Beware Unnecessary Discount Points

Refinance rates keep dropping breaking records nearly every week. Despite historically low mortgage rates many homeowners get caught playing “how low will you go” at the expense of fees. When you’re refinancing the closing costs you pay decide how good of a deal you’re getting regardless of your interest rate. Here’s a tip before you refi to help you avoid one common mortgage mistake that could cost you thousands of dollars.

Par Mortgage Rate Definition

If you’re in the market to refinance par mortgage rate is a term you need to familiarize yourself with. What are Par Mortgage Rates? Simply put a lender’s par rate is one that does not include discount points or markup for Yield Spread Premium. Discount points are a fee you pay at closing on your mortgage refi to buy down your interest rate. Yield Spread Premium is like negative discount points, cash you get back for taking a higher refinance rates, usually used to pay your loan origination fee and closing costs.

Most lenders quote refinance rates that include discount points, meaning their advertised mortgage rates are not as low as they seem. Whenever you see lenders advertising a mortgage rate that’s significantly lower than what other lenders are advertising, you’ll find discount points hidden in the fine print.

You can get that lender’s ultra-low refinance rates but it’s going to cost you a pretty penny in the form of pre-paid mortgage interest.

Discount Points Are a Waste of Your Money

Like a remnant of the cold war, discount points were useful in the 80s when mortgage rates were double digits. Today, refinance rates are beating sixty-year lows so what’s the point in paying thousands of dollars just to lower an already low rate by .25 or .5 percent?

The problem with paying unnecessary points or overpaying your loan origination fee is that it lessens the benefit you’re getting from today’s low refinance rates. You need to break even recouping your out-of-pocket expenses paid at closing or your simply throwing your money away by refinancing.

Here’s a Free Mortgage Tip: Beware loan offers that quote you insanely low refinance rates but neglect to mention that it costs a point or two to get that rate.

Loading mortgage rate quotes with unnecessary discount points is a commonly used bait and switch tactic used to get you in the door. Once you’ve committed to mortgage refinancing the truth comes out of the fine print and you’re stuck with a higher par interest rate.

Is Paying Discount Points Ever a Smart Move?

Refinance mortgage rates haven’t been this low in over sixty years. The last time it made sense to pay points Reagan was in the White house and big hair styles were in vogue. Why throw away your hard-earned cash for no reason?

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You can learn more about getting the best deal for your next mortgage without paying unnecessary discount points or lender junk fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started saving with the best mortgage lenders for your next home loan…

Who Has The Best Mortgage Rates?

Are you shopping for the lowest mortgage rates for your home loan but want to avoid paying unnecessary fees? Should you stick with a big lender like SunTrust Mortgage Rates or shop more from the best mortgage lenders? Did you know that the single most important aspect of your home loan in today’s market isn’t the mortgage rates? Here are several tips to help you get the best deal on your next home loan without walking away from cash on the table.

It’s All About The Fees…

If you’re in the market for mortgage refinancing and are shopping for the lowest mortgage rates you might want to reconsider your approach. If you really want lower refinance mortgage rates than your neighbors got, it’s not hard to do…if you’re willing to pay. Most homeowners focus so much on getting the lowest mortgage rates they lose sight of their closing costs and wind up paying too much for things like unnecessary discount points.

Remember discount points from when you purchased your home? Most people pay a point or two when buying their home because they simply don’t know better. Mortgage rates are hovering near sixty-year lows so paying discount points is not only unnecessary it’s a waste of your money!

Most lenders, even some credit unions like NFCU mortgage rates post tables that include discount points for no other reason that boosting their income. (at your expense) If you agree to pay discount points in exchange for lower refinance rates your out-of-pocket expenses will be higher and you’ll be gaining less benefit from today’s low mortgage rates.

Why Closing Costs Matter

Aside from the fact that closing costs are draining cash out of your pocket that you could be using for anything else, overpaying lender fees makes mortgage refinancing a losing proposition. The reason is that you must recoup these out-of-pocket expenses like the origination fee before benefiting from your new home loan. If you sell or refinance again before breaking even you’re losing money no matter how low your interest rate.

How to Approximate Your Break-Even Point

You can approximate the amount of time it’s going to take to recoup your closing costs by dividing your total out-of-pocket expenses by the amount your payment is going down each month. I say approximate because this method doesn’t take in to consideration any changes in your home loan’s term-length. Term-length is the amount of time you have to repay the mortgage (most people choose 30 years without considering the benefits of a 15-year home loan) and along with mortgage rates determines your payment amount.

If you shorten your term-length, say going from a 30-year fixed rate to a 15-year fixed rate home loan you’ll break even much more quickly than the calculation allows. Conversely, if you extend your term length say going from 15-years to 30 or worse yet 40 years, the calculation is no longer valid because you’re never going to break even.

