Are you considering mortgage refinancing this year? Worried about paying too much or taking out the wrong type of loan when refinancing?
It’s true that mortgage refinancing can save you thousands of dollars by lowering your monthly payment amount; however, there are a number of pitfalls that result in paying too much for your new home loan.
There is mortgage help for homeowners that will allow you to refinance without paying markup of your interest rate or junk fees to the broker or lender. Here are several tips to get you on the right track to saving thousands of dollars on your next mortgage loan.
Mortgage Help for Homeowners
If you’re refinancing your home mortgage loan there are several ways to overpay when taking out the new loan. Most of the junk fees and markup you will encounter come from the person arranging your mortgage and can be avoided if you find the right person to work with. Who is the right person to refinance your home mortgage loan? I’ll get to that in a minute but first I’ll tell you who it’s not…your bank or credit union. Many people think taking out a mortgage with your bank is the most convenient way of refinancing; while it’s true banks make it easy to take out a mortgage you are guaranteed to overpay with any bank or credit union and here’s why:
Real Estate Settlement Procedures Act
There is a bit of legislation in the United States called the Real Estate Settlement Procedures Act that protects homeowners from abusive lending practices by requiring mortgage brokers to disclose their markup and profit margins on your home loan. Sounds great right? There’s just one problem with fair lending laws in the United States, your bank and credit union are exempt from them when it comes to mortgage loans. That’s right; the Banking Lobby spent millions of dollars romancing Congress to be exempt from this legislation and succeeded in getting the laws changed so that your bank is exempt from RESPA legislation.
Because of this loophole in the Real Estate Settlement Procedures Act your bank or credit union is not required to tell you how much they’ve marked up your mortgage rate or how much profit they’re making off your home loan. If you refinance your mortgage with your bank you will pay too much…period.
Mortgage Broker Tricks
Now that you know banks are a bad idea for refinancing your home mortgage loan I should tell you that mortgage brokers aren’t much better as a whole. This doesn’t mean that you can’t find honest brokers to work with it just means you have to stay on your toes when shopping for the right broker to refinance your mortgage. Mortgage brokers are not exempt from RESPA legislation like your bank; however, they do have clever ways of disguising their markup and junk fees. Learn how to recognize mortgage broker tricks and you’ll be able to find an honest mortgage broker and save yourself thousands of dollars on your next home loan.
Mortgage Rate Markup
So what is this markup of your mortgage rate anyhow? Simply put your broker marks up your mortgage rate because the lender pays them a commission for locking and closing your loan with a higher than necessary mortgage rate. This fee is known as Yield Spread Premium and according to the government is responsible for homeowners in the United States overpaying sixteen billion dollars this year alone. How do you recognize Yield Spread Premium when refinancing your home mortgage loan? You won’t typically find it listed on your Good Faith Estimate because this document is little more than a marketing tool used to sell loans.
Your first opportunity to spot Yield Spread Premium when refinancing your home is when you lock in your mortgage rate and receive written confirmation from the lender. This confirmation must come from the lender and not your mortgage broker. Many dishonest mortgage brokers type up a rate lock confirmation on their company letterhead and try and pass it off as the lenders; if your mortgage broker does this they are simply trying to hide their markup of your mortgage rate. Many mortgage brokers will simply refuse to show you rate lock confirmation from the lender stating that the information is “proprietary” or “confidential” and that you cannot see it. Again, this is your broker’s boneheaded attempt to hide what they’ve done to your mortgage rate for a commission from the lender.
Why do mortgage lenders pay the broker a bonus for marking up your mortgage rate? Mortgage lenders make the majority of their profits by selling your loan to investors on the secondary market. Lenders know that mortgage loans with above market mortgage rates bring in premium profits. This is why the lender rewards mortgage brokers that overcharge their profits with Yield Spread Premium, often doubling, even tripling their commissions.
You Don’t Have to Overpay for Your Next Mortgage
Ignorance might be blissful but when it comes to your mortgage loan bliss will cost you thousands of dollars in unnecessary mortgage interest. Fortunately, avoiding this unnecessary markup of your mortgage interest rate is easier than you think. You simply have to find the right mortgage broker to refinance your home loan. It is possible to refinance your mortgage paying only a one percent origination fee without Yield Spread Premium from the lender. The trick is finding the right mortgage broker for the job.
How to Find the Right Mortgage Broker
What kind of car does your mortgage broker drive? Is it a Hummer H3 plastered with their company’s logo? I guarantee this broker is not the right person for the job. The ideal mortgage broker is a small time, self-employed broker that does not employ an expensive sales staff or posh office spaces. They most certainly do not drive a company Hummer. Find a self employed mortgage broker that works out of their home? Better Still. These self-employed mortgage brokers will not have the overhead expenses and will be much more likely to cut you a deal that does not include commission based markup of your mortgage rate.
You can learn more about refinancing your mortgage loan without paying junk fees to the lender or broker by registering for the videos found on this website. Register today and you’ll have immediate, online access to the videos and training materials that will show you step-by-step how to get the best deal on your next home loan.