Refinance Rates Online

A you combing the Internet for the best refinance rates online only to find junk fees and empty promises? The web can be an excellent resource for comparing refinance rates online; however, nearly all of the mortgage offers you find online include unnecessary markup for someone’s bloated commission. Here are several of my best mortgage tips to help you make sense of refinance rates online and spot a good offer when you find one.

Comparing Refinance Rates Online

You probably approach mortgage shopping the same way as many of your neighbors, collecting Good Faith Estimates and rate quotes from various websites you encounter online. What you may not know about the Good Faith Estimates and rate quotes you collect on and offline is that they all include unnecessary markup and fees to create an “extra” commission for someone at your expense.

Yes, I am referring to the so called “lender paid” compensation that many mortgage brokers are quick to point out isn’t coming out of your pocket. Au contraire, what you need to know is why your lender would pay the mortgage broker or website a fee for your loan. After all you’re paying this person a perfectly reasonable origination fee for their services in arranging your home loan, why would the mortgage lender pay extra on top? The answer lies in what’s in it for mortgage lenders. You see, these mortgage lenders make the majority of their profit selling your loan to various investors on the secondary mortgage market. These investors pay top dollar for mortgage loans with higher than necessary mortgage rates. Because of this premium mortgage lenders reward mortgage brokers and companies that lock and close their home loans with higher than necessary mortgage rates which results in a higher than necessary mortgage payment for you.

Mortgage Yield Spread Premium

This commission driven markup of your mortgage rate is known in the business as Yield Spread Premium. For every .25% that you unknowingly agree to overpay the person or website arranging your loan pockets an additional one percent of your home loan amount. This is paid of course in addition to the loan origination fee that they’re probably also overcharging you. How common do you think this practice of mortgage rate inflation for hire is today? It’s so widespread that nearly every single one of your neighbors is currently paying too much for their home loan and so bad that according to the Secretary of Housing and Urban Development American homeowners will overpay sixteen billion dollars this year alone. Let your neighbors pay this; you’ve got better things to do with your money.

Comparing Refinance Rates The Right Way

Collecting mortgage rate quotes from dozens of mortgage brokers and websites will only get you a bunch of marked up, overpriced home loans. The secret to getting the lowest mortgage rates, also known as wholesale or par mortgage rates is to find the right person to originate your home loan. Once you’ve found the right person to arrange your mortgage the unnecessary markup and junk fees take care of themselves.

Who’s the right person to arrange your next home loan? I can tell you for starters who the right person isn’t. Banks for one are the wrong people because they don’t play by the same rules as other mortgage originators thanks to a loophole in disclosure laws. Mortgage brokers that employ expensive sales staff and work out of posh office spaces aren’t going to be willing to negotiate the kind of deal you’re looking for because of their costly overhead. What about the mortgage broker with their face and/or logo splattered all over their brand new hummer? Forget about it, how do you think they paid for that hummer? Not by helping homeowners like you secure honest financing for their homes you can be sure of that…

You can learn more about finding the right person to arrange your next home mortgage loan without paying unnecessary markup or junk fees for someone’s commission by checking out my free underground mortgage refinancing videos.


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Lowest Mortgage Rates When Refinancing

Claiming to offer the lowest mortgage rates is how most lenders market their loans today. They all claim to have the best rates…why then is it so difficult to compare mortgage offers when refinancing your home loan? The problem with getting the best mortgage rates is the rate one lender calls “lowest” isn’t the lowest rate from another lender for a homeowner in your situation. This is why mortgage shopping can get so frustrating…no one wants to overpay and who can you trust to get you the best mortgage when refinancing?

Wholesale Mortgage Lenders

With the exception of bank originated loans, mortgage loans are funded by wholesale lenders. These wholesale lenders don’t deal with the public directly but offer their loans through mortgage companies and brokers. Banks don’t rely on wholesale lenders to fund their loans because bank originated mortgage loans are funded with the bank’s money, creating a unique problem if you’re trying to get low rates refinancing with your bank. (More on that problem later)

Different wholesale lenders offer different mortgage rates on any given day…some lenders will want a larger spread meaning mortgage brokers and companies quoting mortgage loans from these lenders will have higher rates on any given day than others. Picking and choosing wholesale lenders when shopping for a mortgage isn’t something you can do directly; however, you can choose the mortgage broker originating your loan when refinancing your home.

