirmation. The Good Faith Estimates you receive when shopping for a mortgage are little more than a marketing tool used to draw you in to overpriced loan offerings; however, rate lock confirmation from the lender tells the real story about your loan.

First of all, make sure the lock confirmation you get is in writing and comes from the lender, not the broker. Some dishonest mortgage companies and brokers will try and pass off a written lock confirmation on their own company letterhead…if it isn’t in writing from the lender your rate lock is meaningless. Once you have written confirmation from the lender there are several important items disclosed on the lock. Your mortgage rate, Yield Spread Premium, points, and the duration of your lock are all detailed on the lender’s lock confirmation.

Mortgage Junk Fee

Never agree to pay a fee to lock in your interest rate. Mortgage lenders do not charge rate lock fees. This fee to lock your mortgage rate is pure garbage. If you agree to pay a rate lock fee it will go directly into your mortgage broker’s pocket.

You can learn more about mortgage refinance fees you need to avoid including strategies for refinancing with a wholesale mortgage rate by registering for my Underground Mortgage Videos.

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Annual Percentage Rate Definition

Robert — Fri, 12 Sep 2008 19:52:04 +0000

Annual Percentage Rate (APR) is an interest rate that factors in costs and fees for your mortgage loan in addition to the mortgage rate. APR is expressed as a yearly rate of interest and was intended to give you an idea of the total cost of borrowing. Annual Percentage Rate is not the mortgage rate your payments are based on.

The Annual Percentage Rate was supposed to make choosing a mortgage loan easier because you could use the figure to determine which loan had the lowest overall costs. If the loan’s mortgage rate and APR were low you could assume the lender fees were low as well.

The problem is while Truth in Lending laws require that mortgage lenders disclose the APR for their home loans, there are no standard rules for calculating the Annual Percentage Rate. This means mortgage lenders can more or less pick and choose which fees they include in the calculation. This makes the Annual Percentage Rate more of a marketing tool for lenders and all but useless for determining which loan offer is a better deal.

You can learn more about a better way to shop for a mortgage loan by registering for the free mortgage refinancing videos available on this website.

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Locking a Rate When Refinancing Your Mortgage

Robert — Tue, 12 Feb 2008 18:04:49 +0000

Locking in your mortgage rate can be a source of confusion and frustration for many homeowners. When and how do you lock in your mortgage rate? How do you know that your mortgage broker really locked in your rate? Mortgage rates change on a daily even hourly basis; if you miss the opportunity to lock you could lose that low mortgage rate your broker promised you. Here are several tips to help you understand mortgage rate locks and what they mean for your home loan and your bottom line when refinancing.

What Does Locking Your Rate Mean?

When you choose to lock your rate, a process you must initiate yourself, your broker “locks” your mortgage rate with the wholesale lender. The idea is to hold that rate long enough for you to close on the loan. Your broker sets the lock on your behalf with the wholesale lender…more importantly the lock determines the amount of Yield Spread Premium on your new home loan.

What is Yield Spread Premium?

Yield Spread Premium is a percentage of your loan amount created when the broker locks you with an above market mortgage rate. Your broker knows the wholesale mortgage rate that your lender approved you; however, they mark up this interest rate to get a commission from the lender. This commission is called Yield Spread Premium and if you want the best possible mortgage for the long term you need to avoid this commission based markup.

If you plan on living in your home for the long term does it make sense to be constantly refinancing your mortgage loan? Mortgage rates are currently and historically low levels…You’ll probably never see rates below four percent that aren’t teasers. With this in mind doesn’t it make sense to lock in a great rate now and keep it for the long haul? If this is what you’re trying to accomplish you’ll want to lock in a wholesale mortgage rate. Before you can get a wholesale rate you’ll need to understand how mortgage brokers are compensated for originating you loan.

How Are Mortgage Brokers Paid?

There are several ways your mortgage broker gets paid (often overpaid) for their work on your home loan.

I. Origination fees also called Points on your Good Faith Estimate and HUD-1 statement.

II. Mortgage Broker Fees also on your Good Faith Estimate and HUD-1.

III. Yield Spread Premium from the lender always found on the HUD-1 but frequently left off the Good Faith Estimate.

Many brokers tell you that they’re not charging you origination fees because of Yield Spread Premium. Does it make sense to take a higher mortgage rate instead of paying a one percent origination fee when you plan on keeping your home for the long term? Absolutely not…If you plan on living in your home for the long term you want a wholesale rate and you only want to pay a once percent origination fee.

