You may have heard that mortgage refinancing rates are on the rise again. Did you miss out on the opportunities your neighbors brag about, or can a savvy homeowner still get deals reminiscent of the glory days of mortgage refinancing? Did you know it’s possible to get a wholesale mortgage rate, saving yourself thousands of dollars from hidden markup and junk fees? Here are several of my best mortgage refinancing tips guaranteed to cut thousands of dollars worth of fat from your next home loan and help you answer the question Should I Refinance My Mortgage?
Mortgage Refinancing Rates On The Rise
Turn on the news and you’re likely to hear talk of rising rates and the proposed privatization of the mortgage industry in the United States…all bad news for homeowners. According to the CBS Evening News, privatizing of the mortgage industry, which would mean the end of Fannie Mae and Freddie Mac, would cost the average homeowner $150 more per month. Granted, privatization is a tough sell with this economy’s badly bruised housing market; however, anything that drags down your bottom line when it comes to your home loan should give you reason for concern.
Yield Spread Premium and Mortgage Junk Fees
Protecting your family’s bottom line when mortgage refinancing is why you need to know about Yield Spread Premium. Never heard of it? Don’t worry, neither have 97% of your neighbors…that’s why almost all of them are overpaying for their home loans despite mortgage refinancing with historically low-interest rates. What is Yield Spread Premium? Simply put, it’s a kickback (think Al Capone closing home loans in a seedy, smoke-filled bar) paid to loan originators for locking and closing your home loan with higher than necessary interest rates.
That’s a right; lenders reward your broker for overcharging you with this fee called Yield Spread Premium. The way it works is for every .25 percent you unknowingly agree to overpay the lender pays your broker a commission of one percent of your loan amount. This hidden commission is disclosed in your loan documents; however, most brokers have clever ways of explaining away the fee that isn’t coming out of your pocket.
Why Your Neighbors Are All Overpaying
Here’s an example to illustrate the problem with accepting Yield Spread Premium when Mortgage refinancing. Suppose for example, you are refinancing your home loan for $275,000 and the broker quotes you a mortgage rate of 5.75%. Your payment on this amount refinancing with a 30-year, fixed-rate home loan would be $1,604 per month.
What you don’t know is that mortgage refinancing could have landed you an interest rate of 5.0%; however, your broker marked it up to 5.75% to collect Yield Spread Premium from the lender. This hidden commission is paid in addition to any loan origination fee you’re already paying the person arranging your mortgage refinancing. If you had the interest rate you deserve at 5.0% your payment would only be $1,470. That’s a difference of $134 per month, a whopping $1,608 per year because your broker overcharged you.
You can learn more about mortgage refinancing with wholesale rates while avoiding junk fees by checking out my free Underground Mortgage Videos.
Here’s a quick sample to get you started saving as much as $1,200 on your next home loan.
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.
