If you’re searching for information on the Internet to help you refinance your home loan, you’re probably concerned about paying too much for the new mortgage. Most homeowners understand how mortgage rates affect their monthly payment amount but not many know their mortgage rates are marked up to give a commission to the broker.
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that can save you thousands of dollars on your next home loan.
Here are several tips to help you avoid this unnecessary markup of your mortgage rate while avoiding lender junk fees.
The commission based markup of your mortgage rate is known as Yield Spread Premium (YSP). Simply put, YSP is a percentage of your loan amount paid by the lender when your mortgage broker locks and closes your mortgage with a higher than necessary mortgage rate. Lenders pay a commission to brokers for overcharging homeowners because these loans bring a premium profit when sold to investors on the secondary mortgage market.
Here’s a simple example of Yield Spread Premium. Suppose you’re refinancing your home for $150,000 and the broker tells you the lender approved your loan at 6.75%. You agree to pay the broker a 3% origination fee for their services and walk away with a monthly payment of $972 per month. What your mortgage broker didn’t tell you is that the lender actually approved your for a 6.0% mortgage rate which would have saved you $75 per month…that’s $900 per year you’re throwing away because your mortgage broker lied to you. In this example a lie of omission is still a lie right?
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Yield Spread Premium sounds like a scary technical term, but that’s really all there is to it. The HUD Secretary was quoted saying American homeowners will overpay almost sixteen billion dollars this year alone and Yield Spread Premium is responsible. It is possible however to refinance your home loan without paying this unnecessary markup. There are honest mortgage brokers out there willing to work for a flat origination fee of one percent without inflating your mortgage rate. The free videos available on this website will not only show you how to find this person but how to avoid lender junk fees. When you register for the refinancing videos you’ll also get a list of recommended mortgage brokers in your area to help get you on the right track.