If you’re considering refinancing your home loan, finding the best lender is probably at the top of your to-do list for the loan. Finding the best lender will help you get the lowest mortgage rate refinancing your loan. Here are several tips to help you get the best mortgage rate refinancing your home without paying commission based markup or junk fees.
Avoiding Commission Based Markup
If your goal for the new home loan is to get the lowest rate possible you’ll need to get a wholesale mortgage rate. The only way to get a wholesale mortgage rate is to find the right mortgage broker who is willing to give you access to wholesale rates for a reasonable fee. How do wholesale rates work? Only mortgage brokers have access to these rates; you’ll never get wholesale from bank, credit union, or broker bank.
The problem with using a mortgage broker to refinance your mortgage is that most brokers rely on commission based markup of your interest rate as a source of income. You’re already paying a perfectly reasonable origination fee for their services; why accept a higher mortgage rate just to give your mortgage broker a commission?
This commission based markup of your mortgage rate refinancing is called Yield Spread Premium and you’ll need to avoid this markup to get the lowest possible rate.
How do you get the best mortgage rate refinancing your home? Find a mortgage broker willing to work for a one percent origination fee without tacking Yield Spread Premium to your loan. These people are out there…they are typically self-employed mortgage brokers that run their own businesses without staff or posh offices. The key is to find a mortgage broker that doesn’t employ a sales staff. These brokers always split their commissions with their salespeople are will not typically negotiate over Yield Spread Premium. The same is true of a large brokerage house…the owner is always going to want their cut.
You can start your search by checking the website of the Upfront Mortgage Broker Association. (upfrontmortgagebrokers.org) Their website lists their members by Sate and all of the brokers agree to run their businesses by certain professional and ethical standards. When you contact these brokers ask them how long they’ve been originating loans. You’re looking for ten years or longer and someone that is the owner of their business. Make sure they close your loan in the name of the wholesale lender and not their own company. Brokers that close in their own companies name fund their own loans and are not required to disclose their profit margin or markup under the Real Estate Settlement Procedures Act. This is the same reason you should never refinance your home loan with a Bank or Credit Union.
When addressing Yield Spread Premium, make sure your broker will not include this in your loan and is willing to show you the rate lock confirmation from the wholesale lender. This document provided by the lender is proof that your broker is not receiving Yield Spread Premium for marking up your rate. If the broker is unwilling to provide you this document he or she is hiding the fact that Yield Spread Premium is a part of your loan and cannot be trusted. You can learn more about getting the best mortgage rate refinancing your home and expensive pitfalls to avoid by registering for my free video tutorial.
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.