Get The lowest Refinance Mortgage Rates

You can control how much your mortgage broker or retail Mortgage Company is making off your interest rate when they originate your home loan. This is as simple as picking who you choose to do business with when refinancing…you see, the wholesale lender makes money from your mortgage rate and the retail mortgage company or broker makes money by marking up your mortgage rate. It doesn’t matter if you are refinancing your home with a mortgage company, bank, or a mortgage broker…they all mark up mortgage rates for profit.

The money your mortgage broker makes by marking up your rate is called Yield Spread Premium. When a bank makes their profit from a spread on your mortgage rate it’s known as Service Release Premium. The lowest mortgage rate available on any given day is directly influenced by how much your originator is making off this spread. The lower your mortgage rate, the less spread and the less your originator makes on the transaction. It is possible to get a mortgage rate that hasn’t been marked up…this zero spread mortgage rate is called a Par mortgage rate…meaning it doesn’t cost you points to get and that it does not create Yield Spread Premium for the originator. (Quick side note…banks do not offer par mortgage rates to their customers…ever. If you want par you’ll have to find the right mortgage broker to arrange your loan)

Origination fees also affect your mortgage rate. If your mortgage company or broker is not charging you an origination fee for arranging your loan you can be sure they are marking up your mortgage rate in order to collect a fee from the mortgage lender. This drives your monthly payment up unnecessarily and will cost you more in the long run…it’s almost always better to pay a one percent loan origination fee instead of taking a higher mortgage rate. Many brokers market loans that don’t include origination fees because this figure is often high and causes sticker shock. As a result many mortgage companies and brokers lowball fees in their loan offers to avoid this…making effective comparison shopping difficult if not impossible. If you want the lowest possible mortgage rates and want to save money in the long run, bite the bullet and pay your origination fee and closing costs up front. Doing so will save you thousands of dollars over the life of your home loan.

How to Shop for a Mortgage Loan

What’s the best way to shop for a mortgage loan? Should you call every mortgage company in the phone book to get a quote or should you go somewhere like Lending Tree to get your quotes? Lending Tree’s motto is something about getting lenders to compete for your business and you’ll win, right? Did you know they’re being sued because all of the lenders they quote you are from mortgage companies they own? Not a lot of competition there huh? Sites like Lending Tree are also notorious for computerized loan origination fees, a junk fee you shouldn’t have to pay.

When you’re shopping for a mortgage loan the best way to shop is not to focus your energy comparing loan offers but concentrate on finding the right person to arrange your next mortgage loan. The right person for your next home loan isn’t going to be the loan officer at your bank or most of the mortgage brokers you find in the phone book. Most mortgage brokers rely on Yield Spread Premium to boost their commissions paying for expensive offices, sales staff, and even company hummers. If your mortgage broker drives a company hummer with their logo and/or face plastered all over it don’t walk…run and find another mortgage broker.

Self employed mortgage brokers are often the best for getting you the lowest mortgage rates. These brokers don’t have expensive overhead and are more likely to negotiate a mortgage that doesn’t include Yield Spread Premium, junk fees, or excessive origination fees.

You can learn more about finding the right mortgage broker to arrange your next home loan by checking out my free Underground Mortgage Videos. Register today and you’ll get immediate access to this mortgage refinancing guide and discover how to cut hundreds of dollars from your payment every month.

How to Get The Best Mortgage Rates When Refinancing

If you’re in the process of refinancing your home you’ll want the lowest possible mortgage rate for your next loan. The lower your mortgage rate, the lower your payment will be, meaning you’ll keep more hard-earned cash in your pocket. The problem is how do you get low mortgage rates and what is a low rate anyhow? Most people’s idea of mortgage shopping is to collect quotes from every broker in the phone book or eLender website on the Internet before picking the “lowest” quote. The problem with this approach to mortgage shopping is that all of the quotes you find online or get out of the phone book have been marked up to create a commission for someone.

Here are my best tips for getting the lowest mortgage rate when refinancing your home. By the way…I know of one mortgage “guru” that charges $49 for the information in this article…

What is a Good Mortgage Rate?