Bottom line for today: the less you pay for mortgage refinancing the better off you’ll be. You can learn more about getting the best deal on your next home loan by checking out my free Underground Mortgage Videos.

How to Refinance With Today’s Lowest Mortgage Rates

Want to know how to refinance with the lowest mortgage rates without paying unnecessary lender fees? If you’re in the market for a new home loan you might be disappointed to find that the refinance mortgage rates you’re being quoted by lenders like Amerisave are higher than what’s being advertised on television. There are a several reasons why this could be happening; however, there are steps you can take to improve the quotes lenders offer you. Here are several tips on how to refinance with the lowest possible mortgage rates without paying one cent in unnecessary fees.

How to Refinance With Today’s Lowest Rates

Did you know that the refinance mortgage rates you see advertised on television are based on having a lofty credit score of 820 or better? If you have less than perfect credit the interest rates you’ll be quoted will be higher than what you’re seeing advertised. Here’s a chart to illustrate how your credit score affects the interest rates you’ll qualify for when mortgage refinancing and how much you’ll pay for financing for the duration of the loan.

credit mortgage rate How to Refinance With Todays Lowest Mortgage Rates

As you can see, the higher your credit score, the higher your refinance mortgage rates will be. Luckily, there are steps you can take to improve your credit score before applying for a new home loan, and you don’t have to be a finance guru to pull it off.

The first thing you’ll want to do before mortgage refinancing is take control of your credit. You don’t have to pay anything to get started; however, there are several paid tools that can make staying top of your credit easier. For example, I’m a member of USAA and they offer a low-cost credit monitoring service through Experian. I think I pay $12 a month for full access to all three credit reports (Equifax, Experian and Trans Union) as well as credit scores and monitoring from each. The service provides alerts when your credit reports are accessed or new information is added. Most credit Unions offer similar low-cost services. Bank of America and Wells Fargo have similar offerings; however, as always you can expect to pay more from a bank.

Your Credit Reports Are Free

Despite what those Free Credit Report dot websites tell you, all of your credit reports are available online for free without paying for some credit monitoring service. Several years ago Congress passed a law requiring all three credit bureaus to give you access to your credit file for free every year. The website you can access your credit reports on is AnnualCreditReport.com. They’ll still and try to sell you a credit score with your report; however, you don’t need to pay for this either as your lender will tell you your score. Once you have all three of your credit reports carefully review each one for mistakes or inaccurate information. If you find mistakes you’ll need to dispute the mistake with each credit bureau. Experian makes it easy to dispute mistakes online; however, Equifax and Trans Union still need you to write a letter.

Tips to Quickly Boost Your Credit Score

The most effective thing you can do to boost your credit score before mortgage refinancing is to pay down the balances on your credit cards. Don’t close accounts but try to carry a zero balance when possible. Also, avoid opening new accounts for at least 90 days before applying for a mortgage. Once you’re sure that you credit score isn’t holding you back we can get back to tips on how to refinance with today’s lowest mortgage rates.

Mortgage Rate Shopping Online

Shopping for refinance mortgage rates is a frustrating experience for many homeowners. Knowing how to refinance without paying junk fees is a common mortgage mistake overlooked by many homeowners. Qualifying for the lowest possible refinance rates at the expense of fees doesn’t automatically mean you’re getting a good deal. In fact, if you don’t recoup your out-of-pocket expenses from mortgage refinancing you’re actually losing money.

If you haven’t already answered the question “Should I Refinance,” now is probably as good a time as any. The easiest way to answer this question is to look at the benefit or refinancing as cost versus savings. Keep in mind that the average homeowner refinances every four years so you’ll need to recoup your out-of-pocket expenses long before to benefit from lower mortgage rates. You can calculate how long it’s going to take to break even on your closing costs by dividing your total out-of-pocket expenses including the mortgage origination fee by the amount you’ll be saving each month on your payments. This tells you the number of months it’s going to take to break even before benefiting from mortgage refinancing. If this time frame is acceptable for you then mortgage refinancing probably makes good sense in your situation.

Getting back to how to refinance without overpaying at closing; the best strategy for most is to enlist the help of a good broker. Finding the right mortgage broker eliminates the need for comparison shopping. Mortgage comparison shopping is very difficult to begin with as you can’t rely on the Good Faith Estimate to make an apples-to-apples comparison of fees from different lenders like Wells Fargo Refinance and Amerisave due to a lack of standards in the law protecting homeowners from predatory lending.

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You can learn more about finding the right broker to arrange your next home loan without overpaying at closing by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started learning how to refinance without those pesky lender junk fees…

Waiting for the Lowest Refinance Mortgage Rates Could Cost You Thousands

If you’ve been waiting for the lowest refinance mortgage rates instead of refinancing your higher rate mortgage loan you could be losing out on thousands of dollars. Refinance mortgage rates from companies like Amerisave are next to impossible to predict so if you’re spending time trying to game the market there are other more tangible ways to save money. Here are several tips to help you get the lowest refinance mortgage rates from the best mortgage lenders without overpaying closing costs on your next home loan.

