Should You Pay Loan Origination Fees On Your Mortgage Refi?

If you’re considering mortgage refinancing you might wonder if it’s better to pay the loan origination fee yourself or let the lender pay it for you? What could the downside possibly be of having your lender pay part of your closing costs for you? What you need to know about lender paid compensation is what you’re giving up before you let some fast talking broker convince you it’s the right choice for your refi.

Before we dive into the pros and cons of the mortgage loan origination fee here’s a quick definition from Mortgage101.com.

Loan origination fees, also known as points, are not a necessary expense when obtaining a mortgage. These fees are a way for a lender or broker to make money from closing the loan. By shopping around, you can find the best rate and the lowest origination fees.

http://www.mortgage101.com/article/loan-origination-fee-necessary

What are you giving up by letting the lender pay this fee for you? Mortgage lenders are more than happy to pay your loan origination fee because you’ll be giving up your best refinance rates by letting them do so. The fee lenders pay your broker for locking and closing your mortgage refinancing with higher than necessary interest rates is called Yield Spread Premium and always results in a higher than necessary mortgage payment for the entire duration of your home loan.

You can avoid unnecessary markup and get the best refinance rates for your next home loan simply by paying your loan origination fee. How much should you pay? A reasonable amount for loan origination is one percent of your home loan. Loan origination fees vary from one broker to the next so don’t be afraid to haggle.

You can learn more about avoiding markup and junk fees on your mortgage refi by checking out my free Underground Mortgage Refinancing Videos. These refi videos are yours without obligation and save the average homeowner $1200 by avoiding common mortgage mistakes when refinancing.