How Do You Lock Your Mortgage Rate?

Before you decide to lock in your mortgage rate you need to be sure that you’re working with the right mortgage broker. Talk to your broker about the rate you qualify based on your financial details. Did you know it takes sixteen pieces of your financial details to accurately quote a mortgage rate? If your broker has not asked for detailed financial information before quoting you a rate you can be certain that they have no intention of honoring that rate.

Talk to your broker about their compensation. This includes the origination fee, broker’s fee, and any Yield Spread Premium they get from marking up your mortgage rate.

Remember that a reasonable amount to pay for loan origination including origination points and fees should not be more than one percent of your loan amount. Ask your broker for an updated Good Faith Estimate on a daily bases; remember that mortgage rates are always changing.

Before you make the decision to lock your mortgage rate make sure you have an updated Good Faith Estimate from the same day.

Finally, after you’ve instructed your mortgage broker to lock make sure they email you the rate lock confirmation from the wholesale lender. This confirmation will show you the rate, points, and any Yield Spread Premium associated with your loan. You should have this confirmation within one hour of locking…if you don’t get it contact your broker immediately. Make sure that you get the rate lock from the wholesale lender. Don’t accept anything typed up by your mortgage broker on their own letter head as this is not a guarantee of anything and you want to see if there is any Yield Spread Premium included in your lock.

You can learn more about refinancing your mortgage with a wholesale rate while only paying a one percent origination fee by registering for my free mortgage refinancing videos.

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Beware Internet Mortgage Scams

Robert — Mon, 31 Dec 2007 21:36:28 +0000

The Internet is an excellent tool for refinancing your home mortgage and can save you thousands of dollars; however, you need to know that big named mortgage companies run scams online every day. These are companies you see advertising on television and if you’re not careful you could overpay thousands of dollars for your next mortgage. Here are several tips to help you protect yourself when refinancing your home loan on the Internet.

When Lenders Compete You Lose

Have you seen those commercials on television about making banks compete for your business when taking out a mortgage? It sounds great…mortgage loans are a fiercely competitive industry and anything that gets lenders competing for your business can’t be a bad thing right? Wrong!

What is Lending Tree Really?

The first thing you need to know about Lending Tree is that they are not a mortgage lender and actually have nothing to do with mortgage loans whatsoever. Lending Tree and many of the other big named sites you see on the Internet are simply lead generation sites. They put up a flashy website, advertise on television, and sell your information to the four highest bidders. Lenders are competing for your personal information, not your business. Once these lenders have your information you will start receiving phone calls and emails soliciting mortgage loans.

The fact that you have lenders calling you isn’t really the problem with lending tree. The real problem comes from the fee they slip into your loan without your knowledge. Lending Tree for example tells you that they do not charge you a fee for using their service; however, the fine print says otherwise.

Always Read The Licenses & Disclosure Pages

If you read the fine print on Lending Tree’s Access and Disclosure statement you will find that while Lending Tree Claims they are not charging you a fee for their services, you will have a charge on your Good Faith Estimate that will be paid to them by the lender. Because you’re paying the lender the fee for Lending Tree they claim their service is free to use; however, the money still comes out of your pocket even if it’s being paid by the lender. This is only the tip of the deceptive advertising.

Reading further on this Licenses and Disclosure page reveals not only will you be charged a fee for filling out the form on Lending Tree’s website but this fee will be as much as $1,300. That’s $1,300 you’ll have to pay just for filling out your name and address on Lending Tree’s form!

Not only is this deceptive advertising on Lending Tree’s part but this is a ridicules fee to charge someone for selling their information to the highest bidder. Lending Tree had a class action lawsuit filed in 2006 for unfair business practices and deceptive advertising. Is this a company you want involved with your next mortgage loan? You can learn more about protecting yourself from predatory lending practices when refinancing and ways to save money in the process register for a free mortgage DVD.

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100% Mortgage Financing

Robert — Sat, 29 Dec 2007 23:57:53 +0000

Coming up with the necessary down payment to purchase your home can be difficult. For many people achieving the dream of homeownership is only possible with a 100% mortgage loan.

Here are the basics you need to know about so called “no money down” or “no down payment” loans. 100% mortgage loans are still common with competitive mortgage rates. This makes it easier for homebuyers with little or no down payment to purchase homes, even with credit problems.

100% Mortgage Loan Basics

Despite the recent credit crisis, 100% mortgage financing is still possible for the average homebuyer. There are two basic options available to the average homeowner for 100% financing.

