You may have heard on the news recently that mortgage rates are at a 50 year low and now is the perfect time to refinance your home loan. While its true rates are very low right now there a number of junk fees and mortgage broker tricks that can quickly turn that excellent mortgage rate into a horrible deal.
Here are several tips to help you take advantage of historically low mortgage rates without getting ripped off by the lender or mortgage broker.
Yield Spread Premium: What You Need to Know
The number one reason homeowners overpay for their mortgage loans is a little known fee known as Yield Spread Premium. Yield Spread Premium is so bad that the Secretary of Housing and Urban Development was recently quoted that American homeowners will overpay sixteen billion dollars this year alone.
What is Yield Spread Premium? Simply put Yield Spread Premium is the markup of your mortgage interest rate for a commission by the mortgage company or broker. The problem with this markup is that it is rarely disclosed and will cost you in addition to any other fees you pay for loan origination.
Here’s an example of how hidden Yield Spread Premium drives up your monthly mortgage payment costing you thousands of dollars unnecessarily. Suppose you are refinancing your existing home loan for $350,000. Your mortgage company quotes you a mortgage rate of 6.25% and charges you an origination fee of 3% for their part in arranging your loan. This means you will be required to pay $10,500 at closing for loan origination.
What your mortgage company isn’t telling you is that you actually qualified for a 5.5% mortgage rate and they have marked it up for a commission from the lender. The lender behind your loan rewards the mortgage company or broker for overcharging you by paying one percent of your loan amount for every .25% they markup your mortgage rate. In this example the mortgage company was paid an additional $10,500 for overcharging you in addition to the $10,500 you’re paying for loan origination. That’s right; your mortgage company doubled their commission by lying to you about your mortgage rate.
What does this mean for your monthly mortgage payment? With the mortgage rate you got at 6.25% your monthly payment will be $2155. If you had gotten the mortgage rate you deserve at 5.5% your payment would have been only $1980. That’s a difference of $175 per month or $2,100 you’re overpaying every year!
There is good news today since you’ve found this website. The free mortgage videos available online will show you how to avoid Yield Spread Premium when refinancing your mortgage and will get a wholesale mortgage rate. You will also learn which fees charged by the mortgage company and broker are garbage and can be avoided. There are a number of fees mortgage companies and brokers charge like rate lock fees that are complete garbage…if you want the best deal for your home loan you’ll need to avoid these fees in addition to Yield Spread Premium. Register today, you’ll get immediate access to the mortgage videos and materials in our password protected member’s area.