Are 15 Year Mortgage Rates Always The Best Option?

If you’re in the market for mortgage refinancing you might have noticed lenders and programs pushing 15 year mortgage rates. There’s been a strong push for homeowners in the United States to pay off their home loans faster. Even the government is recommending shorter mortgage term lengths to get out of debt faster. Is it really in your best interest to refinance with 15 year mortgage rates? Here are the pros and cons of shortening your term length to help you make an informed decision for your next home loan.

15 Year Mortgage Rates For Underwater Homeowners

Another push for 15 year mortgage rates is for underwater homeowners with the government refinance program HARP 2.0. The reason for this is that shorter term-lengths like those offered with 15 year mortgage rates pay down your balance at a faster rate, thus building equity quickly and getting you right-side up.

15 year mortgage rates are a bit lower than 30 year fixed rates right now meaning the payment for most people will only be a few hundred dollars more. At first glance this sounds like a good idea; however, as the saying goes what’s good for Peter isn’t always good for Paul. If you’re paying $1350 on a 30-year fixed rate mortgage why not switch to a 15 year term length if the payment won’t go up by much? Historically low refinance rates make this possible and can save you a boatload of cash from mortgage interest.

If you’re currently paying mortgage insurance choosing 15 year mortgage rates will get you to the point where you can cancel your mortgage insurance more quickly with the side benefit of building ownership in your home.

Is There a Downside to 15 Year Mortgage Rates?

Because interest rates are so low right now you could make the argument that it’s not a bad time to carry debt, thus freeing up your cash for other things. It doesn’t take much to invest for a higher rate of return than what you’re paying in mortgage interest. The uncertainty hanging over our economy is still there; we’re not out of the woods with the housing market either. Even if you’ve got a respectful loan-to-value ratio now, who’s to say in a year or two that you won’t be underwater thanks to declining home values and a faltering economy?

If you qualify for mortgage refinancing you might consider refinancing for a lower payment to give yourself a little breathing room in your budget. (Especially if you’re paying on an Adjustable Rate Mortgage) Don’t get me wrong, equity is great but there’s no guarantee you’ll ever get it back when you sell your home. Paying that extra cash to pay down your mortgage could be wasted if you have to sell in a down market like the one we have now.

The point I’m making is not that 15-year mortgage rates are bad; simply that there’s more to consider with the big picture when refinancing your home. The fees that you pay for instance will make or break the deal that you’re getting. If you’re not able to break even recouping your out-of-pocket expenses from closing costs you’re going to be losing money no matter how low your refinance rates. One of the most common mortgage mistakes when refinancing is overpaying the loan origination fee or falling for unnecessary discount points. Remember, the less you pay at closing the more benefit you’ll get from today’s low refinance rates.

Click Here For More Details…

You can learn more about paying less for your next home loan by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Underground Mortgage Videos
Here’s a quick sample to get you started with today’s best mortgage lenders while avoiding unnecessary fees…

Avoid These Refinance Traps

If you are in the process of refinancing your home mortgage loan there are a number of pitfalls that can result in overpaying thousands of dollars per year.

These pitfalls range from the markup of your mortgage rate to junk fees that raise your monthly payment. Avoid these refinance traps and you can save thousands of dollars every year that you keep your mortgage. Here’s what you need to know.

Avoid These Refinance Traps

What are mortgage refinance junk fees? Anything that serves no purpose other than boosting the mortgage broker’s commission at your expense is a junk fee. Mortgage brokers receive compensation for their work from a number of sources and if you’re not careful these fees can result in overpaying thousands of dollars every year that you keep the loan.

The first mortgage broker fee you’re likely to encounter when refinancing your home mortgage is the loan origination fee. This is a fee paid to the mortgage broker specifically for their part in arranging your loan. A reasonable amount to pay the mortgage broker for loan origination is one percent of your loan amount; however, many brokers will try and pad this fee. This origination fee, while frequently overcharged, is fairly straightforward and will appear on your Good Faith Estimate and HUD-1 statement.

Don’t Put Much Faith in Your Good Faith Estimate

The law requires mortgage brokers to provide you a copy of the Good Faith Estimate as part of their disclosures; however, there are no standards as to what fees have to be disclosed to you and many are conveniently left off to make expensive loan offers seem more attractive. Your Good Faith Estimate is little more than a marketing tool used to lure homeowners into overpriced home loans… don’t trust this mortgage document.

