Getting low mortgage refinance rates in today’s economy is easy; however, getting a truly awesome deal depends not so much on how low your interest rate is, but how much the fees are you’re paying to get that rate. Paying unnecessary markup, points and lender junk fees can quickly turn low mortgage refinance rates into a boat anchor on your finances. Here are several tips before you refi to help you get the best mortgage refinance rates without overpaying fees.
Mortgage Refinance Rates Historically Low
It’s no secret that mortgage refinance rates are near their lowest levels in fifty years. If you have halfway decent credit you can easily lock in five percent or better for mortgage refinancing. Most homeowners make several common mortgage mistakes when it comes to fees and closing costs, especially with the loan origination fee.
The mortgage origination fee is paid to the person or company arranging your home loan and is intended to compensate them for the work the do. The year 2011 saw several changes in the United States to the laws regulating mortgage broker compensation, particularly when it comes to lender paid compensation. Lenders pay a fee called yield spread premium to any loan originator that locks and closes your refi with a higher than necessary mortgage rate.
Under the old rules this compensation was buried deep in your disclosure forms and brokers had clever ways of explaining it away. Most homeowners have no idea how this unnecessary markup of your interest rate affects their monthly payment amount. Any increase you see in your mortgage rate is going to raise your monthly payment amount, taking more cash away from your bottom line.
Origination Fee vs. Yield Spread Premium
When shopping for mortgage refinance rates you’re likely to encounter no cost refinance offers from lenders like Bank of America. These mortgage quotes boast the ability to refinance without paying fees to close. Your origination fee and closing costs are covered using Yield Spread Premium or an equivalent from the bank or lender. The problem with accepting no cost refinance offers is that you’re giving up the best mortgage refinance rates for a higher monthly payment just to cover your fees.
Accepting higher mortgage refinance rates can drive up your monthly payments by as much as $100 a month or more if you’re refinancing a jumbo mortgage loan. If you plan on staying in your home for any length of time it makes sense to pay the loan origination fee and closing costs yourself to keep your monthly payments as low as possible.
Advice on Mortgage Refinance Fees
I mentioned earlier that the main factor determining how good of a deal you’re getting on your mortgage refi is the fees you pay. The reason this is holds true is that you’ll need to recoup these fees from your lower payment before gaining any benefit from your new home loan. The more you pay for loan origination at closing the longer it’s going to take to break even. This is why paying less is always the best strategy as long as you’re not cutting corners by allowing the lender to pay your closing costs for you.
You can learn more about getting the best mortgage refinance rates for your next home loan without paying unnecessary fees or markup by checking out my free Underground Mortgage Refinancing Videos.
Here’s a quick sample to get you started: