Refinance Home Mortgage Guide

Most homeowners have heard about rescission but do not understand how it works. The three day recession allows you time to review all of your documents after closing to make sure the loan you got is the mortgage you were promised. You have until midnight on the third day to cancel your loan for any reason. This serves to protect homeowners from the pressure sales and bait and switch tactics commonly used by mortgage lenders.

Your mortgage broker is supposed to inform you of your rescission rights; however, most brokers continently forget to disclose this to you when refinancing your mortgage. If you decide to take advantage of rescission you will need to fax the written cancellations to your mortgage broker, lender, and Title Company involved with your loan. The three days timeframe you have for rescission include any business day, Monday thru Friday, excluding weekends and Federal holidays.

Suppose for example you close your loan on Tuesday. Your three day rescission period will be Wednesday, Thursday, and end Friday evening at midnight. Remember that weekends do not count, if you close on a Friday for instance your recession period is Monday, Tuesday and Wednesday with the loan funding on Thursday. Holidays including Labor Day, Columbus Day, Veteran’s Day, President’s Day, Independence Day, Martin Luther King’s birthday, Thanksgiving, Christmas, and New Years do not count against your rescission period.

Knowing your rights as a homeowner is an important part of protecting yourself from abusive lending practices. Mortgage loans are a huge liability and should be treated with care. Don’t ever let a pushy mortgage broker put you in a loan you do not want or fully understand. You have the right do cancel any mortgage during the tree day recession period; just make sure you provide written notification to all parties concerned before the deadline expires. If you elect to cancel your loan I would recommend following up with a telephone call after you provide written notification to the broker, lender, and Title Company.

You can learn more about your rights and the protection provided to homeowners in the United States including strategies for refinancing with a free mortgage tutorial. Register today with no obligation using the links provided at the top of this page.

If you are in the market to refinance your mortgage there are several expensive pitfall you’ll want to avoid. Mortgage refinancing can save you thousands of dollars if you go about it the right way. Here are several tips to help you refinance your mortgage without paying too much to your broker or lender. Finding the right lender makes the difference between getting a great mortgage loan and making an expensive mistake. There are several types of lenders you can choose from when refinancing. You have the option of refinancing your mortgage with your bank or credit union, a mortgage broker, internet lender, or a broker-bank.

Types of Mortgage Lenders

Each type of mortgage lender has advantages and disadvantages. Refinancing your mortgage with a bank or credit union can be a fast and convenient method of securing a new mortgage; however, if you refinance with your bank you’re guaranteed to overpay for that loan. The reason for this is that your bank is exempt from the Real Estate Settlement Procedures Act; this legislation protects homeowners in the United States from abusive lending practices by requiring lenders to disclose their markup and profit margin on your loan.

The Banking Lobby spent millions of dollars ensuring that your Bank doesn’t have to play by the rules. Banks routinely markup mortgage interest rates to boost their profits when the loan is sold to investors on the secondary market. This markup of your mortgage interest rate is called Service Release Premium and because the bank is exempt from the Real Estate Settlement Procedures Act, the bank is the only one that will ever know how much you’re being overcharged.

Never refinance your home mortgage with a bank or a broker-bank. Broker-banks are simply banks pretending to be mortgage brokers. How can you tell if the company you’re considering for mortgage refinancing is really a bank or broker-bank? Ask your loan representative if they close in the name of their own company or the name of the wholesale lender. If the answer is that your mortgage is closed in the broker or mortgage company’s name you’re actually dealing with a bank pretending to be a mortgage broker.

Refinancing With a Mortgage Broker

Mortgage brokers have the advantage of accessing wholesale interest rates for their customers. The problem with refinancing your mortgage with a mortgage broker is that these individuals are paid by commission and the more they mark up that wholesale interest rate the higher their commission will be. The difference between the wholesale mortgage rate your lender approves you and the rate you close with is called Yield Spread Premium.

Avoid Yield Spread Premium and Get a Wholesale Mortgage Rate

Homeowners who learn to recognize the unnecessary markup of their mortgage interest rate can refinance with wholesale rates and save thousands of dollars. This is true if you are refinancing with a local mortgage broker or one you contact on the Internet. Because you’re already paying a perfectly reasonable origination fee for the broker services, any amount of Yield Spread Premium charged by the broker is not only unnecessary but is completely taking advantage of you.

Be Careful With Internet Mortgage Sites

You might be tempted to visit one of the big mortgage sites you see advertising on television like Lending Tree. Many homeowners are surprised to discover that sites like Lending Tree have absolutely nothing to do with mortgages and make money by selling leads to lenders and brokers. While there’s nothing wrong with sites involved with lead generation, RefiAdvisor for example is funded by lead generation, sites like Lending Tree take advantage of their users by charging them a ridiculous “Computerized Loan Origination Fee.”

If you visit Lending Tree’s website and click on their “Licenses & Disclosure Statement” you’ll find that lending tree receives a fee of up to $1,300 for their part in “arranging” your loan. This fee appears on your Good Faith Estimate and you’ll be required to pay it when closing on your loan. What does lending tree do for $1,300? Aside from collecting your personal information and selling it to the highest bidders in their network, Lending Tree does absolutely nothing.