PMI Loans: Many lenders require Private Mortgage Insurance (PMI) for any homeowner with less than a 20% down payment. Private Mortgage Insurance can be expensive and could add hundreds of dollars to your monthly mortgage payment.

If you’re not familiar with Private Mortgage Insurance this insurance protects the lender from losses if you default on your loan. In the event of foreclosure the insurance pays the lenders expenses; this insurance does nothing to protect you as a homeowner. If you have poor credit there is little you can do to avoid paying PMI. If you have good credit the second option could save you money.

80/20 Mortgage Loans: 80/20 loans are also called “piggyback loans.” Taking out an 80/20 loan allows you to avoid the expense of Private Mortgage Insurance because your primary lender is only financing 80% of your home. You will have a second “piggyback” loan for the remaining 20%. This second loan is typically with a different lender and will carry a higher mortgage rate because this lender is assuming great risk than the primary lender. The downside of an 80/20 loan is that you will have two mortgage payments to make each month. Fall behind on either mortgage and you could lose your home to foreclosure.

100% Mortgage Loan Risks

There are financial risks involved with 100% mortgage loans. Primarily, because you are financing the total value of your home, you will have next to no equity in the property. If home values in your area decline you could find yourself owning more than your home is worth. You can learn more about your mortgage options, including ways to minimize your financial risk and save thousands of dollars in the process by registering for a free mortgage DVD.

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Lower Mortgage Rates

Robert — Fri, 28 Dec 2007 21:09:34 +0000

If you’re in the market for a new mortgage and are searching for lower mortgage rates, there are several things you need to know about the rate quotes you receive. Many homeowners think that comparing offers from several different lenders is all they need to get the best deal; however, what most people don’t understand is that they are simply comparing retail mortgage rates with the same markup. If you really want lower mortgage rates you’ll need to find someone willing to offer you wholesale rates without paying garbage fees. Here are several tips to help you refinance your mortgage with a wholesale mortgage rate and save thousands of dollars in the process.

What Are Wholesale Mortgage Rates?

Wholesale mortgage rates are offered by a certain type of mortgage lender that does not do business with the public directly. These wholesale mortgage lenders offer their best rates to mortgage brokers and other retail mortgage companies that sell loans to the public for a commission. Many people think that by contacting one of these lenders directly they can refinance with a wholesale rate; however, wholesale lenders have retail branches that deal with the public and do not offer wholesale mortgage rates. In order to refinance your loan with a wholesale rate you’ll need to enlist the help of an honest mortgage broker willing to give you access to these rates.

Mortgage Brokers Work For a Commission

The problem with refinancing your home loan with a mortgage broker comes from the way that brokers are compensated. Mortgage brokers are paid for their services in two ways. Most brokers charge you an origination fee for their services. This fee could be one percent or more of your loan amount; however, one percent is a reasonable amount to pay for your mortgage broker’s services. The second method your broker receives compensation is from kickbacks the lender pays for overcharging you with your mortgage interest rate. Many brokers mark up the mortgage rate you qualified because lenders pay a commission of one percent for every .25% they overcharge you. This commission is called Yield Spread Premium and is the reason that most homeowners overpay when refinancing their mortgage loans.

Yield Spread Premium Can Be Avoided When Refinancing

Most brokers get defensive or even angry when questioned about Yield Spread Premium. And why wouldn’t they? This markup of your mortgage interest rate can double, even triple their commission on your loan. You can avoid paying a higher mortgage rate with Yield Spread Premium by finding a mortgage broker willing to work for the origination fee alone, without this kickback from the mortgage lender.

Shop Around For Honest Mortgage Brokers

You can start your search for an honest broker to refinance your mortgage by searching the Internet for an “Upfront Mortgage Broker” in your state. Upfront mortgage brokers charge a flat fee for loan origination without charging Yield Spread Premium on your loan. The Upfront Mortgage Broker’s Association maintains a registry of brokers on their website upfrontmortgagebrokers.org that is categorized by State.

If there are no members in your State you can find the right broker by contacting mortgage brokers found in the phone book. Start by telling these brokers that you understand Yield Spread Premium and will not accept any loan offers that include this markup.

It is usually easier to negotiate this type of deal with a mortgage broker that has their own business as those working for a large brokerage firm may not have the authority to give you the deal you are looking for. You can learn more about finding the right kind of mortgage broker to refinance your home loan without paying Yield Spread Premium and other garbage fees by requesting a free mortgage refinancing DVD.

