Are you searching for the best refinance companies for your next home loan and want to avoid overpaying? Should you pay that mortgage origination fee or get one of those no fee home loans in exchange for a higher interest rate? Did you know that 95% of your neighbors are currently overpaying for their home loans because of hidden markup and junk fees? Here are several of my best mortgage refinancing tips to help you get the best deal on your next home loan without paying junk fees or unnecessary hidden markup.
Refinance With Wholesale Mortgage Rates
Most brokers will tell you that you simply can’t get wholesale mortgage rates. They do this in the hope of protecting the hidden commission paid by lenders known as Yield Spread Premium. Don’t worry if you’re not familiar with Yield Spread Premium; most of your neighbors haven’t heard of it either. Simply put, Yield Spread Premium is a commission paid to any broker that locks and closes your mortgage refinancing with a higher than necessary interest rate. This is paid in addition to any mortgage origination fee you’re already paying this person for arranging your home loan.
Should you worry about an origination charge paid by the lender? I mean, if the money isn’t coming out of your pocket why should you care? What should concern you is not the fact that this fee is being paid by your lender but why they’re paying it. Here’s an example to illustrate what hidden markup for lender paid mortgage broker compensation does to your monthly payments. Don’t worry if you’re already in the process of closing on a new home loan but aren’t sure if it includes mortgage yield spread; however, you should familiarize yourself with the 3 day rescission period.
Yield Spread Premium in Action
Did you know that for every .25 percent that your mortgage broker marks up your interest rate the lender pays them a commission of on percent of your home loan amount? Lenders do this because they know home loans with higher than market interest rates bring them a premium profit when sold to investors on the secondary market. What does this hidden markup mean for your bottom line? Here’s an example to illustrate why you should avoid paying for Yield Spread Premium when mortgage refinancing at all cost.
Suppose for example you’re refinancing your home for $350,000. The broker quotes you a mortgage rate of 6.75% and charges you an origination fee of 1.5%. The first thing you should know is never pay more than one percent of your loan amount for loan origination. Secondly, what your broker isn’t telling you about your interest rate is that the lender actually approved you for a 6.0% mortgage rate but they’ve marked it up to collect a kickback of 3.0% from your lender? That’s lender paid mortgage broker compensation in the amount of $10,500 in addition to the loan origination fee of $5,250 you’re already overpaying the broker for a few hours work…ridiculous huh?
What does this hidden markup do to your monthly payments? At 6.75% your payment on a 30 year fixed rate home loan will be $2,270 per month. If you had the mortgage rate you deserve at 6.0% your payment would only be $2,098 per month. That’s a difference of $172 per month, a whopping $2,064 per year you’re throwing away because you trusted the wrong person to arrange your mortgage refinancing.
You can learn more about avoiding this unnecessary markup of your interest rate and other junk fees by checking out my free Underground Mortgage Refinancing Videos.
Here’s a quick sample to get you started by exposing more truth about Yield Spread Premium and 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.
