3 Easy Tips for Finding the Best Refinance Companies

If you’re searching for the best refinance companies there are several steps you can take today to ensure that you’re refinancing with a reputable company. Hidden markup and junk fees can quickly turn that sweet mortgage rate into a costly mistake. (One that could even end in foreclosure…) Here are three of my most effective tips for choosing the best mortgage refinance companies for your next home loan while avoiding hidden markup and junk fees.

Tip #1: Beware Yield Spread Premium

Don’t worry if you’ve never heard of Yield Spread Premium, most of your neighbors haven’t heard of it either. Think of Yield Spread Premium as the gift that keeps paying your lender extra, year after year. Mortgage lenders reward brokers that lock and close home loans with higher than necessary mortgage rates with this fee known as Yield Spread Premium. It’s a kickback to mortgage brokers for overcharging you.

Here’s how it works: your mortgage broker knows the lowest rate you can get when mortgage refinancing; however, they mark this rate up because the lender pays them one percent of your home loan for every .25 percent they overcharge you. Of course the broker isn’t going to tell you that they’re doing this and the disclosure for lender paid compensation is buried deep in your loan documents. Question your broker about this lender paid compensation and many will tell you not to worry about a fee that’s not coming out of your pocket. Why should you worry? This hidden markup drives your payments up by $100 or more every month. Simply avoiding Yield Spread Premium when mortgage refinancing can put $1200 or more back in your pocket every year.

Tip #2: Beware The Mortgage Fat Cats

If you’re looking to get a wholesale mortgage rate when refinancing your home by avoiding Yield Spread Premium you’re not going to get the kind of deal I’m describing from large national companies or banks. Banks are exempt from the Real Estate Settlement Procedures Act that requires them to disclose their markup and profit margins on your loan. (The Banking Lobby spent millions of dollars lobbying congress to make your bank exempt.) All that your bank is required to give you is a Good Faith Estimate (GFE’s are little more than marketing tools these days…) and a fictitious APR based on that estimate. Why would you ever consider refinancing your home with a lender that doesn’t have to play by the same rules as everyone else? As for large nationwide brokerage houses they have too much overhead from employing sales staff and working out of posh office spaces to negotiate the kind of deal I’m describing here today.

Tip #3: Beware Mortgage Junk Fees

I’ve already mentioned that the Good Faith Estimate is little more than a marketing tool that lenders use to make their loan offers seem more attractive. When it comes to refinancing your home the final word on costs and junk fees you want to avoid is found on your HUD-1 settlement statement. Make sure you go over this document with a fine toothed-comb and don’t be afraid to question your mortgage broker on anything suspicious you find here. Question 3rd party processing fees, broker courier fees, and mortgage rate lock fees, as these are pure garbage. If your broker becomes defensive or even combative about the fees on your HUD-1 or wants to charge you more than one percent for the mortgage origination fee it’s a good sign that you should find another broker to refinance your home.