How to Beat Your Bank Getting The Best Refinance Rates

No one likes paying too much for anything and mortgage refinancing is no exception. One of the most common mortgage mistakes made by nearly all of your neighbors is focusing only on getting the best refinance rates. This strategy almost always results in paying too much at closing making it difficult, even impossible to recoup your closing costs. Here’s a proven strategy for getting the lowest refinance rates without paying unnecessary fees or discount points.

How Banks Make Money From Mortgage Refinancing

Did you know many banks and lenders have nothing to do with you once your mortgage closes? You would think banks make money by collecting interest from your payments but really this isn’t the case. Most lenders don’t service their own home loans and simply sell them to investors after closing for an upfront profit.

So how does your bank make money from refinancing your home? The fees you pay closing on your new home loan including unnecessary discount points are pure profit for mortgage lenders. In fact, the more you pay at closing the less benefit you’re getting from the best refinance rates.

Discount Points Benefit Your Banker…Not You

If you spend any amount of time shopping for refinance rates you’ll find lenders quote interest rates with varying amounts of discount points. This is a fee you pay at closing to buy down your refinance rates. Points raise your out-of-pocket expenses meaning it’s going to take you longer to break even recouping your closing costs. Pay too much and you could find that you never break even.

Discount points are a relic of the 1980s when double-digit interest rates made paying the fee worthwhile. Paying one percent of your loan amount would buy down your refinance rates by .25% which you could quickly recoup because interest rates were so high.

Today refinance rates are near historically low levels so paying that one percent fee only benefits your banker. Why do lenders quote refinance rates that include discount points? They’re banking on the fact that your neighbors don’t know better and will pay this unnecessary fee.

Make sure your refinance rate shopping is based on zero point quotes if you want the best deal for your next home loan.

What About No Fee Mortgage Refinancing?

You’ve seen the ads on television to get your home refinanced without paying anything out-of-pocket. Are these offers too good to be true?

The problem with no fee refinancing isn’t what you’re paying at closing but what you’re giving up in exchange. Lenders mark up their refinance rates to cover the loan origination fee and other closing costs.

There’s no such thing as a no-fee mortgage loan; these no fee refinance offers trade higher interest rates for fees which gets you a larger monthly payment.

How to Shop for the Best Refinance Rates

I’ve already mentioned that zero point offers are necessary when shopping for the best refinance rates…but don’t stop there. You want to compare offers from multiple lenders paying attention to the fees found in section 800 of the Good Faith Estimate. Don’t rely on the Annual Percentage Rate to factor in fees when comparison shopping.

Annual Percentage Rate or APR is the most manipulated marketing propaganda you’ll find when shopping for a home loan. More often than not the mortgage with the lowest APR has the highest closing costs. Never choose refinance rates based on the mortgage with the lowest APR.

Mortgage junk fees include the application fee, rate lock fee and processing fees. Your loan origination fee can be negotiated…the less you pay the better.

Don’t be afraid to question the fees found on your Good Faith Estimate. If you don’t like the answers you’re getting or a dealing with a pushy loan officer simply take your business elsewhere.

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You can learn more about getting the best deal on your next home loan without paying unnecessary fees by checking out my free Underground Mortgage Videos.

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  • Underground Mortgage Videos
Here’s a quick sample to get you started refinancing with today’s best mortgage lenders for less…

Best Mortgage Rates

If you’re thinking about refinancing your home mortgage loan you’ll want the best mortgage rates you can get for the new loan. Did you know that 99% of your neighbors are overpaying for their home loans because they went shopping for the best mortgage rates the wrong way? Here are my favorite tips and tricks to help you get the best mortgage rates when refinancing your home mortgage loan without paying any junk fees or markup.

Getting The Best Mortgage Rates Online

Getting the best mortgage rates on the Internet is trickier than you think. What you don’t know about every mortgage quote you find online or get from your local mortgage company is that the mortgage rates have all been marked up to create an “extra” commission for someone. If you want the best mortgage rates when refinancing your home loan you’ll have to find one that hasn’t been marked up. Why are mortgage rates marked up for this commission? Mortgage lenders pay a kickback for home loans that close with higher than necessary mortgage rates because these home loans bring them premium profits when sold to investors on the secondary mortgage market. Mortgage lenders don’t care that this markup drives up your payment by hundreds of dollars per month unnecessarily; these companies are motivated only by greed and their bottom line. If you want the best mortgage rates for your home loan you need to know that the mortgage lender and broker are not looking out for you; judge every loan offer with a healthy dose of skepticism and you’ll be on your way to actually getting the best mortgage rates.

