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Refinance Fees

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If you are in the process of refinancing your home mortgage one of your concerns is undoubtedly paying too much in refinance fees for the new mortgage loan.

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How do you know which fees are garbage headed straight for your mortgage brokers pocket and which ones are absolutely necessary? Here are several tips to help you avoid paying too much for your next home loan.

Refinance Fees 101

The first thing you need to know about the fees you’ll be charged when refinancing isn’t exactly a fee; however, it is the single reason most homeowners overpay for their loans. Did you know that the person arranging your loan marks up your mortgage rate for a commission? This is almost always done without your knowledge or consent. The commission generated by this markup is known as Yield Spread Premium and is a percentage of your loan created when the broker locks and closes your loan with a higher than market interest rate. Lenders reward mortgage brokers with a commission because loans with higher than market rates bring in higher profits when sold to investors on the secondary mortgage market.

The fact that you know about Yield Spread Premium gives you a huge advantage over most homeowners. Avoiding this unnecessary markup isn’t as tricky as you might think…once you know how to recognize the markup in your loan documents you can find mortgage brokers willing to work for a flat origination fee as low as one percent of your loan amount.

How to Spot Mortgage Rate Markup

The first opportunity you’ll have to spot this unnecessary markup of your mortgage interest rate does not come with the Good Faith Estimate as you might think but from the lender’s rate lock confirmation. The Good Faith Estimates you receive when shopping for a mortgage are little more than a marketing tool used to draw you in to overpriced loan offerings; however, rate lock confirmation from the lender tells the real story about your loan.

First of all, make sure the lock confirmation you get is in writing and comes from the lender, not the broker. Some dishonest mortgage companies and brokers will try and pass off a written lock confirmation on their own company letterhead…if it isn’t in writing from the lender your rate lock is meaningless. Once you have written confirmation from the lender there are several important items disclosed on the lock. Your mortgage rate, Yield Spread Premium, points, and the duration of your lock are all detailed on the lender’s lock confirmation.

Mortgage Junk Fee

Never agree to pay a fee to lock in your interest rate. Mortgage lenders do not charge rate lock fees. This fee to lock your mortgage rate is pure garbage. If you agree to pay a rate lock fee it will go directly into your mortgage broker’s pocket.

You can learn more about mortgage refinance fees you need to avoid including strategies for refinancing with a wholesale mortgage rate by registering for my Underground Mortgage Videos.

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{ 2 comments… read them below or add one }

Refinance mortgage b December 15, 2008 at 2:54 am

To many, the term 'bad credit' is the end of the world when it comes to getting financing in the near future. However, it doesn't always have to be like that, you can take the bad credit mortgage refinance option!

Mortgage refinance vs. equity finance

It is essential at the outset that you understand there is a fundamental difference between mortgage refinancing and equity financing. Basically, with equity financing you are using the surplus amount you may have stored up in your property between your outstanding mortgage amount and the appraised value of your home. However a mortgage refinance is where you find a new lender willing to lend you the whole appraised value of your property, the sum of which you then use to repay your existing mortgage lender and the remaining sum you can utilize in any manner you wish. Because of this, you are faced with a different set of problems than would be the case with an equity financing

Reply

Refinance mortgage b December 15, 2008 at 2:58 am

It is essential at the outset that you understand there is a fundamental difference between mortgage refinancing and equity financing. Basically, with equity financing you are using the surplus amount you may have stored up in your property between your outstanding mortgage amount and the appraised value of your home. However a mortgage refinance is where you find a new lender willing to lend you the whole appraised value of your property, the sum of which you then use to repay your existing mortgage lender and the remaining sum you can utilize in any manner you wish. Because of this, you are faced with a different set of problems than would be the case with an equity financing.

Reply

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