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Why You Should Never Refinance Your Mortgage With a Bank

Robert — Wed, 26 Dec 2007 23:14:19 +0000

If you’re considering refinancing your mortgage for any reason and are thinking of taking out the new loan from your bank, there are several very good reasons why you should not do this. While it’s true that mortgage brokers have a reputation for overcharging their customers, banks are actually worse due to loopholes the laws requiring lenders to disclose their profit margins. Here are several tips to help you avoid paying too much when refinancing your home mortgage loan.

Real Estate Settlement Procedures Act (RESPA)

You might have heard of the Real Estate Settlement Procedures Act which requires mortgage lenders to disclose their fees and markup. What you might not know is that thanks to the Banking Lobby your bank is exempt from this legislation and not required to disclose any this information to you. Banks take full advantage of this loophole in the law by charging their customers the interest rate markup known as Service Release Premium. Fortunately, once you understand how wholesale mortgage rates work this markup is easy to recognize.

What is Service Release Premium (SRP)?

Banks are in the mortgage business to make money. Banks know the rates that other lenders offer and they know the rate you could get from a wholesale lender. The mortgage rate your bank offers is marked up to include Service Release Premium.

This is a “premium” mortgage rate and is designed to boost the banks profits when your mortgage loan is sold to investors. Once you close on your mortgage the bank immediately turns around and sells your loan on the secondary market.

Banks know that loans with above market mortgage rates bring them higher profits and this is why Bank mortgage rates will never be competitive. Banks rely on the fact that the majority of homeowners do not understand mortgage rates and that they are exempt from the Real Estate Settlement Procedures act to fleece their customers out of thousands of dollars.

Don’t Trust Your Banker’s Rate Sheets

Most bank employees have never heard of Service Release Premium and will swear to you that their rates have not been marked up. They will even show you the Bank’s rate sheets for that day claiming that their rates are competitive. The problem with the Bank’s rate sheets is that they already have Service Release Premium built into them. Only by comparing the banks rates to the wholesale mortgage rates offered by a broker can you spot the bank’s markup. Because the bank is not required to disclose their markup of profit margin for your loan you will never know exactly what your bank is charging.

Upfront Mortgage Brokers Can Save You Thousands

Most mortgage brokers do not offer their customers wholesale rates. Just like banks these mortgage brokers mark up the interest rate to earn a commission from the lender. When this markup is made by a mortgage broker it is called Yield Spread Premium. Because you are already paying this person an origination fee for arranging your loan, the markup is not only unnecessary, but is dishonest.

There are honest mortgage brokers willing to work for a one percent origination fee. These brokers are frequently called “Upfront Mortgage Brokers” because they disclose a flat fee upfront and do not charge Yield Spread Premium with their loans.

You can learn more about refinancing your mortgage without paying Service Release Premium or Yield Spread Premium by registering for my free mortgage refinancing videos.

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How to Negotiate for the Best Mortgage Rate When Refinancing

Robert — Fri, 14 Dec 2007 22:10:23 +0000

If you are in the process of refinancing your mortgage, negotiating for mortgage rates can be very intimidating. You can greatly improve the odds of negotiating successfully by understanding how your mortgage rate is quoted. Here are the basics you need to know about mortgage rates to help you negotiate for a wholesale mortgage rate and save thousands of dollars when refinancing your mortgage.

What Are Wholesale Mortgage Rates?

Wholesale rates come directly from mortgage lenders and are generally not offered to the public. These loans are sold by third parties and include commission based retail markup. Loan originators are the mortgage companies, brokers, and websites you visit when shopping for a loan. These businesses make money by charging origination fees for their service and by markup up the wholesale rate your lender approved you. The good news is that commission based markup can be avoided if you know how to negotiate when refinancing your mortgage.

Commission Based Markup and Yield Spread Premium

Yield Spread Premium is the technical term for commission based markup of your mortgage interest rate. Your mortgage broker knows the interest rate that you were approved; however, they mark this rate up because the lender pays them a bonus of one percent of your mortgage amount for every .25% they get you to overpay. Most mortgage brokers will never admit that they are marking up your mortgage rate and many become angry and defensive when questioned about their markup.

How Do You Negotiate With Mortgage Brokers?