Mortgage Rate Markup

What is this markup of your mortgage rates that drives your payment up unnecessarily? The fee paid by wholesale lenders for mortgage loans that are locked and closed with higher than necessary mortgage rates is called Yield Spread Premium. Provided you don’t refinance your home with your bank, the person arranging your home loan receives one percent of your loan amount for every .25 percent they markup your mortgage rate. Yield Spread Premium is paid in addition to any fees you’re paying for loan origination to the mortgage company or broker arranging your home loan.

Refinance Mortgage Rates
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Here’s a quick video about finding the lowest
mortgage rates when refinancing your home loan online.

Before you go saying you’ll just avoid all this Yield Spread Premium nonsense by refinancing with your bank, you should know that while banks don’t collect Yield Spread Premium on their loans they do collect a profit margin known as Service Release Premium when your home loan is sold to investors on the secondary market, just like wholesale lenders. Your bank is also exempt from the Real Estate Settlement Procedures Act, meaning they don’t have to disclose their profit margin or markup on your home loan. Banks markup their mortgage rates just like mortgage brokers because they make a premium profit selling your home loan later on. Your bank will never tell you they’re doing this because all they’re required to give you prior to closing is a Good Faith Estimate and Annual Percentage rate, both of which are based on low-balled fees given in “good-faith.” You’ll never get the best mortgage rates refinancing your home loan with your bank.

How to Get the Best Mortgage Rates

Getting the best mortgage rates when refinancing your home isn’t as difficult as you think; you don’t have to be a financial guru to get the best mortgage rates, you just have to find the right person to arrange your loan. Shopping for a mortgage loan isn’t like shopping for a new television or kitchen appliance; comparing mortgage quotes from dozens of lenders will only get you the best of the worst home loans available and this is why most of your neighbors pay too much for their mortgage loans.

Finding the right person to arrange your next home loan means finding an independent mortgage broker willing to work for a flat origination fee without marking up your mortgage rate for Yield Spread Premium. Finding the right mortgage broker can be tricky because many brokers are unwilling or unable to negotiate the kind of deal that doesn’t include Yield Spread Premium because of their overhead costs. Mortgage brokers working out of posh office spaces that employ expensive sales staff will generally not agree to home loans that do not include Yield Spread Premium.

How do you find the right mortgage broker to give you the best mortgage rates? Remember that only mortgage brokers have access to wholesale mortgage rates and this is your goal for refinancing with the best mortgage rates. The best mortgage rates on any given day are going to be as close to “par” as you can get them. Par mortgage rates is a term meaning you don’t have to pay discount points to qualify for a specific mortgage rate and of course that the mortgage rate does not create Yield Spread Premium for the mortgage broker arranging your loan. A discount point is the equivalent of one percent of your loan amount and is a fee due at closing. Mortgage rates are still very low and the benefits of paying discount points are far less than they used to be in the 1980s when mortgage rates were much higher than they are today. In most cases you will want to avoid paying discount points whenever possible.

Getting back to finding the right mortgage broker to arrange your home loan with a par mortgage rate, you want to look for the smaller, self-employed mortgage brokers that don’t have expensive overhead therefore avoiding junk fees and mortgage rate markup. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and will not take a home loan that includes the markup. On the subject of junk fees there are several closing costs that you’ll want to avoid when refinancing your home loan. Junk fees are the subject of my Underground Mortgage Videos; however, finding certain fees in your loan documents is a dead giveaway that you’re dealing with a dishonest mortgage broker. The number one red flag you need to keep an eye out for when refinancing your home is the mortgage rate lock fee. This is a classic example of a mortgage junk fee that serves no purpose other than boosting your mortgage broker’s profit. Mortgage lenders do not charge rate lock fees. If your mortgage broker claims there are rate lock fees you can be 100% certain you are dealing with a dishonest mortgage broke and need to find someone else to arrange your home loan.

You can learn more about avoiding mortgage junk fees and getting the best mortgage rates when refinancing your home loan by checking out my free underground mortgage refinancing videos.

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