If you’re considering mortgage refinancing you might want to avoid paying the loan origination fee. Considering that many of the big names like Amerisave and Wells Fargo Refinance promote no fee refinance offers you might wonder what’s the point of paying the loan origination fee? The truth of the matter is that there are no free lunches when it comes to mortgage refinancing. Take a close at the fine print on those no fee refinance offers and you’ll find there are good reasons for paying your broker’s loan origination fee on your next home loan.
Loan Origination Fee Definition
Your mortgage loan origination fee, also called loan origination points, is simply the fee paid to your broker for the work they do arranging your mortgage refi. It’s not uncommon to find brokers charging 2-3% of your loan amount for arranging mortgage refinancing; however, a perfectly reasonable amount to pay your broker is actually one percent of your home loan amount. Did you know that all the closing costs you can expect to pay are negotiable and vary between lenders?
One of the most common mortgage mistakes is focusing only on getting the lowest refinance mortgage rates at the expense of fees. This mistake makes it difficult, even impossible to recoup your out-of-pocket expenses at closing. That’s right, the test of how good of a deal you’re getting when mortgage refinancing comes not from getting the lowest interest rate but how much you have to pay closing on your new home loan.
Mortgage Brokers Work For You
One of the advantages of finding the right kind of broker to arrange your new home loan is not only getting access to wholesale mortgage rates but avoiding lender junk fees. Good mortgage brokers can cut through the crap lenders are charging to boost their profits at your expense. Sure there are no fee refinance offers that will pay the broker’s fee for you; the problem is you’re giving up the lowest refinance mortgage rates in exchange for the lender paying the closing costs for you. Higher interest rates result in higher monthly payments and higher finance charges over the lifetime of your home loan.
What About Lender Junk Fees?
The mortgage loan origination fee you’re charged when refinancing isn’t a junk fee; however, your Good Faith Estimate is loaded with unnecessary fees. One of the biggest offenders you’ll find is the rate lock fee. This is usually slipped in by a dishonest broker; if you find rate lock fees in your loan documents it’s a sure sign that you need to look somewhere else. Other common junk fees include loan processing fees, application fees, and courier fees. Don’t be afraid to question everything on your Good Faith Estimate. All of the fees you find in your GFE are negotiable…spend a little time haggling and you can literally save yourself hundreds, even a thousand dollars closing on your new home loan.
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You can learn more about paying less for your loan origination fee and other closing costs with today’s lowest refinance rates by checking out my free Underground Mortgage Videos.
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If you’re shopping for a mortgage refinance and are using the Annual Percentage Rate to compare mortgage offers you’re not getting an apples-to-apples comparison of what’s out there. While providing an Annual Percentage Rate APR is required by Truth-in-Lending laws, there is no standard for how lenders calculate this figure. If you’re searching for the best refinance rates for your next home loan you’ll want to know the best way for mortgage rate shopping while avoiding junk fees. Here’s an article by Dan Green at The MortgageReports.com that explains why your lender’s APR is flawed:
More commonly called APR, Annual Percentage Rate is a government-made math formula. It aims to measure the total cost of borrowing over the life of a loan. APR is equal to (your loan size) + (your loan costs) + (your interest charges over time). APR is not the metric for comparing mortgages — it’s a metric. And, sometimes, the best way is the easiest way. Look at rates and look at fees. Beyond that, the rest can be smoke-and-mirrors.
Getting the lowest refinance rates in today‘s market isn’t hard if you qualify; however, the trick is paying less for loan origination fee and closing costs. One of the most common mortgage mistakes is not comparison shopping or negotiating fees when mortgage refinancing. The fees you pay at closing vary widely and are completely negotiable from one lender to the next.
You can learn more about paying less for your home loan when mortgage refinancing by checking out my free Underground Mortgage Videos.
If you’re considering jumping on the mortgage refinance bandwagon to take advantage of today’s best refinance rates there are several things you need to know about the fees you can expect to pay. Scouring the Internet for the best refinance companies or good banks to refinance with will help you find today’s lowest refinance rates; however, the test of how good of a deal you’re getting depends on the fees you pay. Getting a good deal means you need to understand the good faith estimate including what this document isn’t telling you. Here are several of my best tips before you refi to help you avoid paying unnecessary expenses and markup on your mortgage refinance.
