If you’re considering refinancing your home with a flat fee mortgage there are several things you need to know before paying too much for your next home loan. Are flat fee mortgage loans a good deal or just a diversionary tactic for hiding the markup of your mortgage rate? Here’s the scoop on those Flat Fee Mortgage offers you see and how you can create your own offer and avoid thousands of dollars in unnecessary refinancing fees and markup.
Flat Fee Mortgage Offers
From time-to-time on the television and online you’ll see mortgage companies marketing flat fee mortgages. Pay a flat $495 fee for refinancing your home loan and save a bundle of cash today…these offers are always followed by pages of confusing fine print and by the time all is said and done you’re no better off than you were before refinancing AND you’re out $495. If refinancing your home mortgage is supposed to leave you better off than you were with your old home loan why are so many homeowners duped by these flat fee mortgage scams?
I can tell you why…it boils down to simplicity. Mortgage shopping is a confusing and intimidating process and when the Ditech.com’s of the world offer flat fee mortgage refinancing for a mere $495 the attraction for many homeowners is understandable. What you don’t know about these flat fee mortgage loans and what the lenders are not required to tell you is something of the industry’s dirty secret and what you need to understand before refinancing your home loan.
Mortgage Industry Secrets
Companies like Ditech and other so called “direct lenders” that fund their home loans themselves operate their businesses the way that they do to take advantage of a little known loophole in the Real Estate Settlement Procedures Act (RESPA). You see, back in the mid-nineties the Banking Lobby spent a small fortune romancing your Congressional Representatives to have the RESPA laws changes so banks would be exempt. This means when a bank closes on a home loan they are not required to disclose any of their markup or profit margin on that mortgage. Banks are free to charge whatever they like and rely on the fact that most of your neighbors don’t know the first thing about mortgage loans and happily overpay thousands of dollars to the Well Fargo and Bank of Americas of the world. Refinance your home with your bank and you’ll get little more than a low-balled Good Faith Estimate and a fictitious Annual Percentage Rate before signing your money away on an overpriced home loan.
I digress…bank originated mortgage loans is a topic for another day. Getting back to our flat fee mortgage loans, when the RESPA laws were changed a number of companies changed the way they do business to take advantage of the loophole enjoyed by banks. These companies stopped offering mortgages from wholesale lenders and began funding home loans with their own money. What’s so bad about that you ask?
Direct lenders keep the competition honest by keeping their costs down when they cut out the middleman, saving me money right? That’s what these so called “direct lenders” want you to believe when in fact they prey on your neighbors who just don’t know better.
What’s Refi YSP you ask? Looks like more industry gobbly-gook but YSP is the culprit here today and the reason why you should avoid direct lenders and their so called flat fee mortgage offers. These make their money by charging you that measly $495 fee and then charging you a higher than necessary mortgage rate. Technically speaking the profit they lender realizes is called Service Release Premium but you’re not going to be refinancing your home with any of these direct lenders so what you really need to know is how Yield Spread Premium (YSP) works. Back to those evil direct lenders for a moment…how do they make money by charging you that lousy $495 fee?
They make money by selling you a home loan with a higher than necessary mortgage rate. Take your neighbors for instance, nearly all of them agreed to a higher than necessary mortgage rate in one way or another because they simply didn’t know better. The lenders behind these inflated mortgage loans turn around and sell them to investors on the secondary market…this is how they make the majority of their profits, not by collecting those $495 fees. This is also why those flat fee mortgage offers come and go…here today, gone tomorrow.
Create Your Own Flat Fee Mortgage
There is a way to refinance your home paying a flat one percent origination fee without a higher this higher than necessary mortgage rate than drives your payment up by as much as $1200 per year. Find the right person to arrange your home loan, a mortgage broker willing to work for a flat one percent origination fee without taking Yield Spread Premium on your home loan and you’ll walk away with a wholesale mortgage rate and a lot more cash in your pocket than when you started. How do you find the right person? Only mortgage brokers have access to wholesale mortgage rates and may or may-not be willing to share them with their customers. Mortgage Brokers play the same game as banks and direct lenders; however, they are not exempt from RESPA and are required to disclose their markup of your mortgage rate. The problem is that many brokers have clever ways of hiding this markup so you have to find the right mortgage broker for the job.
You can learn more about finding the right person to arrange your next home loan and refinancing with a wholesale mortgage rate by checking out my free Underground Mortgage Refinancing Videos.
Here’s a taste of what you’ll get today when you sign up. This mortgage video is about the hidden markup of your mortgage rate that is your lender’s dirty little secret…