Lowest Refinance Mortgage Rates Aren’t Necessarily The Best Deal

Did you know the home loan with the lowest mortgage rates isn’t necessarily going to save you the most money? In fact, many loans quoting the lowest refinance mortgage rates wind up costing you a lot more at closing making it difficult, if not impossible to recoup your out-of-pocket expenses.

How good a deal you’re getting when mortgage refinancing depends not on getting the lowest refinance mortgage rates, but how much you’re paying for the loan origination fee and other closing costs. The reason fees are so important on your mortgage refi is that you have to recoup these out-of-pocket expenses before you’re going to benefit from a lower payment amount. Most people keep their home loans for four or five years before refinancing again; if you haven’t broken even recouping the closing costs on your last home loan you’re throwing money out the window.

Getting back to timing the market, if you’re paying your existing home loan at five percent or more waiting for mortgage rates to dip below 3.75%, you’re also throwing money way. By taking advantage of today’s refinance mortgage rates and avoiding lender fees you could cut as much as $200 or more a month from your payments. Over the course of a year that adds up and who wouldn’t want an extra $200 a month in their family’s budget?

How to Avoid Unnecessary Lender Fees

One of the most common mortgage mistakes is focusing only on getting the lowest refinance mortgage rates at the cost of fees. Some homeowners even fork over discount points at closing, trying to get a better deal.

One discount point is defined as a fee of one percent of your home loan paid to lower your refinance mortgage rates by .25%.

This is almost always a bad idea in today’s market because it only lengthens the amount of time it takes to break even recouping your expenses.

Ask For Lender Concessions When Refinancing

Did you know that all the closing cost mortgage lenders charge are negotiable and vary from one lender to the next? Don’t be afraid to haggle and ask your lender to credit the overage to get a better deal. If you’re considering a Wells Fargo refinance and they’re not willing to negotiate simply take your business somewhere else. Keep in mind that no fee refinance offers aren’t necessarily going to be the best deals either as you’re always trading lender fees for higher refinance mortgage rates.

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You can get more tips before you refi on getting today’s best refinance mortgage rates by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to help you avoid overpaying one red cent for your next home mortgage loan…

Today’s Top Mortgage Lenders

If you’re considering mortgage refinancing you might be searching for the top mortgage lenders online. While this approach may get you today’s lowest mortgage refinance rates it won’t necessarily help you avoid paying lender junk fees. One of the most common mortgage mistakes is focusing only on getting the lowest refinance rates at the expense of fees and points; the closing costs you pay make or break your mortgage loan and can quickly turn the deal into a big sticky lemon. Here are several of my best tips before you refi to help you find the top mortgage lenders without paying lender junk fees or markup.

Top Mortgage Lenders Online

The Internet is an excellent resource for shopping for a home loan; however, there are several things you need to know about the rate quotes and Good Faith Estimates that you receive online. First of all, should you trust the Good Faith Estimate and Annual Percentage rate when shopping for mortgage refinancing?

The Annual Percentage Rate (APR) is supposed to give you an idea of the total cost of your home loan expressed as a percentage rate that you’ll pay every year for your home loan. The problem with APR is that while Truth in Lending laws require mortgage lenders to give you the APR there is no standard for how they calculate or what fees are included in the percentage. This effectively makes it impossible to get an apples-to-apples comparison of the fees you’ll pay from one lender to the next.

What about the Good Faith Estimate (GFE) you get from the top mortgage lenders? Understand that the GFE is simply an estimate given in “good faith” and is not binding at all. When it comes to mortgage refinancing fees the last word at the end of the day is on your HUD-1 Settlement Statement and the GFE is little more than a marketing tool used to promote overpriced home loans.

Get The Best Refinance Rates Without Junk Fees

If you want the lowest mortgage rates without paying unnecessary fees, instead of shopping for the top mortgage lenders it makes more sense to focus on finding the right person to arrange your next home loan. Refinancing with a good mortgage broker will not only get you today’s lowest refinance rates from the top mortgage lenders but will help you avoid paying junk fees.

How do you find a good mortgage broker? First you’ll need to understand how brokers are compensated for the work they do arranging your home loan. Typically brokers get paid by charging you a loan origination fee which is where most of your neighbors overpaid for their home loans. Brokers typically charge anywhere from one to three percent; however, paying one percent for your broker’s work is perfectly reasonable.

Don’t be afraid to haggle over fees when shopping for a broker to arrange your mortgage refinancing with today’s top mortgage lenders and don’t offer to pay more than one percent for loan origination.

Click Here to Get Started

You can learn more about mortgage refinancing with the top mortgage lenders while avoiding unnecessary fees by checking out my free Underground Mortgage Videos.

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

Here’s a quick sample to get you started refinancing with today’s top mortgage lenders.