Avoid Unnecessary Mortgage Refinance Fees & Markup
You might have come here today by typing a phrase into Google like Using Mortgage Broker Over Bank because you’re searching for the best refinance companies. The fact of the matter is that mortgage refinancing in today’s economy means that just about anyone has access to historically low mortgage rates; however, the trick is avoiding unnecessary fees and markup.
The reason your closing costs are so important when it comes to your mortgage refinance is that you have to recoup these expenses before gaining any benefit from your new, lower monthly payment and interest rate. The more you pay obtaining a new home loan the longer it’s going to take to break even on your closing costs from your savings.
Should I Refinance My Mortgage?
This is a question that leads to a several common mortgage mistakes. Conventional wisdom states that you should never do a mortgage refinance unless the best refinance rate you qualify for is exactly two percent lower than your previous interest rate. Making generalizations about anything in life is usually a bad idea and doubly so when it comes to your personal finances. So how can you decide if a mortgage refinance is a good idea in your situation?
Start by looking at how long it will take to recoup your mortgage refi expenses. Add up all the fees including the loan origination fee and closing costs. Divide this amount by the amount you’ll be saving each month and you’ll have the number of months it’s going to take to break even. If this number is acceptable to you then mortgage refinance probably makes sense in your situation.
How to Pay Less for Your Next Home Loan
You can cut the amount of time it takes to break even on your mortgage refinance by avoiding unnecessary fees. There are a number of mortgage junk fees that serve no purpose other than boosting lender profits at your expense. These junk charges include rate lock fees, application fees, loan processing fees and courier fees. The problem with using the good faith estimate to comparison shop when mortgage rate shopping is that there is no standard for the good faith estimate from one lender to the next. This makes apples-to-apples comparisons nearly impossible. How can you get the best deal on your next mortgage refi without paying unnecessary costs? The answer is simple: Find the right person to arrange your next home and you’ll not only avoid paying lender junk fees but you’ll have access to wholesale mortgage rates.
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You can learn more about finding the right person to arrange your mortgage refi while avoiding junk fees by checking out my free underground mortgage videos.
- Free Underground Mortgage Videos
Mortgage Refinancing with your bank can be a fast and convenient way of lowering the monthly payments on your home loan; however, is your bank really the best place for avoiding hidden markup and junk fees? Mortgage refinancing can save you thousands of dollars if you find the right person to arrange your next home loan; choosing the wrong person could cost you. Here are several of my best tips for getting the lowest mortgage rate while avoiding paying too much in closing costs and fees.
Is Mortgage Refinancing With Your Bank a Good Idea?
Many of your neighbors choose bank mortgage refinancing because it’s a quick and easy avenue to a new home loan. What could be easier than automatically transferring your mortgage payment from your checking account each month? The problem with bank originated mortgage refinancing is what your banker isn’t telling you and isn’t obligated to tell you. You see, banks are exempt from the Real Estate Settlement Procedures Act that requires loan originator to disclose their profit margin and markup of your interest rate. The banking lobby spent millions of dollars lobbying congress in the early nineties to have this key bit of disclosure legislation changed to exclude banks, thereby giving them an unfair advantage. When it comes to your home why would you even consider working with a lender that doesn’t have to play by the rules?
Bank Service Release Premium
I’m going to take a moment to explain how your bank exploits this loophole in the Real Estate Settlement Procedures Act. Every mortgage lender out there, banks or wholesale lenders alike makes money by selling their loans to investors on the secondary market. The higher the interest rate on these loans, the more profit lenders make from investors. Wholesale mortgage lenders have a disadvantage next to banks because their customers know how much their mortgage rates were marked up to create this profit for the lender. Not everyone understands it, but a savvy homeowner can save thousands by recognizing and avoiding this markup.