Mortgage loans that are not originated by banks can be considered retail products like most things you purchase today that have been marked up for profit. The problem with the retail nature of mortgage interest rates is that you’re already paying an origination fee to the person arranging your loan, any markup of your mortgage interest rate for an “extra” commission drives up your mortgage payment unnecessarily.

So what is a good mortgage rate? The industry word for the best possible mortgage rate on any given day is known as a “par mortgage rate.” What are par mortgage rates? Simply put, a par mortgage rate is one that you don’t have to pay discount points to get and does not create the extra commission known as Yield Spread Premium for the person arranging your loan. Remember that discount points are a fee charged at closing in exchange for lowering your mortgage rate. One discount point is one percent of your loan amount and is the cash amount you’ll have to come up with to get or lower a specific rate. If you’re paying discount points one point typically lowers your mortgage rate by .25% and in today’s market is generally not worth your money. Most people will want to avoid paying discount points when refinancing a home mortgage loan.

What is Mortgage Yield Spread Premium?

Not too many homeowners know about Yield Spread Premium, often abbreviated YSP, which is the main reason most people overpay for their home loans. In fact, the Secretary of Housing and Urban Development was recently quoted stating that homeowners in the United States will overpay nearly sixteen billion dollars this year alone because of it. What is Yield Spread Premium? The best way I can explain this lender paid fee is that it is a cash percentage of your loan amount created for the person arranging your mortgage when they lock and close your home loan with a higher than necessary mortgage rate.

This higher than necessary mortgage rate results in a higher than necessary mortgage payment that you’ll keep paying every month. How much higher you ask? Here’s a simple example to illustrate just how much Yield Spread Premium is probably costing you right now on your existing home loan. Suppose for example you plan on refinancing your home for $300,000. Your mortgage broker quotes you a mortgage rate of 6.75% and charges you a loan origination fee of 1.5%. Plug these figures into a simple mortgage calculator and you’ll find that the monthly payment on a 30 year fixed rate mortgage of 300,000 at 6.75% is $1,945. What your mortgage broker isn’t telling you about this transaction is that you actually qualified for a 6.25% mortgage rate but they’ve marked it up to 6.75% to get two points Yield Spread Premium from the lender. If you had the mortgage rate that you deserve at 6.25% your monthly payment would only be $1,847. That’s a difference of $1,176 you’re throwing away because the mortgage broker lied to you and who can’t use an extra $1,176 in today’s economy?

How to Get a Par Mortgage Rate

I get a lot of angry comments from mortgage brokers. I’m not a broker myself, I’m just a guy who got ripped off and now I do this more or less as a hobby. I’m not saying mortgage brokers shouldn’t get paid for their work. That is what the loan origination fee is for. What I am saying is that your mortgage broker has no business charging you a point or two for loan origination and then marking up your mortgage rate for Yield Spread Premium from the lender. This double dipping (more like triple dipping in most cases) is outrageous and plain dishonest.

Again, not all mortgage brokers are bad…you just have to find one who isn’t. I can tell you the mortgage broker driving a company hummer with their face and logo splattered all over it probably isn’t going to be the right person for the job. This is also true of the mortgage broker with a full page in your phone book. These people work out of posh offices often employing expensive sales staff and will simply be unwilling to negotiate a loan that doesn’t include Yield Spread Premium. Remember when refinancing your home you want a par mortgage rate so don’t be afraid to tell potential mortgage brokers that you understand how Yield Spread Premium works, that you’ll pay a reasonable fee for loan origination, (one point is reasonable, not a penny more) and you want a par mortgage rate. Shop around enough for the right person and you’ll find an honest mortgage broker willing to accept your terms.

Keeping Your Mortgage Broker Honest

Once you’ve found a mortgage broker willing to work for a one percent origination fee without taking Yield Spread Premium, how do you keep them honest? Much of the documentation you receive from the lender before closing is worthless. Mortgage lenders routinely lowball fees on the Good Faith Estimate to lure homeowners into overpriced loans and because the Annual Percentage Rate is based on your Good Faith Estimate it is equally worthless for comparing loan offers.

