Many homeowners believe mortgage rates comparison shopping is the best way to save money on a home loan. If you’re out to buy new kitchen appliances this is the way to go; however, what you don’t know about relying on mortgage rates comparison could cost you thousands of dollars. Here are several of my best tips for using mortgage rates comparison to make an informed decision and save thousands of dollars in the process of your next home loan.
Mortgage Rates Comparison
Did you know that your neighbors are throwing away thousands of dollars because of unnecessary markup of their home loans? If you approach mortgage rates comparison shopping the same way as you would shopping for kitchen appliances you’ll be overpaying also. In fact, according to the Secretary of Housing and Urban Development homeowners in the United States will overpay sixteen billion dollars this year due to hidden markup of their home loans. This hidden markup is due to a little-known fee paid by the lender called Yield Spread Premium.
So, you say that you’ve never heard of Yield Spread Premium? Don’t worry, most of your neighbors haven’t and that’s the reason that mortgage rates comparison shopping never works out. Simply put, lenders reward loan originators for locking and closing your home loan with a higher than necessary interest rate. Both your lender and broker know the interest rate you could have; however, the broker justifies marking it up because their markup makes home loan rates “retail.”
You Can Get Wholesale Mortgage Rates
Despite what your broker tells you, this markup for Yield Spread Premium is completely unnecessary because you’re already paying this person a perfectly reasonable loan origination fee. Any amount of Yield Spread Premium taken on your home loan in this case is just plain dishonest.
Earlier I mentioned that mortgage rates comparison shopping doesn’t work. The reason for this is that all of the quotes you get when making a mortgage rates comparison include the same markup. Comparison shopping will only get you the best of the worst when it comes to your home loan. Instead of relying on a mortgage rates comparison to find a home loan that includes unnecessary markup you can get a wholesale interest rate for your next home loan simply by finding the right person to arrange your next home loan.
Brokers, Not Bank Originated Home Loans
I always recommend that homeowners utilize mortgage brokers because banks are exempt from the laws that protect them from predatory lending practices and simply do not offer their customers wholesale interest rates. It’s true, banks 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.
If you want to avoid paying for the hidden markup that comes with a mortgage rates comparison then you’ll want to find a mortgage broker willing to work for a flat loan origination fee (one percent is perfectly reasonable) without taking Yield Spread Premium on your home loan. There are plenty of honest, hard-working brokers out there willing to offer you a home loan with these terms; you just have to find one.
You can learn more about avoiding the hidden markup that comes with mortgage rates comparison shopping and avoiding other junk fees by checking out my free Underground Mortgage Refinancing Vidoes.
Here’s a quick sample that exposes more of the truth about mortgages and why your neighbors are overpaying year in and year out.
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.
