Mortgage Refinance Guide

The average homeowner in the United States refinances every four to five years for a variety of different reasons. Many people refinance to lower their mortgage rate; however, consolidating bills or borrowing cash are also good reasons for refinancing. Is mortgage refinancing right for you? Here are several tips to help you decide if mortgage refinancing is right for you.

Are Mortgage Rates on the Rise?

Did you purchase your home with an Adjustable Rate Mortgage and are concerned how rising rates will affect your monthly payment? If this is you, refinancing your mortgage with a fixed rate loan allows you to lock in your mortgage rate and payment amount. You won’t have to worry about payment shock when that statement from the lender arrives after your Adjustable Rate Mortgage resets. If you already have a fixed rate mortgage and rates are rising there are still good reasons for refinancing even if getting a lower mortgage rate isn’t one reason.

Are Your Payments Too Much to Manage?

If your budget is struggling under the weight of your mortgage payment you could get a lower mortgage payment by refinancing even if you cannot get a lower rate. By extending the term length of your new loan you can get a lower payment by spreading your mortgage out over more time. This is a more expensive option as you will pay more to your lender for the financing; however, if you are in a cash crunch refinancing with a longer term length could be your answer.

Is Your Option ARM Headed For Trouble?

Many homeowners used risky option adjustable rate mortgages to purchase their homes because they couldn’t qualify for traditional financing. If you did this and have only been making the minimum payment you’re headed for big trouble. The problem with only making the minimum payment with an Option ARM is that it does not cover all of the interest due in a given month. The unpaid amount of interest is simply added to your mortgage balance each and every month. This means your loan is actually growing over time.

When your loan reaches a certain amount of negative equity, often 125% of your original balance your lender will “recast” your loan to a standard Adjustable Rate Mortgage amortized for the time remaining on your loan contract. Suppose you’ve been making this payment for five years on a thirty year mortgage; your new loan will have a term length of 25 years with a balance of 125% of you borrowed. Your payments will skyrocket. If you’ve barely been making ends meet with the minimum payment amount you’re destined to lose your home to foreclosure when this happens. If this describes your situation, don’t delay…refinance now before it’s too late.

Has Your Financial Situation Improved?

If your finances have improved since purchasing your home you may qualify for a lower mortgage rate. Did you get married and now have two incomes? Did you get a better paying job or pay off some of your debts? If your credit score is higher now than when you purchased your home you could qualify for a much better rate and lower your monthly payment at the same time.

Do You Have Private Mortgage Insurance?

If you used a 100% mortgage loan to purchase your home the lender might have required you to purchase Private Mortgage Insurance (PMI) at the time. The premiums for this insurance are included in your monthly payment and can add hundreds of dollars to your bill each month. You can save yourself some money by asking your lender to cancel your insurance; as long as you’ve been making your payments on time and have reached a certain amount of equity in the home the lender will cancel your PMI. If cancelling your PMI is not an option refinancing could save you a hundred dollars each month; even more.

Do You Want to Borrow Cash or Consolidate Bills?

If you have equity in your home this money is available to you for any reason you like. You can use this to pay off high interest credit cards, use the money to renovate or repair your home. Because you’re borrowing against the equity in your home you can use this money for any reason; there are no limits or restrictions on how your use of the cash.

You can learn more about refinancing your mortgage with a wholesale mortgage rate without paying lender garbage fees with a free mortgage DVD. Register today, the DVD is yours with no strings attached whatsoever.

If you are in the market for a new mortgage either to purchase your home or refinance an existing loan, you might wonder if a wholesale lender could save you money. Most homeowners in the United States do not understand how the mortgage markets work and are unable to take advantage of wholesale rates even if they contact a wholesale lender directly. Homeowners who learn how the system works are able to take advantage of the wholesale nature of the market and save thousands of dollars. Here are the basics you need to know in order to take advantage of wholesale mortgage rates with your home loan.

Mortgage Market Basics

There are two markets in the United States for mortgage loans. The primary mortgage market is where consumers like you and I take out loans to purchase homes. The secondary market is where institutions and other investors buy and sell mortgage debt for a profit. The primary market is made up of several types of mortgage lenders, most of which make the majority of their profits by selling mortgage debt on the secondary market.

Types of Mortgage Lenders

The basic types of mortgage lenders you will encounter in the primary market include wholesale lenders, banks and credit unions and ”broker-banks” known as correspondent lenders. I don’t recommend taking out a mortgage from your bank, credit union, or a broker-bank such as E-Loan because these lenders are exempt from the Real Estate Settlement Procedures Act thanks to a loophole courtesy of the Banking Lobby. Because these lenders are not legally required to play by the same rules as other mortgage lenders you’ll never know how much they’ve marked up your mortgage interest rate. Besides, why would you want to do business with a lender that isn’t required to play by the rules?

This article is about wholesale mortgage lenders, which now that we’ve eliminated banks and broker-banks are all we’re left with. What are wholesale lenders? Wholesale lenders are institutions that sell loans on the secondary market for a profit. As members of the public, you and I cannot deal with a wholesale lender directly. Even if you were to contact one of these lenders you’ll be dealing with a retail division of that lender and you will not get a wholesale rate. How can you get a wholesale mortgage rate? Glad you asked…

Mortgage Brokers Have Access to Wholesale Rates

If you want to take advantage of wholesale mortgage rates you’ll need to enlist the help of a mortgage broker…and not just any broker, you need to find one willing to work for an origination fee without charging you Yield Spread Premium. Finding a mortgage broker like this is not an easy task. Yield Spread Premium frequently doubles often triples the compensation mortgage brokers receive on your loan.

What is Yield Spread Premium?

Yield Spread Premium is simply the difference between the wholesale rate the lender approves you and the rate your mortgage broker “sells” you. This markup of your mortgage rate is what makes your loan “retail.” Mortgage brokers do this because the wholesale lender pays them a bonus for closing mortgage loans with above market interest rates. In fact your mortgage broker receives a commission of one percent of your mortgage amount for every .25% they con you into overpaying. I use the word “con” because most brokers conveniently omit this markup from your Good Faith Estimate and have ways of cleverly disguising it on the HUD-1 statement.

Many mortgage brokers get defensive, even angry when questioned about Yield Spread Premium. They’ll tell you that because this fee isn’t coming out of your pocket that you shouldn’t worry about it. What you should be concerned about is the reason that this fee is being paid…your broker gets this commission because you’re agreeing to pay an above market mortgage rate.

This is why finding the right mortgage broker is critical for getting a wholesale mortgage rate. You’ll need to negotiate with potential brokers to pay a reasonable origination fee (not more than one percent) without paying Yield Spread Premium. Start by telling your mortgage broker that you understand how Yield Spread Premium works and will not accept this markup on your loan. If you’d like to receive more advice about wholesale mortgage lenders and taking out a mortgage without paying too much register for this free mortgage refinancing blueprint.