If you’re considering a new home loan you might be wondering how to get the lowest mortgage rate refinance. Refinancing your home is easy; however, avoiding unnecessary fees and markup is difficult unless you know what you’re looking for. Here are several tips to help you get the lowest mortgage rate refinance without paying too much in the process.
How to Find the Lowest Mortgage Rate Refinance
Before you can avoid paying interest rate markup and junk fees you need to understand how mortgage brokers are compensated for arranging your home loan. Brokers receive compensation from two sources: you and your lender. Pay close attention to your Good Faith Estimate and HUD-1 Statement and you’ll find a loan origination fee and Yield Spread Premium. The loan origination fee is straightforward; this is a fee you’ll pay at closing for the brokers work on your home loan. Yield Spread Premium is another story all together.
Mortgage Yield Spread Premium
Most of your neighbors have never heard of Yield Spread Premium, which is a shame because it costs the average homeowner as much as $1200 per year. That’s $1200 you could be keeping for a vacation or home improvements. So how does Yield Spread Premium work? It’s not a difficult concept to wrap your head around…lenders reward brokers who lock and close home loans with higher than necessary interest rates with a percentage of your loan amount called Yield Spread Premium.
More specifically, your broker pockets one percent of your home loan for every .25 percent they overcharge you. I say overcharge because you’re already paying the broker a perfectly reasonable origination fee for their work on your home loan. Anything they pocket at your expense beyond that is unnecessary…Period. Many brokers try and explain away Yield Spread Premium when questioned about the fee. They’ll tell you since it isn’t coming out of your pocket that you shouldn’t worry about it. Truth be told it IS coming out of your pocket with a higher than necessary mortgage payment.
Others discount Yield Spread Premium because changes to the Real Estate Settlement Procedures Act in 2010 require brokers to disclose it along with their origination fee. This doesn’t help anyone because shady brokers will go on explaining the fee away just like they were before. Let’s face it; anything that drives up your interest rate is going to take more money out of your pocket. So how do you avoid Yield Spread Premium?
How to Get the Lowest Mortgage Rate Refinance
What you want for your next home loan is a wholesale or par interest rate. Wholesale home loans aren’t difficult to get despite what many brokers will tell you. All wholesale mortgage means is that you’re getting an interest rate that hasn’t been marked up for Yield Spread Premium and you don’t have to pay discount points to get it. Getting the lowest mortgage rate refinance is easier than you think; you don’t have to be a financial guru or have connections to pull it of…you just need to find the right sort of broker.
You can learn more about finding the right mortgage broker to get you a wholesale rate with my free Underground Mortgage Videos.
This short video exposes your lender’s dirty little secret and shows why nearly all of your neighbors pay too much for their home loans.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
