Home Mortgage Refinancing Guide

Your monthly mortgage payment amount is determined by the amount you borrowed and the mortgage you qualified. Mortgage rates are currently at their lowest levels since 2005; if your financial situation has changed since you purchased your home you could significantly lower your payment with a lower mortgage rate. Here are several tips to help you decide if this is the right time to refinance your home loan.

Wholesale Mortgages Rates

If you are a homeowner with good credit the current wholesale mortgage rate is 5.5 percent. Refinancing your mortgage with wholesale rates can be tricky as most homeowners don’t understand how mortgage rates are quoted. The rate quotes your receive online and from your mortgage broker are actually “retail” mortgage rates and can be as much as a half percent to a full percent higher than the going wholesale rate.

What Makes Mortgage Rates Retail?

Mortgage brokers are basically commission based salespeople. Your broker is compensated for their work in two ways; you will pay an origination fee for their services and the lender pays a “rebate” to the broker for closing your loan. A reasonable fee to pay for loan origination is one point, or one percent of your loan amount. If you can get away paying less than one percent you’re doing well, but what about the broker rebate paid by the lender? Should you be concerned about this fee since it’s not coming out of your pocket?

The short answer is yes. You should be very concerned about this fee not because the lender is paying it, but why the lender is paying. Broker rebates are paid for one reason and one reason only. This rebate is a reward for closing loans with above market mortgage rates. That’s right; your mortgage broker receives a bonus form the lender for overcharging you. In the industry this “reward” is called Yield Spread Premium and could wind up costing you thousands of dollars in unnecessary finance charges.

The Mortgage Industry Has a Dirty Little Secret…

Here’s an example to illustrate how the broker rebate works. Suppose you refinance your home for $300,000 and your broker tells you that you qualify for a 6 percent mortgage rate. You agree to pay one point for loan origination which is a perfectly reasonable fee to pay the mortgage broker. This fee amounts to $3,000 paid out of your pocket at closing. But what is your mortgage broker not telling you?

Today’s wholesale mortgage rate is 5.5%. If you agree to a 6.0% mortgage rate that means the loan has .5% Yield Spread Premium. Mortgage lenders pay one point for every quarter percent the broker overcharges you. In this example the broker receives an additional $6,000 on top of the $3,000 you’re already paying. That’s $9,000 for a few hours work and that’s only half the problem.

The real stink of Yield Spread Premium comes form the fact the most brokers will never admit what they’re doing with your mortgage rate and never properly disclose this fee. Most mortgage brokers leave it off the Good Faith Estimate entirety, give you a bogus rate lock confirmation instead of the one from your lender and if you happen to catch the rebate on your HUD-1 statement explain the fee away by saying “It’s not coming out of your pocket, don’t worry about it.

What’s Wrong With Yield Spread Premium?

By accepting an above market mortgage rate your payments will be higher than they need be and you’ll be wasting money on unnecessary finance charges. Because this fee is never properly disclosed your mortgage broker is all but lying to you about the loan and taking money out of your pocket. Is this the mortgage you thought you were getting when the broker quoted you a six percent interest rate?

The good news is that you can avoid mortgage broker rebates when refinancing. There are honest mortgage brokers out there that will work for the origination fee alone without marking up your mortgage rate; you just have to find one. A good place to start is the Upfront Mortgage Brokers Association; members of this association agree to conduct their business following certain ethical and professional standards. Not every State has members however; if your State does not you can still find honest mortgage brokers by doing your homework and shopping for the right broker.

You can learn more about refinancing your mortgage with a wholesale mortgage rate by registering for a free DVD. Register today, this mortgage DVD is yours free with no obligation.

Many homeowners have a difficult time choosing which type of loan is best when refinancing their homes. Taking out a new 30 year fixed rate cookie cutter mortgage every time you refinance may not be the best move for your situation. Here are several tips to help you make sense of the different mortgage products available and choose the right loan for your situation.

How Long Do You Plan on Keeping Your Home?

The first question you need to answer when deciding to refinance is how long you plan on keeping your home. Because there are expenses involved when taking out a new mortgage loan you will need time to recoup this money. If you sell your home prior to recouping this expense you will lose money by taking out a new loan. You can easily determine your breakeven point by dividing the amount you will pay in fees and closings costs by how much lower your monthly payment will be. This will tell you the number of months it will take to recoup your refinancing expenses with the lower payment amount.

What Interest Rate And Term Length Should You Choose?

