If you are considering refinancing your home mortgage the interest rate you receive is probably your number one concern for the new loan. What you might not know about that mortgage rate is that the quotes you receive are often padded to give your mortgage company a commission. Here are refinancing tips to help you avoid this padding of your mortgage rate and save you thousands of dollars in the process.
The Best Rates Come From Mortgage Brokers
It’s true; you’ll never get a wholesale mortgage rate from your bank or that “e” site. You have to find the right person to arrange your loan and negotiate with them to avoid paying the unnecessary markup of your mortgage rate. This is easier than you think…you just need to understand how mortgage brokers are compensated for arranging your loan and then learn which buttons to push.
Mortgage brokers are simply reselling loans from wholesale lenders for a commission. Brokers receive compensation in two ways. The first is the origination fee you pay at closing. This fee can range from anywhere from zero to as high as 4%. You might think that a zero origination fee mortgage is the way to go; however, you’ll soon see that this type of loan results in much higher mortgage rate and monthly
The second way your mortgage broker is compensated is with a commission paid by the lender. Mortgage lenders pay a fee known as Yield Spread Premium when your mortgage broker locks and closes your home loan with an above market mortgage rate. You get a higher rate than you could have and the lender doubles, often triples your brokers commission on your loan…most often without your knowledge or consent.
Here’s an example of how this unnecessary mortgage rate will cost you thousands of dollars. Suppose you’ve decided to refinance your home for $300,000. Your mortgage broker quotes you an interest of 7.0% because you’ll be taking cash back on the loan to pay off some old debts. What you don’t know is that you were approved for a mortgage rate of 6.25% but the broker marked your rate up for a commission. You got suckered into paying .75% too much for your new loan and the broker walked away with the one percent origination fee you pay plus a whopping three percent from the lender for overcharging you.
What does this mean for your monthly payment? On a $300,000 thirty year mortgage with a fixed 7% mortgage rate your monthly payment will be about $2,000 per month. The same loan with the 6.25% mortgage rate that you deserve would have a monthly payment of only $1840. That’s almost $200 per month, a whopping $1,920 per year you’re overpaying for the loan.
You Can Save Thousands of Dollars on Your Next Mortgage Loan
There is good news for any homeowner willing to invest a few minutes learning how to refinance without overpaying. It is possible to refinance your home mortgage paying only a one percent origination fee without markup of your mortgage rate for Yield Spread Premium. Learn how to do this and you and your family will have access to wholesale mortgage rates for every home you buy and every loan you refinance. You can learn more about doing this for yourself by registering for the free mortgage videos found on this website.