Are you looking to take advantage of the New Year’s low refinance mortgage rates to lower your monthly payment? It’s no secret refinance rates are at historically low levels and many insiders see them falling even lower in the New Year. The trick to taking advantage of your potential savings is to minimize your out-of-pocket expenses. Here’s why closing costs are so important and what you can do to pay less under the new mortgage reforms passed by Congress.
Mortgage Reform: Equal Closing Costs for All?
The Dodd-Frank Act imposes new rules under the Mortgage Reform & Anti-Predatory Lending provision. Mortgage lenders like Wells Fargo Refinance and Amerisave have been scrambling to comply with the licensing and disclosure requirements; but what do the changes mean for you?
As a result of this new legislation lenders and brokers have stricter guidelines to follow when quoting fees for mortgage refinancing. Before this new legislation your mortgage broker could quote you higher refinance rates to get a commission from the lender. Because of the new legislation this commission based markup of your refinance mortgage rates known as Yield Spread Premium is no longer legal. For years Yield Spread Premium was the mortgage industry’s dirty little secret and abused by opportunistic brokers. Mortgage reform was intended to stop this abuse.
How to Get the Best Deal Mortgage Refinancing
When shopping for the lowest refinance rates and closing costs you won’t be able to negotiate lender fees line-by-line on your Good Faith Estimate. Under the new rules you’re not allowed to get a better deal on fees than say your neighbors did. Remember this only applies to lender fees paid at closing. You can still negotiate things like discount points used by even the best mortgage companies to artificially lower their refinance rates.
Mortgage Rate shopping is still as important as ever and overpaying at closing in the form of discount points or the loan origination fee will drive up your closing costs making it more difficult, even impossible to recoup your out-of-pocket expenses from your lower payment amount. If you’re not able to break even recouping your closing costs you’ll be losing money no matter how low your mortgage rates.
You can learn more about paying less at closing by avoiding unnecessary points by checking out my free Underground Mortgage Refinancing Videos.
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.
