The Hidden Truth About Mortgage Refinancing

Mortgage Refinancing has the potential to lower your payment and save you a lot of money. The problem is that common mortgage mistakes can quickly push you from the savings column into losing money. Here are several truths your broker won’t tell you about refinancing your home that will save you thousands of your hard-earned dollars.

Mortgage Closing Costs vs. Potential Savings

The goal of refinancing your home is to save money. You save by getting a lower monthly payment from today’s best refinance rates. You lose money by overpaying at closing. The more you pay closing on your new home loan for things like the loan origination fee or discount points the less benefit you’re getting from lowering your mortgage rate.

Makes sense right? The less you pay at closing the better off you’ll be in the long run. A good mortgage broker will explain how your break-even point is calculated and how long it will take you to get there. You can approximate your break-even point by adding up all of your out-of-pocket expenses and dividing the total you’re spending by the amount you’re saving every month. This will tell you (approximately) how long it’s going to take to break-even recouping your closing costs.

It’s worth saying that this calculation is only valid if you keep the same mortgage term length or choose a shorter one. Lengthening your term length, going from a 15-year to a 30-year mortgage for example, means you’ll never break even because of the finance costs you’re paying for those extra years.

What Your Mortgage Brokers Won’t Tell You

There are consequences to refinancing your home that you need to know about. The first consequence is how refinancing affects your home mortgage loan’s amortization. Mortgage amortization is the process of paying down your home loan over time that factors in the interest you’re paying. Home loans are front-loaded with interest meaning that from day one the majority of your payment gets pocketed by the lender as interest.

As a result you’re building very little equity in your home during the early years of your mortgage payments. This gradually reverses over time and you being building equity in your home and stuffing less cash in your lender’s pocket. Once consequence of refinancing your home is that the equity you’re building comes to a screeching halt after refinancing.

Your Mortgage Interest Tax Deduction

Another consequence of today’s low refinance rates is that come April the amount you’ll be able to deduct for mortgage interest is going to be painfully smaller. This could lead to a higher than anticipated tax liability or a smaller than expected tax refund.

It’s worth taking a look at how your tax liability will be affected and planning accordingly to avoid an unpleasant surprise next April.

Watch Out for Hidden Mortgage Fees

If your existing mortgage includes a prepayment penalty it could be expensive getting into a new home loan. Check your loan contract or call your current lender to find out if you’ll pay a penalty for refinancing and if and when that prepayment penalty expires.

Another example of a lender fee that drives up your cost with very little benefit is the discount point. If you spend any amount of time shopping for refinance rates you’ll find that lenders quote refinance rates that include discount points first.

Discount points are a fee you pay in exchange for lowering your mortgage rates. Typically one discount point is one percent of your loan amount and lowers your interest rate by .25%. Is it worth it? Mortgage refinance rates are at historically low levers so paying discount points doesn’t make sense for most homeowners. This fee raises your out-of-pocket expenses lengthening the amount of time it takes you to break even.

The average homeowner refinances every four or five years meaning if you haven’t broken even because you overpaid the loan origination fee or paid unnecessary discount points means you’re losing money no matter how low your refinance rates. It’s best to do your refinance rate shopping with quotes that do not include discount points.

How to Pay Less For Your Next Home Loan

Invest a little time shopping for the lowest refinance rates AND fees and you can pay significantly less at closing than your neighbors. Many of the fees you pay like the broker’s loan origination fee, application fee, processing fee, administrative fee or rate lock fee can be negotiated to pay less or not pay at all.

Some of these fees are simply junk fees that do nothing but drive up your out-of-pocket costs. Comparison shopping and careful negotiation can literally save you thousands of dollars.

Click Here For More Details…

You can learn more about getting the best deal on your next home loan while avoiding lender junk fees and points 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 refinancing with today’s best mortgage lenders without overpaying…

10 Steps to Lower Refinance Rates

Getting the lowest refinance rates for your next home loan is important. Overpaying at closing can quickly turn even the best refinance rates into an expensive mistake. Mortgage rate shopping isn’t an apples-to-apples comparison, especially when you’re considering closing costs like the origination fee. Here are ten tips to make sure you’re getting today’s lowest refinance rates without paying unnecessary discount points or junk fees.

1. Beware Unnecessary Discount Points

Lenders usually advertise refinance rates that include discount points. That means if you want the interest rate being advertised you’ll have to come up with the cash at closing. One discount point is one percent of your loan amount which typically lowers your refinance rates by .25 percent.

It doesn’t matter if you’re seeing refinance rates quoted online, on the television or the radio, take a look at the fine print and nine times out of ten the offer requires discount points. Suppose you find refinance rates quoted at 3.25% with one discount point. On a $300,000 mortgage you’d be required to pay $3,000 at closing to qualify for the offer being advertised. Discount points are paid on top of any other lender fees and closing costs you’re required to pay for mortgage refinancing.

Should you pay mortgage discount points? Refinance rates are at their lowest levels in history. One common mortgage mistake made by many homeowners is trying to get the lowest possible interest rate at the expense of fees. Remember when refinancing you won’t benefit from today’s lowest refinance rates until you break even recouping your out-of-pocket expenses. Paying unnecessary discount points means it’s going to take that much longer to break even before you’ll benefit from your new home loan.

