If you’re considering refinancing your home mortgage you’re probably searching the internet for the best refinance mortgage rate. What is the best mortgage rate? Is it the lowest one you can find with the least amount of fees? How do you compare mortgage offers to determine which one is better? Most homeowners think they know how to shop for a mortgage; however, most of these homeowners overpay hundreds of dollars every month because they shop the wrong way. Here is my no holds barred, take no prisoners guide to getting the best refinance mortgage rate without paying too much.
How to Get the Best Refinance Mortgage Rate
Remember that old Meineke commercial from the 80s? “I’m not going to pay a lot for this muffler!” That’s the attitude you need to adopt when shopping for a mortgage; however, you still need to know how mortgage loans are sold. That’s right…mortgage loans are sold. Just like paying retail for kitchen appliances creates a profit for someone, paying retail for a mortgage loan is putting your money in someone else’s pocket. It’s a fairly simple concept to wrap your head around…the less you pay for your next home loan, the better off you’ll be financially.
Wholesale Mortgage Loans
Everyone’s familiar with buying wholesale. Whatever you’re looking for from plasma televisions to spark plugs are cheaper if you can buy wholesale. The same is true of mortgage loans…get a wholesale mortgage rate and you’re cutting out the middleman’s commission, saving as much as several hundred dollars per month. What is a wholesale mortgage rate? Wholesale mortgage rates are called Par Mortgage Rates in the business. Par mortgage rates don’t cost anything to get, meaning you don’t have to pay points upfront to qualify, and they do not create an unnecessary commission for the person arranging your home loan. That’s what the loan origination fee is for…many mortgage brokers double dip their commissions at your expense. They’ll charge you a loan origination fee for arranging your home loan and then take a commission from the lender for marking up your mortgage rate…often without explaining what they’ve done. It is this unnecessary markup of your interest rate that you need to avoid if you want the best refinance mortgage rate.
Yield Spread Premium
How does this mortgage broker scam work? Here’s a simple example to illustrate how sleazy mortgage brokers can be. Suppose for instance you’re refinancing your home loan for $315,000. Your mortgage broker quotes you an interest rate of 6.5 percent and charges you a loan origination fee of 1.5 percent. On a 30 year, fixed rate mortgage of $315,000 at 6.5 percent your mortgage payment will be $1,990. What your sleazeball mortgage broker isn’t telling you actually qualified for a 6 percent rate but they marked it up to get a two point commission from the lender for overcharging you. If you had the mortgage rate you deserve at 6 percent your mortgage payment would be only $1,880 per month! That’s $1,320 you’re losing every year because the scumbag broker took advantage of you. Am I being too hard on mortgage brokers? Not at all…sure there are honest, hardworking mortgage brokers out there that actually help their customers; however, it’s better to error on the side of caution when dealing with a mortgage broker so you don’t end up with some bloodsucking jerk whose business model is ripping off their customers with Yield Spread Premium.
Yield Spread Premium is a commission created for the mortgage broker when they lock and close your mortgage loan with a higher than necessary mortgage rate.
The good news is that you can avoid this unnecessary markup of your mortgage rate when refinancing your home loan. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and that you will not accept any mortgage loan that includes the markup. Finding the right mortgage broker can difficult; chances are large brokerage firms are not going to be willing to negotiate the kind of deal you’re looking for to get the best refinance mortgage rate. Self employed mortgage brokers are typically willing to negotiate and are usually the honest, hard working professional you would expect your mortgage broker to be.
You can learn more about getting a wholesale mortgage for the best refinance mortgage rate possible while avoiding unnecessary fees by checking out my free Underground Mortgage Videos.
Here’s a quick sample of what you’ll get when you register today.
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.