Your bank isn’t required to disclose any of this mortgage refinancing markup. They know the home loan rates other lenders are offering their customers; however, they mark the bank mortgage rates up as much as they think their customers will pay to create this extra profit known as Service Release Premium for the bank. Because your bank isn’t required to disclose any of this markup you to you all you’ll get when mortgage refinancing with your bank is an Annual Percentage Rate based on a Good Faith Estimate filled with low-balled fees.
Wholesale Mortgage Refinancing?
It is possible to refinance your home loan with a wholesale mortgage rate and pay only a one percent origination fee in the process. Banks simply do not offer their customers wholesale mortgage rates because they don’t have to; however, find the right mortgage broker and you can get this kind of deal and save yourself as much as $1200 per year from unnecessary markup. Who is the right mortgage broker for mortgage refinancing with a wholesale rate? Look for an independent, self-employed broker. These brokers will be much more willing to negotiate the type of deal that gets you wholesale rates without points or junk fees.
You can learn more about mortgage refinancing with wholesale rates by checking out my Underground Mortgage Videos.
Here’s a quick taste to get you started cutting as much as $1200 worth of fat from your mortgage payments every year.
Typing Refinance FHA Home Loan into Google might have brought you here today searching for the best way to get a new home loan. Did you know that simply searching for Refinance FHA Home Loan could result in overpaying thousands of dollars for your new mortgage loan? Many homeowners get a false sense of security because they get FHA home loans; however, government backing by the FHA does nothing to protect you from unnecessary markup or junk fees. Here are several tips to help you avoid the trap of simply typing Refinance FHA Home Loan and save thousands of dollars from unnecessary markup and junk fees.
Refinance FHA Home Loan Online
The internet is a great resource for your home loan. Just type Refinance FHA Home Loan into your browser and you’re on your way to finding great loan offers, right? Not exactly…what you might not know about those refinance FHA home loan offers is that they all include markup intended to create a commission for the person arranging the home loan. Nothing wrong with that you’re saying…mortgage brokers deserve to get paid too. The problem is that you’re already paying the person arranging your refinance FHA home loan a perfectly good loan origination fee. Any markup of your interest rate for lender paid compensation is at your expense in the form of a higher than necessary monthly payment.
How does this unnecessary markup of your mortgage rate quote work? Wholesale lenders publish daily rate sheets used by mortgage brokers to quote mortgage rates. These rate sheets include various amounts of markup intended to generate the fee known by mortgage fat cats as Yield Spread Premium. Simply put, brokers who lock and close your refinance FHA home loan with a higher than necessary interest rate get one percent of your loan amount for every .25 percent they overcharge you. Think of this fee as an incentive for overcharging you. Mortgage lenders do this because any refinance FHA home loan with a higher than market interest rate brings them a premium profit when sold to investors on the secondary market…this is how lenders make the majority of their profits.
How to Pay Less for Your Home Mortgage Loan
What your lender doesn’t want you to know is that you can get a wholesale mortgage rate. Wholesale mortgage rates are also known as par mortgage rates; this simply means there is no Yield Spread Premium generated for the broker and you won’t pay discount points to qualify. Most mortgage brokers will tell you that you cannot get wholesale rates because they’re protecting their commission. Truth be told, find the right mortgage broker and you’ll not only get a wholesale refinance FHA home loan but can avoid paying junk fees in the process.
What should you be paying for your refinance FHA home loan? A mortgage origination fee of one percent is more than reasonable for the broker’s work. This is assuming there is no Yield Spread Premium and you’re not finding junk fees on your HUD-1 like the broker courier fee. Here’s a bonus tip, never rely on the Good Faith Estimate to provide reliable lender fees; it is after all just an estimate given in “Good Faith.” When it comes to home loans the final word in lender fees is the HUD-1 statement. Lenders are required to give you one at least 24 hours prior to closing. If you’re not going through this document with a fine-toothed comb you could be losing thousands of dollars in unnecessary fees.
You can learn more about getting a wholesale mortgage rate for your refinance FHA home loan while avoiding junk fees by checking out my free Underground Mortgage Videos.
Here’s a quick video to get you started that exposes your lender’s dirty secret that according to the HUD Secretary will be responsible for fleecing American’s out of sixteen billion dollars this year alone.