If you’re considering refinancing your home loan a mortgage refinancing breakdown can help you spot troublesome areas of the loan offers you are considering.
There are a number of things including mortgage broker markup and junk fees that result in overpaying thousands of dollars when refinancing your home. Here is the mortgage refinancing breakdown you’ll need and several tips to help you avoid paying too much for your next mortgage loan.
Mortgage Refinancing Breakdown Online
RefiAdisor.com provides a number of resources to breakdown the refinancing process. There is a video tutorial in the member’s area that will show you how to refinance your home without paying markup of your mortgage rate or junk fees at closing. There is no cost to join RefiAdvisor.com. Registration is required to access materials in the password protect member’s area.
What to Look for When Refinancing Your Home
Mortgage refinancing can be an intimidating process. Should you refinance with a mortgage broker, your bank, or a mortgage company out of the phone book? I never recommend that anyone refinance with a bank or credit union; because of the Banking Lobby, banks and credit unions are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margin on your home loan. Plain and simple, you’ll never get anything close to a Par Mortgage Rate refinancing your home with a bank or credit union.
What is a Par Mortgage Rate?
Mortgage rates change daily and on any given day “Par” mortgage rates may not be available; however, keep an eye on wholesale mortgage rates during the course of the week and you can get a par rate. What are par mortgage rates? Simply put a par mortgage rate is one that doesn’t cost you anything to get and does not create a commission for the person arranging your loan. Cost to you comes from discount points required to qualify for a specific mortgage rate and the commission for the mortgage broker comes from Yield Spread Premium. We’ll discuss Yield Spread Premium and the broker’s commission later but your goal when refinancing should be to get a mortgage rate that doesn’t cost you anything or create cash for the broker at your expense.
How To Get Par Mortgage Rates
Mortgage rates can be tricky and most of the rate quotes you encounter have been marked up one way or another for a commission. How does this commission based markup of your mortgage rate occur? Lenders reward mortgage brokers that lock and close home loans with higher than market interest rates with a commission known as Yield Spread Premium. If your home loan includes Yield Spread Premium your mortgage payment will be higher than it needs to be for the duration of your loan. Don’t get me wrong, your mortgage broker should get paid for their work; however, you don’t want this compensation driving up your payment for years to come. How should your mortgage broker get paid? Mortgage brokers receive a fee called a loan origination fee for their work and one percent of your home loan is a reasonable amount to pay. The problem is many (greedy) mortgage brokers charge origination fees and then take Yield Spread Premium on top of this which can double even triple their compensation at your expense.
You Can Avoid Mortgage Broker Markup
Many mortgage brokers become defensive and even angry when questioned about Yield Spread Premium, so how can you avoid unnecessary markup of your mortgage rate? You can start by finding the right mortgage broker for the job. We’ve already discussed why banks are a bad choice for refinancing your home loan; however, there is also a type of mortgage broker that you’ll need to avoid for the same reasons.
When the Banking Lobby had the law changed to exclude banks a number of mortgage brokers wanted in on the action and found that if they formed a company that funded home loans with their own money they could exploit the same loophole in the Real Estate Settlement Procedures Act as banks. This allows them to charge whatever they like without disclosing their markup of profit margins to their customers. Mortgage brokers that run their businesses in this manner are known as Mortgage Broker Banks and you’ll want to avoid them for the same reasons listed above.
How can you tell if a mortgage broker or company is operating as a broker bank? Ask them if they close home loans in the name of the wholesale lender or their own company. If the answer you get is that they close mortgages in their company’s name then you know you’re dealing with a broker bank and should move on to the next mortgage broker on your list. Who then is the best mortgage broker to refinance your home loan? Look for small, self-employed mortgage brokers working from home. Those mortgage brokers you see around town with their logos plastered on company hummers probably aren’t going to be willing to negotiate the kind of deal I’m describing here. Also, mortgage brokers working out of posh office spaces with expensive sales staff are another red flag when choosing a mortgage broker.
You can learn more about refinancing your mortgage without markup of your mortgage rate or lender junk fees with the online Mortgage Refinancing Breakdown in my Underground Mortgage Videos. Register today and you’ll have immediate access to the videos without downloading anything to your computer in the password protected member’s area.