If you can’t rely on the Good Faith Estimate when shopping for a mortgage loan what can you trust? There are two reliable documents you will receive when refinancing your home loan. The first is the original written rate lock confirmation from the mortgage lender and the second is the HUD-1 Settlement Statement; however, neither one of these documents help you shop for a mortgage loan. Make sure that the rate lock confirmation you receive comes from the mortgage lender and not the mortgage broker and never accept verbal confirmation of your rate lock. As for the written confirmation, make sure it comes from the mortgage lender and is not typed up on your broker’s letterhead. Many mortgage brokers pass off bogus rate lock confirmation in an attempt to hide their markup of your mortgage interest rate.

How to Shop for a Mortgage Loan

A common refinance trap to avoid is shopping for a mortgage loan like you would a kitchen appliance. While it’s true that mortgage loans are retail products and are subject to the same type of markup that results in overpaying, you don’t want to try making apples to apples comparisons of your mortgage loan offers. There is simply no reliable way to screen mortgage loans when refinancing due to these limitations of your disclosure documents.

The best way to shop for a new mortgage when refinancing is not to compare loan offers, but shop for the right mortgage broker instead. When you find the right person to arrange your next mortgage you’ll avoid all of the refinance traps that I’ve mentioned here today. How can you find the right mortgage broker to arrange your home loan? It’s not as hard as you might think; however, there is one other junk fee we need to discuss known as Yield Spread Premium.

Unnecessary Mortgage Broker Fees

Ask most mortgage brokers about Yield Spread Premium and they get defensive, even angry. Many think that as a mortgage broker Yield Spread Premium is their birthright. The simple fact of the matter is that charging an origination fee and Yield Spread Premium is advantageous and wrong. What is Yield Spread Premium? Simply put, it is the number one refinance trap to avoid and according to the HUD Secretary will cost homeowners in the United States sixteen billion dollars this year.

Yield Spread Premium is a Trap

Not only is Yield Spread Premium a trap that drives up your mortgage payment unnecessarily, like the jelly of the month club it’s keeps doing it all year long…every year you keep the mortgage loan. Yield Spread Premium is a fee paid to your mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. Mortgage lenders reward your mortgage brokers for overcharging you with this commission. Because you’re closing with a higher mortgage rate than you deserve your monthly payment will also be higher than it needs to be, meaning you’re overpaying as long as you keep this mortgage loan.

Yield Spread Premium works as an incentive from the lender for overcharging you. For every .25% you overpay on your mortgage the broker receives a bonus of 1.0% of your loan amount in addition to the origination fee you’re already paying. The good news is that like any other refinance trap, Yield Spread Premium and other junk fees can be avoided.

You can learn more about this article Avoid These Refinance Traps, including which mortgage fees are junk like Yield Spread Premium by registering for my Underground Mortgage Videos. Register today and you’ll get immediate online access to all the videos without downloading anything to your personal computer.

How to Get the Lowest Mortgage Payment When Refinancing Your Home Loan

Are you looking for a mortgage with the lowest possible monthly payment? Do you know which fees drive up your mortgage payment unnecessarily and how to avoid them? There is one hidden fee you should know about that according to the Secretary of Housing and Urban Development will cost homeowners in the United States sixteen billion dollars this year alone. Here are several tips to help you get the lowest possible monthly payment while avoiding unnecessary fees on your next home loan.

What Determines Your Monthly Mortgage Payment?

Assuming that you don’t have a derogatory credit rating there are two main factors that determine your payment amount. The first of course is the mortgage rate you qualify for, and the second is the term length you choose for your home loan. Term length is the amount of time you have to repay the loan and determines your amortization schedule. Amortization is a term that describes the repayment of your mortgage loan over time as well as how much of your monthly payment is applied to finance charges. The most common term length lengths are 15 and 30 years; however, there are 40 year terms available. As a rule of thumb the longer your term length the lower your monthly payment will be. Conversely, choosing a shorter term length will raise your payment amount as more of that payment will go towards repaying the loan, than paying the lender interest.

Fees That Affect Your Mortgage Payment

There is a fee you will find on your Good Faith Estimate known as a “Discount Point.” This is a fee your lender may require you to pay to qualify for a specific mortgage rate. One point is equal to one percent of your mortgage rate due at closing. Mortgage rates are very low in today’s market so it’s best to avoid paying discount points whenever you can as the return on your investment for paying this fee will be very low. As a rule of thumb one discount point should lower your mortgage rate by .25 percent; however, if your credit rating is poor you may be required to pay points just to get approved for the loan.

