Did you know that your friends and neighbors are throwing away $1200 a year or more because they’ve paid too much for mortgage refinancing? According to the Secretary of Housing and Urban Development this mortgage refinancing theft is so widespread that it will cost homeowners in the United States sixteen billion dollars just this year. Did you also know that it’s possible get mortgage refinancing with wholesale interest rates and avoid overpaying? Here are several of my best tips for avoiding this rampant theft and refinance your home loan with wholesale rates.
Theft by Mortgage Refinancing
Am I being overly dramatic when I say your mortgage refinancing company is stealing from you? Hear me out and I’ll let you decide. Did you know that mortgage refinancing companies reward loan originators (your broker) with a little known fee called Yield Spread Premium for overcharging you? This fee is more like a kickback and an incentive for your broker to rip you off. Here’s how this mortgage refinancing theft works.
Did you know that lenders make the majority of their profits by selling your home loan to investors on the secondary market? Your lender knows that mortgage refinancing home loans with higher than market interest rates bring them a premium profit when these home loans are sold. Yield Spread Premium is an incentive for loan originators to mark up your interest rate.
Recent RESPA Law Changes
People often leave comments on my blog saying that recent changes to the Real Estate Settlement Procedures act in the United States make Yield Spread Premium illegal. This simply isn’t true; the new law only requires brokers to disclose Yield Spread Premium on your HUD-1 settlement statement along with their mortgage refinancing origination fee. As far as your broker is concerned it’s just business as usual because they all have clever ways of explaining this fee away if anyone happens to question it. Most people have never heard of Yield Spread Premium and why would you ever question a fee that’s not coming out of your own pocket?
The Trouble with Yield Spread Premium
The problem with Yield Spread Premium is not the fact that your lender is paying this fee but the reason they’re paying the fee. Consider for a moment mortgage refinancing on a $315,000 home loan. Suppose the broker is quoting you a mortgage rate of 5.75% and changing you an origination fee of 1.5%. Sounds reasonable right? What your broker isn’t telling you is that your lender actually approved you for an interest rate of 5.25% and they’ve marked it up to collect an extra point from the lender.
What’s the difference in your payment? If you had the interest rate you deserved when mortgage refinancing at 5.25% your payment on a 30-year, fixed-rate home loan would be $1,740 a month. Thanks to this theft your payment on the same home loan at 5.75% will be $1,839 a month. That’s a difference of $99 a month, a whopping $1,188 of your money that broker helped themselves to. Still think I’m being overly dramatic about mortgage refinancing theft?
You can learn more about getting wholesale mortgage rates for your next home loan by checking out my free Underground Mortgage Refinancing Videos.
Here’s a quick sample to show you how easy it can be to avoid mortgage theft on your next home loan.
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.
