Refinancing your mortgage with a wholesale mortgage rate can save you thousands of dollars in unnecessary finance charges. By doing your homework before refinancing you will not only learn how to take advantage of the wholesale nature of mortgage interest rates, but learn how to avoid the junk fees added by your broker and lender. Here are several tips to help save you money when refinancing your home mortgage loan.
What are Wholesale Mortgage Rates?
Wholesale mortgage rates are offered exclusively by wholesale lenders. You will never get a wholesale rate form a bank or credit union and the only way to get them is to find a mortgage broker willing to let you. The problem with mortgage brokers is that one of they ways they are compensated for their services is by marking up your interest rate for a commission. This broker added markup is what makes mortgage rates “retail” and is called Yield Spread Premium.
How to Avoid Yield Spread Premium
How do you find a mortgage broker that won’t markup your mortgage interest rate? Yield Spread Premium is a significant part of most brokers’ income; eliminate this and they’re only working for the origination fee you agree to pay them. One of the biggest problems with Yield Spread Premium today is that the fee is not properly disclosed. When questioned about this markup most brokers try and explain the fee away or simply tell you that because it’s not being paid out of your pocket you shouldn’t worry about it.
Every single mortgage broker you encounter when refinancing your mortgage loan knows about Yield Spread Premium and makes an income from it; however, if you agree to a mortgage with this markup you’ll pay thousands of dollars in unnecessary finance charges. There are mortgage brokers willing to work for a reasonable origination fee without marking up your mortgage rate. Many of these brokers belong to a professional organization known as the “Upfront Mortgage Brokers Association.” Members of this professional association agree to conduct themselves adhering to certain professional and ethical standards….meaning they will not mark up your mortgage rate for a commission and hide the fact that they’re doing it.
The Upfront Mortgage Brokers Association maintains a registry of its members categorized by State on its website. You can search for a member in your state by visiting http://www.upfrontmortgagebrokers.org. If you’re living in a State that doesn’t have any members you can still take advantage of wholesale mortgage rates; however, you’ll have to do some negotiating to find the right broker.
Beware Mortgage Broker Junk Fees
In addition to Yield Spread Premium, there are a number of junk fees you’ll need to keep an eye out for when refinancing. If you find anything on your Good Faith Estimate or HUD-1 statement that resembles a “Broker Courier Fee,” “Rate Lock Fee,” Loan Processing Fee,” or “Application Fee” you should question your mortgage broker as to the validity of these charges. The “Rate Lock Fee” is a perfect example of a garbage fee invented by your mortgage broker. No mortgage lender charges a fee for locking in your interest rate; if you find a rate lock fee in your loan documents this fee has been fabricated by your broker and will go straight into their pocket.
You can learn more about refinancing your mortgage with a wholesale interest rate while avoiding ridiculous garbage fees by registering for a free mortgage DVD. Register today; you’ll get immediate access to the membership area and all of the training materials that will save you thousands of dollars on your next mortgage 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.