Hidden Fees That Raise Your Mortgage Payment

There is a hidden fee you will not find on your Good Faith Estimate that drives up your mortgage rate and monthly payment unnecessarily. Most people think that using the Good Faith Estimate is a way to compare mortgage fees when shopping for a home loan; however, while disclosure laws in the United States require lenders to provide you with a Good Faith Estimate, there are no requirements as to which fees need be listed. Most mortgage brokers find it convenient to leave off any fees related to their commission that drive up your mortgage payment.

The fee you won’t find on your Good Faith Estimate is known as “Paid Outside of Closing” or POC fees. This is a commission paid by the lender to the mortgage broker for locking and closing your home loan with a higher than necessary mortgage rate. This fee is also known as Yield Spread Premium, and while you won’t see it on your Good Faith Estimate it will appear in one form or another on your HUD-1 statement. The problem is by the time you get the HUD-1 it’s often too late to do any good for comparison shopping. So how can you recognize Yield Spread Premium earlier in the mortgage process?

How to Recognize Paid Outside of Closing (POC) Fees

The first opportunity you’ll have to spot the POC fees also known as Yield Spread Premium on your loan, assuming that your broker is honest about not taking this fee on your loan, is when you lock in your mortgage rate. The rate lock confirmation from the lender will show you the mortgage rate, any discount points you will be required to pay, as well as any fees paid outside of closing to your mortgage broker. Be careful that the rate lock confirmation you get is in writing and comes directly from the lender, not your mortgage broker. Some dishonest brokers type up a bogus mortgage rate lock confirmation on their company letter head and try and pass it off as the lender’s mortgage rate lock. Also, if you have a “verbal” rate lock with your mortgage broker or a bogus written lock there is no way to be sure that you have actually locked in your mortgage rate. If you’re in this situation walk away and find another mortgage broker to arrange your loan.

Yield Spread Premium Drives up Your Mortgage Payment Unnecessarily

We’ve already discussed how your mortgage broker can receive a hidden commission for marking up your mortgage rate, but how does this drive up your monthly payment? Have a look at the following example to illustrate how this unnecessary markup can cost you thousands of dollars. Note that I’m saying “unnecessary” and “hidden” commission on your loan. Don’t get me wrong… I’m not saying your mortgage broker shouldn’t get paid for their work, that’s what the origination fee you pay is for. As for origination fees, one percent is a perfectly reasonable fee to pay for your mortgage broker’s services that won’t drive up your monthly payment.

Suppose for example you are refinancing your home for $315,000. Your mortgage broker quotes you an interest rate of 6.0% and charges you one percent for loan origination. That one percent origination fee is perfectly reasonable; however, what about your six percent mortgage rate? What your mortgage broker isn’t telling you is that you actually qualified for a 5.25 percent interest rate but the broker marked it up to get a commission from the lender. In this case, your mortgage broker receives one percent of your loan amount for every .25 they’ve overcharged you. Your broker walked away from this transaction with your one percent in their pocket plus three percent from the lender and you get stuck with a monthly payment higher than what it should be.

How much money is going down the drain on this home loan? With the mortgage loan you got at six percent on a thirty-year fixed rate deal your payment will be $1,900 per month. If you had the mortgage payment you deserve at 5.25 percent your payment would only be $1,740 per month! That’s a difference of $160 per month and a whopping $1,920 per year! The good news is that now you know about this hidden fee that drives up your payment and you can avoid it.

You can learn more about getting the lowest mortgage payment when refinancing your home by registering for my Underground Mortgage Videos. Register today and you’ll be on your way to saving thousands of dollars in markup and junk fees on your next home loan without downloading anything to your computer.

Mortgage Refinancing Breakdown

If you’re considering refinancing your home loan a mortgage refinancing breakdown can help you spot troublesome areas of the loan offers you are considering.

There are a number of things including mortgage broker markup and junk fees that result in overpaying thousands of dollars when refinancing your home. Here is the mortgage refinancing breakdown you’ll need and several tips to help you avoid paying too much for your next mortgage loan.