Your first opportunity for securing reliable documentation from the lender is when you lock in your mortgage rate. The written rate lock confirmation from the lender will clearly disclose your interest rate and any Yield Spread Premium on the loan. Make sure you get written confirmation from the lender. If it’s not in writing you haven’t locked. Also, make sure that your written lock confirmation came from the lender and isn’t something your mortgage broker typed up on their company letterhead. Many brokers pass off bogus rate lock confirmation to hide the Yield Spread Premium they’ve taken on your home loan. The next document you’ll use to ensure you’re not paying too much at closing is the HUD-1 settlement statement. Makes sure you get this prior to closing and carefully review it for junk fees. Yield Spread Premium will be in section 800 and anything on this document resembling a rate lock fee or a mortgage broker courier fee is a junk fee you’ll want to avoid paying.

You can learn more about getting the best mortgage rates while avoiding junk fees and Yield Spread Premium by registering for my free Underground Mortgage Refinancing Videos.


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P.S. Earlier I made a distinction that mortgage loans not originated by banks could be considered “retail.” You might think “I’ll just avoid all of this mortgage broker nonsense by refinancing with my bank.” The problem with bank originated mortgage loans is that your bank does the same thing mortgage brokers do AND because of a loophole in the Real Estate Settlement Procedures Act are not required to tell you they’ve done it. When a bank marks up your mortgage rate their profit on your loan is called Service Release Premium and does the same thing to your payment as Yield Spread Premium. Banks do not give their customers par mortgage rates and some of the worst predatory lenders around are banks like Wells Fargo and Countrywide, now Bank of America.

The Insider’s Guide to Mortgage Rates

If you’re in the market for a new home loan you’re probably searching for the lowest mortgage rate. As a homeowner does anyone really understand how mortgage rates work? Sure, the lowest mortgage rate should result in a lower mortgage payment, but how do you get low rates without paying too much for them? Here’s an insider’s guide to mortgage interest rates written by retired mortgage broker Louie Latour.

The Fed and Interest Rate Cuts

If you follow financial news you’ll often hear that the Federal Reserve is cutting interest rates with the hope of fending off inflation. This means that mortgage rates go down as well…right? Unfortunately, when the Fed cuts interest rates they are only lowering short term rates, which have nothing to do with the interest rates on your home loan.

30 Year Mortgage Rates

When the news reports a drop in interest rates many homeowners jump on the refinancing bandwagon looking for a drop in thirty year interest rates that usually doesn’t happen. The reason mortgage rates don’t go down is that the Fed Funds rate is the interest rate paid by banks when they borrow money from the government. The logic behind lowering the Fed Funds rate is that it will make it easier for banks to borrow money and their savings will trickle down to you, the consumer. When this happens the interest rate on your car loans, credit cards, and other lines of credit should go down.

Remember the Fed only tinkers with short term interest rates. Long term interest rates like what you’re paying on a 30 year mortgage don’t work the same way. When it comes to mortgage rates the Fed has nothing to do with what lenders charge for fixed or adjustable rate mortgages. Long term interest rates like 30 year fixed rates are influenced by what happens in the bond markets. The fluctuation you see in mortgage rates has more to do with the yield on bond investments like the 10 year bond. Predicting mortgage rates is nearly impossible and likening them to bond yield is an oversimplification but there isn’t really any better way to explain why mortgage rates rise and fall.

You can track 30 year mortgage rates by watching the yield on the 10 year bond. Remember that yield is the return of investment in the bond market. When the 10 year bond yield drops, which usually coincides with bad financial news, mortgage rates like the 30 year fixed rate will also go down. This bond yield is usually why you see mortgage rates go down in bad economic times like the current recession.

Mortgage Rate Secrets

Now that you know that the Federal Reserve lowering interest rates has nothing to do with mortgage rates, how can you get the lowest mortgage rate for your next home loan? The trick to get the lowest mortgage rates isn’t to shop for the best loan or lender, but to find the right person to arrange your loan. This may sound backwards to some; however, mortgage loans are basically retail products and the mortgage quotes you receive online or from your local mortgage broker have all been marked up to create an extra commission for the person arranging your home loan. It doesn’t matter if you get your mortgage from a broker, your bank, or even that faceless internet mortgage lender you see on television, they’re all marked up in one way or another. The good news is that this markup of your mortgage rate is not only unnecessary, but it can be avoided.

