Are you in the process of taking out a new home loan and want advice on negotiating refinancing?
Negotiating with your mortgage broker can help you avoid unnecessary markup of your mortgage rate and lender junk fees that result in overpaying thousands of dollars when refinancing your home.
Here are several tips to help you when negotiating refinancing to avoid overpaying for your next mortgage loan.
Negotiating Refinancing with a Mortgage Broker
The first thing you need know is that it’s important to use a mortgage broker when refinancing and to avoid your Bank or Credit Union. Banks are exempt from disclosure laws that protect you from predatory lending practices; while your bank might not be out to rip you off, because of this legislation you’ll never get anything close to “par” mortgage rates from a bank or credit union. This is because the Banking Lobby spent millions of dollars getting banks excluded from the Real Estate Settlement Procedures Act.
What are “Par Mortgage Rates?” Par mortgage rates are simply those that don’t cost you anything to get and do not create a commission for the person or bank arranging your loan. Banks don’t hand out par mortgage rates to anyone, (including you) so the only way to get them is by negotiating refinancing with the right mortgage broker. Notice that I said “the right mortgage broker.” Who is the right mortgage broker for your next home loan?
How to Find the Right Mortgage Broker for the Job
Self employed mortgage brokers are your best bet for negotiating the deal you’re looking for when refinancing your mortgage. The self employed broker is much more likely to agree to refinance your loan with a par mortgage rate than the mortgage broker that employs an expensive sales staff or works in a posh office space. Can you find a self employed mortgage broker working from their home? Even better…Also, the ideal mortgage broker for the job has at least ten years experience. Find this person and you’ll be able to refinance for a flat one percent origination fee without paying commission based markup of your mortgage rate.
How to Negotiate with Your Mortgage Broker
Before you can negotiate with your mortgage broker you need to understand how this person is compensated for arranging your loan. Mortgage brokers receive compensation from two sources: you and your lender. First, you’ll be charged an origination fee for the broker’s part in arranging your home loan. This fee can be as high as three percent or more; however, a reasonable fee to pay for this mortgage broker fee is only one percent of your loan amount.
The second way mortgage brokers get paid is from a commission paid by the lender. Mortgage lenders pay a commission to brokers that lock and close home loans with higher than market mortgage interest rates. This markup of your mortgage rate by the broker creates a commission known as Yield Spread Premium. The mortgage broker gets a commission and you get a higher than necessary mortgage rate which drives up your monthly mortgage payment. The only way to avoid Yield Spread Premium is by finding and negotiating with the right mortgage broker.
Tell your mortgage broker that you’re willing to pay a flat one percent origination fee and that you will not accept a home loan that includes Yield Spread Premium. If your mortgage broker agrees to your terms then you’ve found the right person for the job. If the broker becomes defensive or angry when discussing Yield Spread Premium, move on to the next person.
Beware Mortgage Broker Junk Fees
Before closing on your new mortgage loan you’ll need to take a hard look at the fees found on your HUD-1 statement. Don’t use the Good Faith Estimate for this; the GFE is practically worthless for rooting out junk fees since it’s just an estimate given “in good faith.” Pay close attention to all mortgage broker and processing fees listed on your HUD-1. Anything listed as a “mortgage broker courier fee” or a “rate lock fee” is pure garbage and headed for your mortgage broker’s pocket.
Check your HUD-1 section 800 for anything that resembles Yield Spread paid to broker or POC fees. POC stands for “Paid Outside of Closing” and is just a way of disguising Yield Spread Premium on your mortgage loan. Be careful when reviewing your HUD-1; mortgage brokers have clever ways of hiding their junk fees. If you don’t understand a fee listed in your loan documents don’t be afraid to question your mortgage broker.
You can learn more about negotiating refinancing with your mortgage broker for the lowest Mortgage Rates while avoiding junk fees by checking out my Underground Mortgage Videos. Register today and you’ll have immediate access to the video guide and a list of mortgage brokers in your area without downloading anything to your PC or Mac.