2. Lowest Refinance Rates Could Be The Worst Deal

As I mentioned, the loan with the lowest refinance rates could have the highest closing costs even if the Annual Percentage Rate (APR) is lower. The most expensive home loan often has the lowest APR because of the way lenders factor discount points as prepaid interest into their calculations. This is one of the many reasons Annual Percentage Rate is a flawed calculation and should never be used for mortgage rate shopping.

3. Compare Closing Costs On Every Mortgage Offer

When shopping for the lowest refinance rates make sure you’re comparing loan offers using the lender’s par rate. Par mortgage rates do not include discount points or markup for Yield Spread Premium (YSP). YSP is cash paid by the lender when you accept higher than necessary refinance rates. If you eliminate discount points and Yield Spread Premium from your quotes you can focus on comparing the loan origination fee for each offer. Loan origination and discount points are the most commonly overpaid mortgage fees. If you’re short on cash for closing Yield Spread Premium could cover your closing costs and origination fee at the expense of a higher refinance rates.

4. Consider Shorter Loan Term Lengths

When shopping for a new home loan consider 15 year refinance rates. 15 year mortgage rates recently dipped below three percent which could save you a significant amount of cash over the duration of your home loan, especially if you’re still paying six percent or more.

While it’s true that your payment on a 15 year mortgage will be higher than if you had a 30 year term length the amount you’re saving by eliminating that extra 15 years can be staggering.

5. Beware Bad Financial Advice

If your bank or broker is pushing a loan program on you that could overextend your budget don’t be afraid tell them no. Pushy brokers often recommend programs that don’t have your best interests at heart so it’s best to do your homework comparing refinance rates AND fees before accepting a loan officers recommendation.

Many loan officers pitch riskier adjustable rate mortgage rates when you’re shopping for fixed refinance rates because the lower payment seems more attractive. Always check the fine print for discount points and pay close attention to your broker’s loan origination fee.

6. Don’t Overlook Community Based Credit Unions

Just because Wells Fargo is the largest nationwide lender doesn’t mean they’re the best. I’ve reviewed dozens of mortgage lenders on this site and the best deals I’ve found when it comes to fees were from small community based credit unions. If you don’t have the time to shop for the lowest refinance mortgage rates an honest broker can find you a good deal while helping you avoid unnecessary fees and points.

Don’t stop with just one or two mortgage refinancing quotes. You could be missing out on thousands of dollars in savings if you go about refinance rate shopping the wrong way. If your neighbors put as much effort into mortgage rate shopping as they did shopping for a new plasma television they wouldn’t be overpaying thousands of dollars on their current home loan.

7. Research The Best Mortgage Lenders

When shopping for the lowest refinance rates take a close look at the top mortgage companies. Look for lender reviews like the ones I’ve published here and find out who services the loan. Many lenders sell your home loan as soon as you’ve closed on it meaning you’re dealing with a servicing company for your payments and when problems arises.

This is another selling point for small community based credit unions. Most credit unions service their own home loans and you’ll always have a real person to deal with in person if you hit a snag.

8. Check Your Credit Reports First

The mortgage refinance rates you’re quoted depend primarily on your credit score and loan-to-value ratio. If your quotes are coming in higher than what lenders are advertising the likely culprit is your credit score. Check your credit reports for errors at AnnualCreditReport.com and avoid opening new credit accounts until after closing on your new home loan.

If you find mistakes in your credit reports be sure to dispute the errors as any negative information found in your credit reports drags down your credit score.

9. Should You Float or Lock Refinance Rates?

Knowing when to lock or float your refinance rates could mean the difference between getting the lowest refinance rates and just missing the best deal. Once you lock a great refinance rate it’s yours forever. (Almost) The duration of your rate lock needs to allow you enough time to close and get your mortgage funded. Lock for too long and you’ll get higher refinance rates. Lock too short and you could find your lock expires if you hit a snag during underwriting.

If refinance rates continue to fall as they have been consider floating your rate. Also, watch out for rate lock fees. This is a common junk fee that raises your closing costs unnecessarily. Some lenders require a rate lock deposit which is applied to your closing costs. This is still cash out of your pocket that you could be using for other things.

10. Don’t Rush To Get Mortgage Refinancing Done

Mortgage Refinancing isn’t something you should take lightly. According to the HUD Secretary most homeowners are overpaying because they neglected to do their homework. If you find a pushy broker or loan officer don’t feel obligated to continue working with them.

Take your time and pay close attention to the mortgage origination fee as this is one of the most commonly overpaid closing costs. The time you spend comparing loan offers AND fees will be well worth your while and can save you thousands of dollars.

Click Here For More Details…

You can learn more about getting the lowest refinance rates without unnecessary discount points or junk fees 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 refinancing with the best mortgage lenders while avoiding junk fees…

What is a Mortgage Broker?

The right mortgage broker arranging your home loan can save you thousands of dollars from unnecessary points and junk fees. The wrong mortgage broker could turn your home loan into a train wreck that could take years to recover. What is a mortgage broker? Someone you should approach with a healthy dose of suspicion. Here are several tips to help you find the right person to arrange your next home loan.

