In a single word…yes, your mortgage broker is better. There are a number of reasons that direct mortgage lenders and banks should be avoided at all costs when refinancing your home loan. Banks and other direct mortgage companies can legally hide the profit they make from marking up your mortgage rate where a mortgage broker is legally required to disclose their commission.
The Real Estate Settlement Procedures Act
The banking lobby spent millions of dollars having legislation passed requiring mortgage brokers disclose the commissions they receive on your loan. They also made sure that banks and other lenders that fund mortgage loans with their own capital were exempt from the law. This legislation known as RESPA requires your mortgage broker to disclose Yield Spread Premium on the HUD-1 statement you receive prior to closing.
Yield Spread Premium & Service Release Premium
The commission paid to your mortgage broker by a wholesale lender is called Yield Spread Premium. Brokers get paid by the lender when they lock and close your loan with an above market mortgage rate. If you learn how to recognize this markup you can avoid it when refinancing your home loan which essentially allows you access to wholesale mortgage rates. Service Release Premium on the other hand is the profit the bank makes when your loan with an above market mortgage rate is sold to investors on the secondary market.
Because banks are exempt from RESPA legislation they will never tell you how much your mortgage rate has been marked up for their profit. This type of markup is therefore impossible to avoid and reason enough never to take out a mortgage loan from your bank.
Avoiding Yield Spread Premium Is Easier Than You Think
You don’t have to be a financial guru to get a wholesale rate when refinancing your mortgage. Spend a little time learning how mortgage brokers are paid and you can easily negotiate with your broker to pay a flat origination fee without including Yield Spread Premium on your new home loan. You can learn more about refinancing with a wholesale rate by registering for the free videos found on this website.
The videos offer a step-by-step system for finding the right mortgage broker and the lowest interest rate while avoiding lender junk fees. Register today, these mortgage videos are yours free for a limited time.
Looking forward to more information before I start my search deciding to refinance.