Choosing a 30 year fixed rate loan when refinancing is not a good idea for most homeowners. Refinancing your mortgage with a 15 year loan allows you to build equity in your home at a much faster rate. Choosing an adjustable rate loan could allow you to take advantage of lower mortgage rates. Mortgage interest rates are still very low; however, you should weigh your tolerance for financial risk before choosing a mortgage with a variable interest rate.

What Are Your Objectives For The New Mortgage Loan?

Do you need a loan with the lowest possible payment or would you like to pay the mortgage off as quickly as possible? If you can tolerate a fair amount of financial risk and need the lowest possible payment an interest only adjustable rate mortgage could be right for you. Interest only mortgages have payments based only on the amount of interest due in a given month; however, these mortgages do not remain interest only forever. At the end of the interest only period your lender will recast your loan to a standard Adjustable Rate Mortgage amortized for the time remaining in your loan term

Amortized? What Does That Mean?

Amortization is just a fancy word for describing how your mortgage balance is paid down over time. Mortgage loans are front loaded with interest so at the beginning of your loan the majority of your mortgage payment is applied to the finance charges. Over time this reverses as the interest is paid down and more of your payment is applied to the loan balance. Because mortgage loans are front loaded in this manner it is best for you to find the lowest rate possible when refinancing. You can do this by avoiding broker markup of your mortgage rate and other garbage fees.

You can learn more about how to refinance a mortgage by registering for our free video tutorial. The videos are yours free and will show you how to save thousands of dollars refinancing your home with a wholesale mortgage rate while avoiding garbage fees.

Refinancing your mortgage with a wholesale mortgage rate can save you thousands of dollars in unnecessary finance charges. By doing your homework before refinancing you will not only learn how to take advantage of the wholesale nature of mortgage interest rates, but learn how to avoid the junk fees added by your broker and lender. Here are several tips to help save you money when refinancing your home mortgage loan.

What are Wholesale Mortgage Rates?

Wholesale mortgage rates are offered exclusively by wholesale lenders. You will never get a wholesale rate form a bank or credit union and the only way to get them is to find a mortgage broker willing to let you. The problem with mortgage brokers is that one of they ways they are compensated for their services is by marking up your interest rate for a commission. This broker added markup is what makes mortgage rates “retail” and is called Yield Spread Premium.

How to Avoid Yield Spread Premium

How do you find a mortgage broker that won’t markup your mortgage interest rate? Yield Spread Premium is a significant part of most brokers’ income; eliminate this and they’re only working for the origination fee you agree to pay them. One of the biggest problems with Yield Spread Premium today is that the fee is not properly disclosed. When questioned about this markup most brokers try and explain the fee away or simply tell you that because it’s not being paid out of your pocket you shouldn’t worry about it.

Every single mortgage broker you encounter when refinancing your mortgage loan knows about Yield Spread Premium and makes an income from it; however, if you agree to a mortgage with this markup you’ll pay thousands of dollars in unnecessary finance charges. There are mortgage brokers willing to work for a reasonable origination fee without marking up your mortgage rate. Many of these brokers belong to a professional organization known as the “Upfront Mortgage Brokers Association.” Members of this professional association agree to conduct themselves adhering to certain professional and ethical standards….meaning they will not mark up your mortgage rate for a commission and hide the fact that they’re doing it.

The Upfront Mortgage Brokers Association maintains a registry of its members categorized by State on its website. You can search for a member in your state by visiting http://www.upfrontmortgagebrokers.org. If you’re living in a State that doesn’t have any members you can still take advantage of wholesale mortgage rates; however, you’ll have to do some negotiating to find the right broker.

Beware Mortgage Broker Junk Fees

In addition to Yield Spread Premium, there are a number of junk fees you’ll need to keep an eye out for when refinancing. If you find anything on your Good Faith Estimate or HUD-1 statement that resembles a “Broker Courier Fee,” “Rate Lock Fee,” Loan Processing Fee,” or “Application Fee” you should question your mortgage broker as to the validity of these charges. The “Rate Lock Fee” is a perfect example of a garbage fee invented by your mortgage broker. No mortgage lender charges a fee for locking in your interest rate; if you find a rate lock fee in your loan documents this fee has been fabricated by your broker and will go straight into their pocket.

You can learn more about refinancing your mortgage with a wholesale interest rate while avoiding ridiculous garbage fees by registering for a free mortgage DVD. Register today; you’ll get immediate access to the membership area and all of the training materials that will save you thousands of dollars on your next mortgage loan.

If you purchased your home with an option adjustable rate mortgage because you needed the lowest payment possible you should be very concerned about all the trouble brewing in the mortgage industry. When your option ARM begins resetting coupled with the declining values of homes across the country it could become extremely difficult for you to keep up with rising mortgage payments. Here are several tips to help you decide if refinancing your option adjustable rate mortgage is right for you.

