How to Refinance a Mortgage

If you’re considering a “no cost” or “no fee” mortgage loan for your home loan there are several things you need to know about these loans to avoid paying too much. Whenever lenders talk about “no fee” mortgage loans they are always trading off a higher mortgage rate in exchange for lender fees paid at closing. Here are several tips to help you avoid falling for the “no closing cost” lie with your home mortgage loan.

What are no cost mortgage loans? No closing costs loans are simply a gimmick to get your business. There will always be third party closing costs that cannot be waived…if your lender is “waiving” these costs they may be paying them for you; however, they will mark up your mortgage rate to cover the cost.

When you take out a mortgage the person arranging your loan typically slips .50 to .75 percent markup of your interest rate to get a commission. If you take out a no cost mortgage you will have this markup plus as much as a full point markup from the lender. This higher mortgage interest rate can result in paying hundreds of dollars extra each month that you keep the loan. This is true of both the mortgage lenders and banks you see offering “no closing cost mortgages” as well as the “flat fee” loans.

Suppose you take out a $350,000 mortgage to purchase your home. The mortgage rate you qualify for paying your closing costs is 6%; however you elect to take a 6.75% mortgage to avoid paying closing costs. Your monthly mortgage payment at 6.75% on a 30 year fixed rate loan will be $2,270 per month. If you paid the closing costs upfront your monthly payment at 6% would have only been $2098. That’s an extra $2,064 you’ll pay every year you keep the loan.

In five years this “no fee” mortgage has cost you a whopping $10,320…money you’d still have in your pocket had you elected to pay your closing costs up front. You can learn more about saving money on you home loan while avoiding unnecessary markup of your mortgage rate and garbage fees with my free video tutorial.

You might hear people talking about Par mortgage rates from time to time but what does Par mean? Par simply means a mortgage rate with no discount points or Yield Spread Premium attached. This is the rate you want when refinancing or taking out a new loan to purchase your home. Here are the basics you need to know about Par rates and how you can get one.

Discount Points And Yield Spread Premium

When retail mortgage rates are quoted you may see them based on a certain number of “points.” Points, also called “Discount Points” are a fee you would be required to pay in order to qualify for a specific mortgage rate. One “point” is the equivalent of one percent of your loan amount and paying this fee is typically something you want to avoid; especially if you are trying to refinance with a wholesale rate. Points are easy enough to recognize because the lender tells you about them upfront; however, no one talks about Yield Spread Premium.

Yield Spread Premium is the markup your mortgage broker adds to get a commission from your lender. Lenders pay this “broker rebate” for closing loans with above market interest rates. They do this because the lender makes the majority of their profit by selling loans to investors on the secondary market…loans with above market mortgage rates bring the most profit.

If you want wholesale mortgage rates when refinancing your home loan you’ll need to find a mortgage broker willing to work for you without marking up your mortgage interest rate. You’ll have to pay a reasonable origination fee for their services; however, there are honest mortgage brokers out there who are willing to do this for you. You can learn more about mortgage shopping for par rates while avoiding garbage fees by registering for our free video tutorial.

Mortgage Rates fell again today, down to 5.0% from yesterday’s 5.25%

…this is the lowest that mortgages rates have been since 2004.

Can you find a rate like this shopping online or from your bank? The short answer is no, never. Rate quotes you receive online all have retail markup and banks never quote wholesale rates. The only way to take advantage of this 5.0% mortgage rate is to find a broker willing to quote you a rate that does not include commission based markup. Here are several tips to help you find the right mortgage broker for the job.

What is Yield Spread Premium?

Mortgage lenders reward brokers for closing loans with above market interest rates. This broker rebate is paid because the lenders make a premium profit when the loans are sold to investors on the secondary mortgage market. Your mortgage broker receives one percent of your loan amount as a bonus for every quarter percent that you unknowingly agree to overpay.

Suppose you are in the process of refinancing your home for $250,000. The broker quotes you a mortgage rate of 5.75% and charges you an origination fee of one percent. What you mortgage broker isn’t telling you is that you actually qualified for a mortgage rate of 5% but they’ve marked it up to 5.75% for a commission. Your broker pockets $2,500 that you’re paying them for loan origination plus $7,500 from the lender for overcharging you. You get stuck paying thousands of dollars in unnecessary mortgage interest.

If you’re planning on refinancing and want that great 5% mortgage rate you’ll need to find a mortgage broker willing to work for the origination fee alone without charging you Yield Spread Premium. A reasonable amount to pay for loan origination is one percent of your loan amount and not a penny more. There are honest mortgage brokers out there willing to work for this much.

You can learn more about your mortgage refinancing options with a wholesale mortgage rate without paying lender garbage fees by registering for a free mortgage video tutorial. Register today for the videos while this is still a free offer.

If you’re considering refinancing your home loan with a mortgage broker there are several things you need to know in order to avoid paying too much. Mortgage brokers can be an excellent resource for finding loan offers you wouldn’t have access to on your own; however, unless you know how to negotiate with mortgage brokers you’ll be refinancing with a mortgage rate that includes commission based markup and unnecessary junk fees.

Here are several tips to help you find the right mortgage broker allowing you to refinance with wholesale mortgage rates while avoiding garbage fees.

What Are Retail Mortgage Rates

The biggest mortgage broker secret today is also the sleaziest. Mortgage brokers take wholesale rates and markup them up to get a commission from the lenders. They do this even though you’re paying them an origination fee for finding you a loan…lining their pockets at your expense. Here’s an example how this commission based markup works.

Suppose you’re refinancing a $250,000 mortgage loan for 30 years at 6.75%. Your mortgage broker charges you an origination fee of 1.25% which means you’ll have to pay $3,125 at closing for your broker’s services. What your mortgage broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate from the lender that approved your application and they’ve secretly marked your rate up to 6.75%. Most mortgage brokers never admit that they’re doing this with your interest rate and if you were to question the markup they would try and explain it away.

Many mortgage brokers go so far as to fabricate rate lock confirmation from the lender to hide what they’re doing with your mortgage rate. If you were to see the actual rate lock from the lender this markup of your interest rate is clearly disclosed. The final opportunity you have to catch your mortgage broker’s dirty little secret is on the HUD-1 statement. The fee your broker receives for overcharging you is disclosed around lines 810-811 of this document; you will often see it called mortgage broker rebate, YSP paid to mortgage broker or Yield Spread Premium.

In the previous example he mortgage broker receives 1% of your loan amount for every quarter percent that they secretly overcharge you. This mortgage broker walked away with $7,500 on top of the $3,125 you’re already paying for their services. That’s $10,625 for a few hours of dishonest work. Don’t be a victim of these mortgage broker secrets…by doing your homework you can avoid this unnecessary markup of your mortgage interest rate and garbage fees like loan processing fees and rate lock fees to name just to name a couple.

You can learn more about refinancing your mortgage with a wholesale rate by registering for a free mortgage video tutorial. The videos will show you not only how to avoid paying too much with unnecessary junk fees and markup of your mortgage interest rate, but how to tune up your credit score before you apply for a new mortgage and get the lowest possible interest rate. Register today while this is still a free offer.

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.