You can learn more mortgage refinancing tips to help save you money and avoid being taken advantage of by your lender with my free mortgage toolkit. You can get started today free with no obligation by registering using the link at the top of this page.

Continuing with my series on mortgage refinancing for the first time homebuyer I’ll pick up where I left off with mortgage terminology you need to know. If you missed part one you can catch up with Mortgage Refinancing for the First Time Homebuyer.

Advanced Mortgage Terminology

There are several terms related to key concepts you need to know before refinancing your mortgage. Among these concepts is the markup your mortgage broker adds to your interest rate to get a commission from the wholesale lender behind your loan.

Yield Spread Premium – This markup puts the “retail” in your mortgage loan. When the wholesale lender approves your application you qualify for a specific mortgage interest rate. Your broker knows this interest rate (many pretend they don’t) and marks it up because the wholesale lender pays a bonus of one percent of your loan for every quarter percent you agree to overpay. Homeowners who avoid paying Yield Spread Premium are able to refinance with a wholesale interest rate.

Service Release Premium – Similar to the Yield Spread Premium this is the markup added to your mortgage interest rate by a bank or broker-bank. Remember banks are exempt from the Real Estate Settlement Procedures Act and are not required to tell you that they’ve marked up your interest rate. Banks do this because they make the majority of their profit selling your loan on the secondary market; loans with above market interest rates make them the most money. What’s a broker bank? This is simply a bank pretending to be a mortgage broker.

Points – This is a fee you’ll be required to pay at closing. Points come in two varieties: you’ll pay origination points to the broker for their work on your loan and you may be required to pay “discount” points to the lender. Discount points are typically paid in exchange for something like a lower interest rate; however, some homeowners may find they are required to pay points for loan approval. One point is always one percent of your loan amount.

Garbage Fees – These are fees your loan originator or lender tries to “slip past” you. You’ll find your Good Faith Estimate loaded with unnecessary fees. Examples of common garbage fees are application fees, lock fees, and broker courier fees.

That’s all for mortgage terminology; in part three of this series on mortgage refinancing for the first time homebuyer I’ll cover strategies for comparison shopping for mortgage brokers that don’t unnecessarily markup your interest rate with Yield Spread Premium. You can learn more tips for refinancing without paying too much or being taken advantage of with my free mortgage refinancing toolkit. Simply click the DVD image at the top of this page for immediate access to the videos, free with no obligation.

If you’re in the process of refinancing your home mortgage there are a number of expensive pitfalls you’re likely to encounter along the way. Doing your homework before refinancing will not only help you avoid refinancing headaches but save you thousands of dollars in the process. Here are several tips to help you avoid common mortgage refinancing headaches.

The biggest headache you’ll need to avoid when refinancing your mortgage is overpaying. Most homeowners never know that mortgage brokers mark up the interest rate wholesale lenders approved them to get a commission. Wholesale mortgage lenders reward brokers for closing loans with above market interest rates. The difference between the interest rate you were approved and the mortgage rate your broker closes with is called Yield Spread Premium.

Here’s an example to illustrate Yield Spread Premium in a typical refinancing transaction. Suppose you’re refinancing your home with a $250,000 thirty year fixed mortgage. Your mortgage broker quotes you an interest rate of 6.75% and charges you one point for the origination. Remember that one point is always one percent of your loan amount due at closing. While one point is a reasonable fee to pay for loan origination, what the broker isn’t telling you is that the wholesale lender approved you for a 6.0% mortgage rate. Your mortgage broker marked the interest rate up to 6.75%, without telling you of course, because the lender pays a bonus of one percent of your loan amount for every .25% you agree to overpay.

In this example your mortgage broker pockets the $2,500 you pay for loan origination AND $7,500 from the lender for overcharging you. For a couple hours work your mortgage broker walks away with $10,000 and you get stuck paying an above market mortgage rate for the entire time you keep this loan. There is good news for homeowners who do their homework can avoid this refinancing headache; you can avoid paying the unnecessary markup know as Yield Spread Premium by learning to recognize the markup and negotiating with a mortgage broker to pay an upfront fee when refinancing.

Watch out for Prepayment Penalties

Another source of refinancing headaches for many homeowners is the dreaded prepayment penalty. Before setting out to refinance your existing mortgage make sure your existing loan does not include a penalty for early repayment. Your loan originator might try to slip this penalty past you to get an incentive from the lender; however, unless you have poor credit and no other option, there is no reason whatsoever to accept a mortgage when refinancing that includes a prepayment penalty. Shrewd negotiating and cutthroat competition in the industry will ensure this is one refinancing headache you don’t have to face; don’t be afraid to remind your broker just how competitive it is out there.

Tell Your Mortgage Broker to Take Out the Trash

The final source of refinancing headaches we’ll discuss today are garbage fee. Chances are more likely than not, your Good Faith Estimate is littered with junk fees you don’t have to pay. If you find anything on your Good Faith Estimate that resembles an application fee, lock fee, broker courier fee, or computerized loan origination fee, these are garbage fees you should not be paying. Again, reminding your loan originator how much competition there is for your loan and telling them to take the trash out of your Good Faith Estimate will help you avoid many common refinancing headaches. You can learn more about your refinancing options and other headaches to avoid with my free refinancing toolkit. You can access the video toolkit by clicking the DVD image at the top of this page.