Negotiation can be intimidating for many homeowners. Fortunately, negotiating for wholesale mortgage rates is more like comparison shopping. If you get a mortgage broker that refuses to answer your question or agree to your terms you’ll simply move on to the next broker. Mortgage brokers are licensed by your State and are a dime a dozen. Spend a little time with your phone book and you should have no problem finding a broker willing to refinance your mortgage with a wholesale rate.

How to Get a Wholesale Mortgage Rate

You can avoid Yield Spread Premium when refinancing your mortgage by finding a mortgage broker willing to work for an origination fee alone without Yield Spread Premium. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and will not accept a mortgage that includes commission based markup. Tell your mortgage broker that you will pay a reasonable origination fee for their services. A reasonable fee for a mortgage broker’s work is one percent of the mortgage amount.

Once you’ve found a mortgage broker willing to work for an origination fee without charging you Yield Spread Premium you’ll need to pay close attention to your loan documents to ensure this person is being honest with you. Yield Spread Premium will appear on the lender’s rate lock confirmation, your HUD-1 statement, and possibly on the Good Faith Estimate (GFE). Yield Spread Premium should be disclosed on the Good Faith Estimate; however, many brokers omit this markup to make their loan offers more attractive. You’ll notice that the GFE and HUD-1 statement look very similar. If Yield Spread Premium is present with your loan you will find it around lines 810-812 of these documents.

Beware Mortgage Junk Fees

There are a number of garbage fees mortgage brokers try and slip past you when refinancing. If you find anything on your Good Faith Estimate or HUD-1 statement that resembles a rate lock fee, mortgage broker courier fee, processing fee, or application fees, these are garbage fees that you do not have to pay. Take the “rate lock fee” for example. Mortgage lenders never charge your broker a fee for locking in your interest rate. If you find this fee listed on any of your loan documents you can be sure it’s headed for your mortgage broker’s pocket.

You can learn more about refinancing with a wholesale mortgage rate with a free mortgage DVD.

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Mortgage Points – What You Need to Know

Robert — Thu, 29 Nov 2007 00:24:36 +0000

If you are in the process of purchasing your home or refinancing your existing mortgage you will most likely encounter the term “points.” What are points and is it ever in your best interest to fork over additional cash at closing? Here are the basics you need to understand about mortgage points and whether or not it’s in your best interest to pay them.

Mortgage Points Come In Two Flavors

There are two varieties of mortgage points. The first are the origination points you pay for your loan originators part in arranging your loan. Your loan originator could be a mortgage company, internet mortgage site, your bank, or a mortgage broker. Origination fees vary widely and are one of the reasons many homeowners overpay for their mortgage loans. How much is a reasonable amount to pay for your mortgage origination points? A reasonable fee to pay is one percent of your loan amount and not a penny more.

One Mortgage Point = One Percent of Your Loan Amount

The second type of mortgage points you will encounter are the “discount” points you pay in exchange for something from the lender, usually a lower mortgage rate. Discount points can be used for other reasons when negotiating; for example you could negotiate to pay discount points in exchange for a certain rate and not having a prepayment penalty included in your loan contract. Don’t underestimate your ability to negotiate with mortgage lenders, especially with the current economy. Mortgage lenders are hurting and are desperate to close loans. You can leverage this to your advantage when negotiating for loan terms.

Should You Pay Discount Points?

The decision to pay discount points depends on your financial situation and what you have to gain by paying this fee. One of the main factors to consider is how long it will take you to recoup the expense from paying discount points with the lower mortgage payment. You can easily calculate how long this will take by dividing the amount you’ll pay in discount points by how much lower your mortgage payment will be because of the fee. This will tell you the number of months it will take you to recoup paying discount fees before you realize any savings. If you plan on selling your house within the next five years or in the amount of time you calculated above, it doesn’t make sense to pay discount points.

There Are Tax Advantages When Paying Discount Points

Paying discount points will earn you a tax deduction in most cases. According to the IRS the discount points you pay are prepaid mortgage interest. There are stipulations and you may or may not be able to deduct the full amount in one year according to IRS rules; however, this prepaid interest can certainly reduce your tax liability if you itemize deductions on your tax returns.

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Mortgage Rate Locks Can Be Broken

Robert — Mon, 16 Jul 2007 18:06:05 +0000

Mortgage rate locks are supposed to protect you from rising interest rates while your loan originator prepares the documents necessary to close on your loan. What happens when your mortgage rate lock breaks? Broken locks occur when you aren’t able to close before your designated lock period expires. Ones your lock breaks the wholesale lender that approved your loan is no longer obligated to honor the mortgage rate you were approved.