Payment Option Adjustable Rate Mortgages

Pay option mortgage loans are relatively new and offer a great deal of flexibility for the savvy homeowner or Real Estate investor. The problem is that many people who purchased homes with these loans don’t understand how they work and blindly go on paying the minimum amount due each month until the lender recasts their loan and find out that foreclosure is a short 120 days away.

If you’re reading this and are unfamiliar with payment option mortgages, they are a very flexible mortgage with several different payment options. Homeowners with these loans can make payments on any given month based on the following options:

15 year or 30 year amortization
Interest Only
Optional Minimum Payment

The first option is a fully-amortized payment meaning that portion is applied to your loan balance after the interest is paid. If you choose to make the interest only payment you will only pay the finance charges due each month without paying down your loan balance. The “optional minimum payment” is what gets homeowners in trouble. This payment does not cover all of the interest due in a month. The unpaid portion is added to the loan balance every month. This means that your mortgage is actually growing over time and when it reaches a certain threshold, usually 125% of your loan amount, the lender will “recast” your loan.

Recasting means that the mortgage is converted to a standard adjustable rate mortgage amortized for the time remaining in your loan contract. For many homeowners this results in payment shock that they are unable to recover from and ultimately lose their homes.

Are You Running Out of Options?

If you are a homeowner who has been making the minimum payment month in and month out you should refinance your loan immediately. Your option mortgage is a ticking time bomb that could cost your home. The payment option mortgage problem is not limited to homeowners with poor credit; industry analysts estimate that there are 580 billion dollars in outstanding option loans from 2005 and 2006 alone. Analysts expect many of these loans to end in foreclosure due to declining home values.

Protect Your Home

How can you protect yourself from mortgage payment shock with your option mortgage? Use a mortgage calculator to predict your monthly payment when your loan resets. Read your mortgage contract and find out what the lender’s margin is when calculating your future payment amounts. If you find that you will not be able to afford the payments after the reset consider refinancing with a hybrid adjustable rate mortgage to keep your payments low and lock in your mortgage rate for the time being.

You can learn more about your mortgage refinancing options; including costly pitfalls to avoid when dealing with mortgage brokers with a free mortgage DVD. Request yours today.

If you are a homeowner struggling with the payments for your second mortgage loan, low mortgage rates could help you take back your budget by combining your first and second mortgage into one payment. When your home is secured by only one loan you will qualify for a lower mortgage rate which could result in a lower, more manageable payment. Here are several tips to help you decide if now is the right time to refinance and combine your higher interest mortgage loans.

Why Consider Mortgage Refinancing?

The obvious benefit of mortgage refinancing is that you will have only one monthly payment to manage, a lower mortgage rate, and a payment that could be much lower than what you’re currently paying. If you’re interested in paying down your mortgage more quickly you have the option of shortening the term length of your new mortgage, allowing you to pay more towards the principle balance of your loan. Paying more towards your loan balance will save you money in the long run by paying less in finance charges over the lifetime of your mortgage.

Consider the Cost of Refinancing a Second Mortgage

Whenever you take out a new mortgage loan you will be required to pay fees for securing the loan. These fees can include an appraisal, title search, application fees, processing fees, and various third party closing costs. If you are consolidating your second mortgage you should have no problem recouping theses expenses based on your potential savings; however, it is still important to shop around compare loan offers. You can also save yourself a lot of money by dong your homework and learning how to negotiate for a wholesale mortgage rate.

What are Wholesale Mortgage Rates?

There are two kinds of mortgage interest rates available on the market today. There are the retail mortgage rates that include commission based markup offered to the majority of homeowners today, and wholesale rates offered to those that know how to avoid this incentive based markup. This markup of your mortgage interest rate is known as Yield Spread Premium and agreeing to a mortgage that includes it results in overpaying thousands of dollars unnecessarily.

What is Yield Spread Premium?

Simply put, Yield Spread Premium is the unnecessary markup of your mortgage interest rate to get a commission from the wholesale lender behind your loan. For every quarter percent you unknowingly agree to overpay, your broker receives a bonus of one percent of your loan amount. This kickback to the broker is paid in addition the origination fees you are already paying for the mortgage broker’s work.

Consolidate Your Second Mortgage with a Wholesale Mortgage Rate

By consolidating your first and second mortgage loans with a wholesale rate and avoiding junk fees you can save yourself thousands of dollars. If you would like more information on how to refinance your second mortgage, register for a free video guide.