Remember those old commercials “I’m not going to pay a lot for this muffler!” This is the attitude people should adopt with their mortgage companies when it comes to refinancing a home loan. Unfortunately saying it and actually doing this are two entirely different things…unless you learn how mortgage companies make their money. Here are the basics you need to know so you can look your mortgage broker squarely in the face and say “I’m not going to pay a lot for this mortgage!”
Mortgage Secrets Revealed
The last thing your mortgage broker wants you to know is how he or she makes their money. I’m going to spill the beans that nearly every mortgage originator in the country hopes you don’t know…where their money comes from.
Mortgage brokers and other businesses that arrange mortgage loans for people make money from two sources. First, they can charge you a fee known as a loan origination fee for their part in arranging your loan. This loan origination fee can range from anywhere from one percent to as much as five percent of your loan amount. One percent is a reasonable amount to pay for the mortgage broker’s part in arraigning your home loan.
The second way your mortgage broker receives a commission for your loan is with a fee paid by the lender. This fee comes from something known to brokers as Yield Spread Premium. In the simplest definition, Yield Spread Premium is a percentage of your loan amount created when the broker locks and closes your home loan with an above market mortgage rate. The percentage created is their commission for overcharging you.
That’s right, you could have refinanced with a lower mortgage rate but the broker or mortgage company marked your rate up to get a kickback from the lender. Think your mortgage broker would ever tell you they’re doing this? Guess again…most loan originators have clever tricks to disguise Yield Spread Premium in your loan documents. Add in the fact that most people have never heard of Yield Spread Premium and it’s no wonder that according to the Secretary of Housing and Urban Development homeowners in the United States overpay nearly sixteen billion dollars every year.
There is good news since you’re reading this blog post today. Now that you know what Yield Spread Premium is you’ve got a leg up over 90% of homeowners and most of the mortgage brokers in this country. All you have to do is find the right broker to arrange your loan…one willing to work for a loan origination fee of one percent without creating Yield Spread Premium on the loan.
You can learn how to do this for yourself by registering for the free videos found on this website. When you register you’ll get a list of recommended mortgage brokers in your area and access to a free video tutorial that will show you how to refinance without paying junk fees on your loan.