If you’re considering mortgage refinancing with a broker it’s important to understand how brokers get paid to avoid overpaying the origination fee on your refi. Brokers can be an excellent resource for getting the best refinance rates; however, they have earned a used car salesman like reputation for ripping people off. Here’s an article from the TruthAboutMortgage.com that explains more about mortgage broker compensation:
Put simply, they could charge a loan origination fee directly to the borrower and get paid by the mortgage lender via a yield spread premium. So some were paid twice for the same transaction, though the yield spread premium came in the form of a higher mortgage rate, so it didn’t directly cost anyone – it just meant the borrower had a higher mortgage payment for their entire loan term.
Yield Spread Premium is not gone entirely; in fact, many brokers and lenders are pushing no fee refinance offers because of the recent changes to broker compensation rules. These no fee refinancing loans use Yield Spread Premium to pay the loan origination fee and closing costs for you, meaning you’re getting the same higher payment amount for the entire duration of your home loan.
If you want the best refinance rates for your mortgage refi you have to pay closing costs and origination fees yourself. There are no free lunches when it comes to your home loan; however, doing your homework before mortgage refinancing is the best prevention when it comes to overpaying.
You can learn more about getting the lowest refinance rates without paying junk fees or markup by checking out my free Underground Mortgage Refinancing Videos.