Mortgage Refinancing Closing Costs

Are you in the process of refinancing your home loan and don’t want to pay too much at closing?

There is mortgage rate markup and a number of junk fees lurking in your Good Faith Estimate and Settlement Statement that you need to avoid if you don’t want to pay too much.

Here are several tips to help you avoid overpaying at your mortgage refinancing closing.

Mortgage Refinancing Closing Pitfalls

Refinancing can be a frustrating process. You’re presented with a Good Faith Estimate by your cantankerous mortgage broker, someone who you’re not sure you can trust and a variety of cryptic fees that your broker assures you are “normal.” The fact of the matter is that if you accept your mortgage broker’s word on these fees you will surely overpay for your next home loan. What can you do to ensure you don’t pay too much at closing when mortgage refinancing? Read on… the mortgage tips found on this site save the average homeowner $1,000 per year in junk fees and mortgage markup.

Avoid Refinancing Pitfalls Including Junk Fees

Most of the junk fees you’ll encounter at mortgage refinancing closing are a result of your mortgage broker padding their commission at your expense. Simply put there are a handful of fees you’re likely to encounter that serve no purpose whatsoever and go straight into your mortgage broker’s pocket. What fees should you keep an eye peeled for? Mortgage rate lock fees, mortgage broker courier fees, and loan processing fees are pure garbage and not necessary for your loan. Additionally, if your mortgage broker is charging you a fee to lock in your mortgage rate this is a sure sign that you’re dealing with a dishonest broker. There isn’t a single mortgage lender out there that charges a fee for locking in your mortgage rate.

Your Mortgage Broker’s Commission

What about your mortgage broker’s commission? Surely your broker deserves to be paid for their work? No one’s saying that your mortgage broker doesn’t deserve to be paid; however, many brokers are too liberal when helping themselves to your money. Your mortgage broker’s fee for arranging your loan is the loan origination fee that you find on your Good Faith Estimate and Settlement Statement. This fee is more than ample compensation for your mortgage broker’s work and a reasonable amount to pay for loan origination is one percent of your home loan amount. Many brokers try and charge more than one percent; it’s not common to find estimates as high as two or three percent. Never agree to pay this much for loan origination… there are plenty of honest mortgage brokers out there willing to work for one percent.

There are also a handful of mortgage brokers out there that do not charge loan origination fees and are happy to brag about it. If the broker isn’t charging origination fees on your loan how are they paid? Ask the mortgage broker and they will spin you a tale that the lender is paying the fee which is saving you thousands of dollars on the refi. While it is true that the lender is paying the mortgage broker a fee they’re not paying this fee to do you a favor. Mortgage lenders reward brokers that lock and close mortgage loans with higher than necessary mortgage rates. In exchange for duping you with too high a mortgage rate the lender pays your mortgage broker’s commission. You get stuck with a higher than necessary mortgage rate and payment because the lender is paying your origination fee. Is it worth it to save one percent up front to pay this amount each and every year you keep the mortgage loan? This commission based markup of your mortgage rate raises the payment of an average home loan by $100 or more per month. Can you afford to throw away $1200 per year, every year for your mortgage broker’s commission?

You Can Pay Less For Your Mortgage Loan

You don’t have to be a financial guru to get the deal that I’m describing here when refinancing your home loan. Do your homework by investing one hour of your time to watch the mortgage videos on this site and you’ll have all the tools and knowledge you need to find the right person to arrange your next home loan. Notice that I said find the right mortgage broker rather than find the right mortgage loan. A common mistake many homeowners make is to shop for a mortgage loan in the same manner as a household appliance. This approach results in paying the hidden mortgage broker commission every time. Did you know that according to the Secretary of Housing and Urban development the hidden broker fee we’ve discussed is responsible for homeowners in the United States overpaying sixteen billion dollars per year? Don’t be a part of this statistic; find the right broker and you’ll save thousands of dollars per year on your next home loan.

How to Find the Right Mortgage Broker When Refinancing

Find the right mortgage broker to arrange your home loan and you won’t have to worry about mortgage refinancing closing costs. Who is the right mortgage broker for the job? Look for small time, self-employed mortgage brokers that do not employ a sales staff or work out of expensive office spaces. Mortgage brokers with expensive overhead will be unwilling to negotiate the deal you are looking for. Self-employed mortgage brokers do not have this overhead and will typically work for a one percent origination fee. Explain to the mortgage brokers you contact that you are willing to pay a one percent mortgage origination fee but will not accept any loan that includes markup of the interest rate for a commission. This fee for marking up your mortgage rate is called Yield Spread Premium. If you are upfront with the mortgage brokers you contact you will have no trouble finding one that will agree to your terms.