Mortgage Refinance Rates Without Overpaying Fees

AIf you’re considering mortgage refinancing there are a number of things you’ll need to know to avoid overpaying. The first thing you need to know is how 2011 changed the laws protecting homeowners from mortgage broker abuse and how to take advantage of these new laws. (Hint: They aren’t applied evenly to everyone.) According to the Secretary of Housing and Urban Development homeowners in the United States will lose sixteen billion dollars this year because they’re paying too much for their homes. Here are several of my best tips before you refi to help you get the lowest mortgage refinance rates without overpaying lender and broker fees.

Mortgage Refinance Rates – Brokers vs. Banks

You might be considering your bank’s mortgage refinance rates for your next home loan. While it’s true that banks are a convenient way to refinance your home, they’re exempt from the Real Estate Settlement Procedures Act, including the new rules that went into effect April of 2011.

These new rules prevent mortgage brokers from taking a double commission on your home loan. They can charge you an upfront mortgage origination fee or take a commission from the lender for marking up your interest rate, but not both. Because banks and broker banks fund their home loans with the bank’s money rather than funding with a wholesale lender they are exempt from laws that protect you from lender abuses.

Mortgage Yield Spread Premium in 2011

What you’ll need to know about your broker to get the best mortgage refinance rates is that wholesale lenders pay the person arranging your refinancing a fee known as Yield Spread Premium for locking and closing your home loan with higher than necessary mortgage refinance rates. Think of Yield Spread Premium as a kickback from the lender for overcharging you. Lenders pay Yield Spread Premium because they know home loans with higher than market interest rates bring them a premium profit when the loan is sold to investors on the secondary market.

Banks don’t play the same game as brokers and wholesale lenders. They do make the same profit when selling your home loan on the secondary market but they don’t have to pay anything for it. The result of your bank overcharging you is that you get stuck with a higher than necessary payment and the bank realizes a higher profit known as Service Release Premium on your home loan. The stink of it is thanks to that loophole in the Real Estate Settlement Procedures Act the bank isn’t required to disclose any of their profit margin or markup of your mortgage refinance rates.

The New Law Protects You if You Put it to Use

Most homeowners have never heard of Yield Spread Premium and do not understand how the unnecessary markup drives up their payments. If you want the lowest mortgage refinance rates for your next home loan you’ll need to find the right broker to arrange your home loan. It is possible to pay a flat fee of one percent for the mortgage origination fee and get wholesale mortgage refinance rates for your next home loan…you just have to find the right sort of broker for the job.