What Are Par Mortgage Rates?

If your head is still spinning from all that talk about the Fed and bond markets, forget everything you’ve read to this point. If you want the lowest possible mortgage rate for your next home loan you need to get a par mortgage rate. Assuming you have a decent credit rating the mortgage rate you get has nearly nothing to do with your credit or financial details and everything to do with the fees generated by originating your home loan. Confused? Think of a “par” mortgage rate as a wholesale interest rate, one that hasn’t been marked up to create a commission and doesn’t cost you anything to get. Par mortgage rates are the lowest possible mortgage rate available to anyone that knows how to get them.

You can learn more about getting a par mortgage rate (also known as a wholesale rate) for your next home loan by checking out my free Underground Mortgage Videos. Here’s a sample of what you’ll get today when you sign up:


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Mortgage Discount Point Fee

mortgage payment Mortgage Discount Point FeeIf you’re in the process of taking out a new mortgage to purchase your home or refinance an existing home loan you’re likely to encounter points before it’s done. Is it necessary or even beneficial to pay discount points on your next mortgage loan? Are mortgage points a bait and switch scam used to trick homeowners into overpriced mortgage loans? Here are several tips to help you avoid paying too much for your next home mortgage loan.

Discount Points Definition

Mortgage points come in two flavors. There are the discount points you can pay in order to buy down your mortgage rate and the origination points you pay the person arranging your home loan. They are very different fees and it’s important to understand how they work. One point, whether it discount or origination, is a fee that you’ll pay at closing and equals one percent of your mortgage loan amount. In the case of discount points you’re paying this fee in exchange for a lower mortgage rate. This is a legitimate fee that is often abused by dishonest advertisers trying to make their rates appear much lower than they really are. Points don’t always come in full percentages; you could pay less than one percent or more a point.

Suppose for instance you were going to pay one discount point to lower your mortgage rate from 6.0% to 5.75%. On a $250,000 mortgage one discount point would be $2,500 that you would pay at closing in exchange for this lower mortgage rate. The only situation where paying discount points make sense is if you plan on keeping your home for the long term. Even then, as low as mortgage rates are in today’s market the amount of time it will take you to recoup the expense of paying points may outweigh the benefit a slightly lower mortgage rate.

You can figure this out for yourself by spending a few minutes with a simple mortgage calculator. In the previous example your mortgage payment at 6.0% on a $250,000, 30 year fixed rate mortgage would be $1,498 per month. The same loan with a mortgage rate of 5.75% has a monthly payment of $1,458 per month. That’s a savings of $40 per month meaning it will take you 63 months, that’s just over five years to recoup your expenses before you realize any savings. Is it worth it? What happens if you refinance or sell your home before the five years are up? Your $2,500 is down the drain…

Are Mortgage Points Tax Deductable?

Because mortgage discount points are a form of prepaid interest, the points you pay at closing could be a tax deduction. Be careful when shopping for mortgage that your mortgage broker isn’t staring out with an inflated mortgage rate. If you’re a victim of this type of scam, you’re not paying discount points. Real discount points are paid to the lender, not the originator.

Other mortgage scams involving discount points come from companies advertising mortgage rates that seem too good to be true. If you come across one of these offers check the fine print and you’ll find that “x amount” of discount points are required at closing to qualify. Always ask if paying discount points are required to qualify for the mortgage rate advertised.

What About Mortgage Origination Points?

Origination points are a fee paid to the person arranging your home loan. This “loan originator” could be a mortgage broker, company, or banker. Like discount points this is a fee you’ll pay at closing and one point equals one percent of your loan amount. How much is a reasonable fee to pay for mortgage origination? One percent is reasonable, provided the person arranging your home loan has not also marked up your mortgage rate to get a commission from the lender.

Many originators use a hidden commission known as Yield Spread Premium to boost their profits at your expense, often without telling or fully explaining what they’re doing. It’s not uncommon for shady mortgage brokers to charge you as much as two or three percent for loan origination in addition to inflating your mortgage rate for a bonus from the lender. Keep in mind that any markup of your mortgage rate by the broker drives up your monthly payment unnecessarily. Want to avoid overpaying for your next mortgage loan? Learn how to recognize and avoid the markup of your interest rate for Yield Spread Premium.

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