Mortgage Refinancing Breakdown Online

RefiAdisor.com provides a number of resources to breakdown the refinancing process. There is a video tutorial in the member’s area that will show you how to refinance your home without paying markup of your mortgage rate or junk fees at closing. There is no cost to join RefiAdvisor.com. Registration is required to access materials in the password protect member’s area.

What to Look for When Refinancing Your Home

Mortgage refinancing can be an intimidating process. Should you refinance with a mortgage broker, your bank, or a mortgage company out of the phone book? I never recommend that anyone refinance with a bank or credit union; because of the Banking Lobby, banks and credit unions are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margin on your home loan. Plain and simple, you’ll never get anything close to a Par Mortgage Rate refinancing your home with a bank or credit union.

What is a Par Mortgage Rate?

Mortgage rates change daily and on any given day “Par” mortgage rates may not be available; however, keep an eye on wholesale mortgage rates during the course of the week and you can get a par rate. What are par mortgage rates? Simply put a par mortgage rate is one that doesn’t cost you anything to get and does not create a commission for the person arranging your loan. Cost to you comes from discount points required to qualify for a specific mortgage rate and the commission for the mortgage broker comes from Yield Spread Premium. We’ll discuss Yield Spread Premium and the broker’s commission later but your goal when refinancing should be to get a mortgage rate that doesn’t cost you anything or create cash for the broker at your expense.

How To Get Par Mortgage Rates

Mortgage rates can be tricky and most of the rate quotes you encounter have been marked up one way or another for a commission. How does this commission based markup of your mortgage rate occur? Lenders reward mortgage brokers that lock and close home loans with higher than market interest rates with a commission known as Yield Spread Premium. If your home loan includes Yield Spread Premium your mortgage payment will be higher than it needs to be for the duration of your loan. Don’t get me wrong, your mortgage broker should get paid for their work; however, you don’t want this compensation driving up your payment for years to come. How should your mortgage broker get paid? Mortgage brokers receive a fee called a loan origination fee for their work and one percent of your home loan is a reasonable amount to pay. The problem is many (greedy) mortgage brokers charge origination fees and then take Yield Spread Premium on top of this which can double even triple their compensation at your expense.

You Can Avoid Mortgage Broker Markup

Many mortgage brokers become defensive and even angry when questioned about Yield Spread Premium, so how can you avoid unnecessary markup of your mortgage rate? You can start by finding the right mortgage broker for the job. We’ve already discussed why banks are a bad choice for refinancing your home loan; however, there is also a type of mortgage broker that you’ll need to avoid for the same reasons.

When the Banking Lobby had the law changed to exclude banks a number of mortgage brokers wanted in on the action and found that if they formed a company that funded home loans with their own money they could exploit the same loophole in the Real Estate Settlement Procedures Act as banks. This allows them to charge whatever they like without disclosing their markup of profit margins to their customers. Mortgage brokers that run their businesses in this manner are known as Mortgage Broker Banks and you’ll want to avoid them for the same reasons listed above.

How can you tell if a mortgage broker or company is operating as a broker bank? Ask them if they close home loans in the name of the wholesale lender or their own company. If the answer you get is that they close mortgages in their company’s name then you know you’re dealing with a broker bank and should move on to the next mortgage broker on your list. Who then is the best mortgage broker to refinance your home loan? Look for small, self-employed mortgage brokers working from home. Those mortgage brokers you see around town with their logos plastered on company hummers probably aren’t going to be willing to negotiate the kind of deal I’m describing here. Also, mortgage brokers working out of posh office spaces with expensive sales staff are another red flag when choosing a mortgage broker.

You can learn more about refinancing your mortgage without markup of your mortgage rate or lender junk fees with the online Mortgage Refinancing Breakdown in my Underground Mortgage Videos. Register today and you’ll have immediate access to the videos without downloading anything to your computer in the password protected member’s area.

Origination Fee and Points

refinance rates online Origination Fee and Points
Many homeowners absolutely dread refinancing their mortgage loans because they don’t fully understand how the loan origination Fee and discount points work.

In fact, the loan origination fee and unnecessary discount points are one of the reasons homeowners in the United States will overpay well over sixteen billion dollars this year alone when refinancing their mortgage loans according to the HUD Secretary. Here are several tips to help you avoid being a part of this statistic when refinancing your home loan AND save you thousands of dollars in the process.