What happens with the lender when you haven’t closed when your lock expires? The broken lock creates a problem for everyone involved. It’s more work for the broker, although some will argue they don’t do enough to warrant their commissions, and the lender has a problem because they’ve earmarked funds for your loan. This money is referred to as “hedged” and is budgeted to fund your loan when you close. If you miss your deadline for closing the lender is out the money they paid to earmark the hedge for your loan. This is why your interest rate goes up when you break your lock.

Suppose you’re refinancing your mortgage at six percent and the broker locked your interest rate for thirty days. You miss the deadline for closing and mortgage interest rates have gone up to seven percent. Even if mortgage rates had dropped you’d still be stuck with the higher of the two rates at six percent if you pursue the loan. If you anticipate problems when refinancing your loan ask for a longer lock period…and stick to it.

What If You Haven’t Locked Yet?

If your loan originator hasn’t locked your mortgage rate you have what’s called a floating interest rate. This is the complete opposite of being locked and your rate will change with market conditions. If mortgage rates go down prior to locking you’ll get a better rate; however, there are no protections in place for you if mortgage rates go up. If you’re in the process of refinancing and haven’t locked in your interest rate in writing, you’re taking a gamble with your loan. For most people the gamble of a lower rate is not worth the risk; have your loan originator lock in your rate, in writing, as soon as possible.

How Soon Can You Lock Your Interest Rate?

When you’re refinancing your mortgage you can lock in the interest rate at any time. If you’re satisfied with the interest rate your mortgage broker quotes you and are certain that it does not include unnecessary markup, ask your broker to lock as soon as possible. Once you’ve locked in your best mortgage rate make sure you return all documents and requests for information in a timely manner to prevent breaking your lock.

You can learn more about refinancing your home loan without overpaying by registering for our free mortgage refinancing videos; get started today by clicking the links at the top of this page.

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Refinancing Mortgage Rate

Robert — Thu, 12 Jul 2007 19:24:14 +0000

Most homeowners focus solely on finding the lowest mortgage rate when refinancing their home loans. While qualifying for the lowest refinancing mortgage rate will get you a lower payment and save you money, there are a number of other fees you should not overlook. Here are several tips to help you get the best refinancing mortgage rate without overpaying lender junk fees.

If you are looking at refinancing mortgage rates online, you’ll want to be careful to avoid computerized loan origination fees. This fee is often tacked onto your loan by the mortgage website you visited to fill out a contact form. The most notorious example of the computerized loan origination fee gone wrong is Lending Tree.

When Lenders Compete, You Lose

Mortgage lead generation sites like lending tree actually have nothing to do with mortgage loans whatsoever. Surprising? These websites have huge advertising budgets and put up a flashy website to trick homeowners into filling out their contact forms without reading the fine print. Check out the fine print on Lending Tree’s website; you’ll find it under Licenses and Disclosures.

Read this disclosure statement carefully and you’ll find that Lending Tree receives a fee of up to $1,300 for their part in “arranging” your loan. Lending Tree simply sells your information to the highest bidder on it’s “network” of mortgage lenders and collects their fee. This is a fee that appears on your Good Faith Estimate and is paid out of your pocket just because you filled out a contact form on Lending Tree’s website. The bottom line when shopping for the lowest refinancing mortgage rate online is to always read the fine print.

Avoiding YSP Can Get You A Wholesale Mortgage Rate

Another problem with finding the best refinancing mortgage rate is that most homeowners don’t know their interest rate has been marked up to give the broker a commission. Mortgage loans are considered retail products and the interest rate is what makes your mortgage “retail.” When you were approved for your refinancing mortgage rate your loan originator was given a specific interest rate for your loan; however, this person overcharges you to get a bonus form that lender.

That’s right, for every quarter percent you agree to overpay for your refinancing mortgage rate, that person gets a bonus of one percent of your mortgage amount from the lender. This bonus is paid in addition to the fees you’re already paying for their services. How can you avoid this ridiculous markup of your refinancing mortgage rate?

The difference between the refinancing mortgage rate you were approved and the one you close with is called Yield Spread Premium or YSP. If you’re upfront with your mortgage broker when comparison shopping and tell them you understand how YSP works and will not tolerate this lender paid compensation, you can negotiate for a wholesale interest rate. You can learn more about finding the perfect refinancing mortgage rate without paying lender junk fees with our free mortgage toolkit. Sign up today by clicking the DVD image at the top of this page.

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