Home loan mortgage refinancing can be an intimidating subject for any homeowner. No one likes to be taken advantage of with their purchases; however, many people don’t realize that when it comes to home loan mortgage refinancing there are people at every corner trying to take advantage of you. How can you avoid the mortgage fat cats looking to help themselves to your hard earned cash? Here are several tips that will save you thousands of dollars in the unnecessary markup and junk fees that you’ll encounter when home loan mortgage refinancing.
Home Loan Mortgage Refinancing Secrets
What your broker doesn’t want you to know about home loan mortgage refinancing is that lenders pay an extra commission to brokers that lock and close with higher than necessary mortgage rates. The fee your broker receives for marking up your mortgage rate is called Yield Spread Premium and according to the Secretary of Housing and Urban Development will cost American homeowners sixteen billion dollars this year for no good reason. I say no good reason because you’re already paying the broker a perfectly reasonable fee for mortgage origination; Yield Spread Premium serves no purpose other than an incentive for your broker to overcharge you.
Mortgage Yield Spread Premium in Action
Here’s how this scam known as Yield Spread Premium works. Suppose you’ve decided home loan mortgage refinancing is the right move for your existing $315,000 home loan. Your broker quotes you an interest rate of 6.25 percent and charges you an origination fee of 1.5 percent. First of all, a reasonable amount to pay for the mortgage broker fee is one percent of your home loan. The broker is overcharging you for the origination fee, but what about that mortgage rate? What your broker isn’t telling you in this example is that you actually qualified for a mortgage rate of 5.5%. Your broker marked it up to 6.25 percent to collect a whopping 3 percent commission from the lender. That’s 3 percent on top of the 1.5 percent you’re already overpaying for the origination fee and you get stuck paying a hundred dollars more every month than you should be.
Why do lenders pay this ridiculous fee to the broker for overcharging you? The reason lenders pay Yield Spread Premium when home loan mortgage refinancing is that they make the majority of their profits by selling your home loan to investors on the secondary market. Home loan mortgage refinancing with higher than necessary interest rates brings them a premium profit; therefore lenders can afford to throw money at their brokers for overcharging you.
How to Avoid Yield Spread Premium
How can you avoid Yield Spread Premium when home loan mortgage refinancing? It’s actually easier than you think…you don’t have to be a personal finance guru or have a cousin on the “inside” to get a wholesale or par mortgage rate. You just have to find the right kind of mortgage broker to arrange your next home loan. Who’s the right mortgage broker? I can start by telling you who the right mortgage broker is not. Most brokers working for large national chains will be unable to negotiate the kind of home loan mortgage refinancing that doesn’t include Yield Spread Premium. Also, many independent brokers will be unwilling to negotiate this type of deal because they work out of posh office spaces and have hummer payments to make. Bonus tip: Never refinance with that mortgage broker you see driving a hummer around town splattered with their logo. That’s a sure sign their ripping people off.
Here’s a quick video to get you started…these home loan mortgage refinancing videos are quick, easy to understand, and best of all free.