Your Loan Origination Fee Can Make or Break Your Deal

Let’s get started with the loan origination fee. Sometimes called “origination points” this a fee you will pay to the person arranging your new loan. This person could be a discount mortgage company or a broker. A reasonable amount to pay for loan origination is one percent of your loan amount; however, it is not uncommon for mortgage brokers to charge as much as five percent. If you follow the system outlined in the free underground mortgage videos on this website you can find a loan broker willing to work for one percent without padding your best mortgage rate for a commission…but more on that later.

What About Discount Points?

There is another flavor of mortgage points you need to be aware of and that is the so called “discount points.” This is a form of pre-paid interest paid by you at closing in exchange for the lowest mortgage rate. One “discount” point is the equivalent of one percent of your mortgage amount and should lower your mortgage rate by .25%. Some lenders will require you to pay points to get a specific low mortgage rate; however, in today’s market you can get rock bottom rates without paying discount points.

If you have less than desirable credit you might not be able to get around paying points…whether or not it makes sense to refinance in your case depends on how long it will take to recoup your points and closing costs from your savings on the new loan. You can easily calculate the break-even point when refinancing by determining how much lower your new monthly payment will be each month and dividing your total closing costs including points by the amount of your savings. This will tell you how many months it will take to recoup your expenses from refinancing; if you can live with the length of time it takes to get your money back then refinancing your home loan probably makes sense in your situation.

This is a much more intelligent method of determining if refinancing is a good idea in your situation than relying on that old wife’s tale known as the two percent rule. (The two percent rule states you should only refinance if the best mortgage rate is two percent lower than you existing rate. A real bonehead came up with this rule…you’d never want to be seen with him and he’d embarrass you at parties.) Getting back to points in most cases you will want to avoid paying discount points whenever possible because mortgage rates are so low right now.

What About Mortgage Broker Markup?

That’s the million dollar question…what about all these sneaky mortgage brokers that mark your interest rate up to get a commission from the lender? I’ll bet you didn’t know they did that? In fact, many brokers become defensive and angry if you ask them about this markup, insisting that the fee they receive from the lender is “none of your business…it’s between me and the lender.”

Well, I’m here to tell you that this “fee” known as Yield Spread Premium is your business and you should be very concerned as to why the lender pays the broker for marking up your mortgage rate. Mortgage lenders love loans that close with higher than market mortgage rates. Your online mortgage lender actually makes the majority of their profits selling loans to investors on the secondary mortgage market and home loans with higher than necessary mortgage rates make them the most profit. This is why mortgage lenders reward brokers that overcharge their customers with a commission known as Yield Spread Premium.

Most homeowners have never heard of this markup and don’t know how to spot it in their loan documents. You’ll probably never see it on your Good Faith Estimate because many brokers leave it off completely. The lender is required by law to disclose it in the HUD-1 statement; however, if you don’t know what you’re looking for at this point it’s probably too late and you’ve already paid too much.

Better luck next time around right? Well, fortunately for you, you’re probably not that far along in the closing process and have time to learn how to avoid this unnecessary markup of your discount mortgage rate that results in overpaying thousands of dollars every year that you keep the mortgage loan. Another little known fact when refinancing your home mortgage loan is that you actually have three days to change your mind and put the brakes on before your lender funds the loan. This is known as your three day rescission rights…you can bail on a shady lender at any time until your loan is funded three business days after closing.

How to Avoid Overpaying the Loan Origination Fee

You might be thinking to yourself I know how to avoid all this on line mortgage broker trickery… I’ll just refinance my home loan with my bank or credit union. Guess again, banks have their own tricks due to a little known loophole in the Real Estate Settlement Procedures Act. Refinance your home loan with a bank and I guarantee you’ll pay more than you have to AND will never know how the bank overcharged you. The best deals when refinancing your mortgage without overpaying come from finding the right mortgage broker for the job.

Your Mortgage broker works for a commission, you’ll never get around this and they do have kids to feed like everyone else; however, they should not be taking advantage of people just to make a hummer payment. There are honest mortgage brokers out there who are willing to work for a one percent loan origination fee without taking Yield Spread Premium on the loan; you just need to know how to find them.

Click for Instant Online Access

Check out my free Underground Mortgage Refinancing Videos and you’ll discover how easy it is to save thousands of dollars getting the best refinance rates without paying unnecessary markup or lender junk fees.

httpv://www.youtube.com/watch?v=be9md0A0_2c
  • Free Underground Mortgage Videos

Here’s a sample to get you started paying less for the loan origination fee from today’s best mortgage lenders