Mortgage Brokers Are Salespeople

Brokers originate home loans for lenders, receiving a commission for their work. The mortgage broker’s job is to connect you with the best lender for your situation, be it purchase or refinancing. The problem is many mortgage brokers have earned a bad reputation as sleazy sales types out to earn a commission at your expense.

Ideally your mortgage broker serves as an impartial intermediary between you and the bank:

You < –> Your Mortgage Broker < — > The Bank or Lender

Mortgage brokers can be described as selling you retail home loan products from wholesale lenders and banks.

Mortgage Brokers Work For You

Many homeowners skip the middleman by going to their bank or a so-called direct lender. This strategy eliminates the mortgage broker in name only as you still pay a loan origination fee. Skipping the mortgage broker won’t get you wholesale purchase or refinance rates either. There is no cutting out the middleman when it comes to mortgage loans. You’ll pay one way or another.

Since you’re going to be paying for loan origination anyway why not find the best mortgage broker to arrange your home loan? The right person works for you gathering important documentation about your home, income, employment and credit making sure you sail through underwriting without a hiccup. The mortgage broker can also place you with the lowest cost mortgage solution for your situation, educating you along the way.

How Do Mortgage Brokers Get Paid?

Your mortgage broker gets paid form one of two sources. They can charge you a loan origination fee which you’ll pay out-of-pocket at closing, OR they can accept lender paid compensation in the form of Yield Spread Premium. Many homeowners incorrectly think that the government outlawed Yield Spread Premium; however, the government only prohibited charging you for loan origination and accepting Yield Spread Premium from the lender.

So what’s Yield Spread Premium? Simply put, it is cash paid by the lender for the broker marking up your mortgage interest rate. This cash can be used to pay your origination fee and closing costs depending on how much markup you’re willing to accept. Yield Spread Premium is what pays for those “No Fee” refinance offers you see lenders advertising.

Use Your Mortgage Broker to Rate Shop

The main advantage of using a broker to arrange your home purchase or mortgage refinancing is the ability to leverage their contacts and experience to get you the lowest mortgage rates. Brokers can weed through lender junk fees and unnecessary discount points to get you the best deal. The problem is there are mortgage brokers out there that abuse their position by overcharging their origination fee.

Bad mortgage brokers are easy to spot. If yours is too busy selling home loans to process their own paperwork and charges you for a third-party loan processor you should consider taking your business elsewhere. You want a mortgage broker that’s going to give your home loan the attention it deserves without overcharging you.

It’s a good idea to shop around from several brokers before choosing one to arrange your home loan. Different mortgage brokers will have different connections with lenders that others won’t. Be sure and ask what lenders a broker works with before choosing one.

How Much Should You Pay Your Mortgage Broker

If you’re paying the origination fee yourself and not taking higher mortgage rates for Yield Spread Premium a reasonable amount is one percent of your home loan amount. Keep in mind that loan origination fees are negotiable and vary from one mortgage broker to the next. Don’t be afraid to haggle with the person arranging your home loan to get the best deal. Remember the less you pay closing on your new home loan the more benefit you’ll get from today’s low rates, especially when refinancing.

Click Here For More Details…

You can learn more about finding the best person to arrange your next home loan while avoiding unnecessary points and fees 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 without falling for unnecessary fees…

Cash In Mortgage Refinancing Is an Option

Are you struggling to qualify for refinance mortgage rates with today’s best mortgage lenders like Amerisave because of your loan-to-value ratio? While the President promises to submit broad based mortgage refinancing to Congress, many homeowners are qualifying for better refinance rates with cash-in mortgage refinancing. In fact, according to Freddie Mac one half of mortgage refinance transactions today paid to qualify. Here are several tips to help you decide if cash-in mortgage refinancing is right for you.

What is Cash-in Mortgage Refinacing?

Everyone’s familiar with borrowing against your home equity when refinancing; however, cash-in options are a relatively new phenomenon spurred on by the housing crisis. If you’re underwater in your existing home loan qualifying for mortgage refinancing can be difficult unless you’ve got sufficient money on hand to pay down your home loan balance to a suitable loan-to-value ratio.

According to mortgage giant Freddie Mac, 49% of mortgage refinance transactions in the fourth quarter of last year were of the pay to qualify variety. That’s the highest levels in nearly 26 years. As for those equity tapping mortgage refinance loans responsible for putting so many homeowners underwater, they’re down to 15 percent and the lowest levels in 26 years.

Is Cash-In Mortgage Refinancing Right For You?

Mortgage refinance rates are at their lowest levels in sixty years which is motivation for most to take advantage and lower their payment amount. The average homeowner saves nearly $3,000 a year by lowering their interest rate by 1.5% on a $200,000 home loan.

Should you consider cash-in mortgage refinancing? Well, first of all you have to have sufficient money on hand to buy yourself a favorable loan-to-value ratio. Second, you have to have a high enough credit score to qualify for today’s low refinance mortgage rates and pay the loan origination fee, discount points, and closing costs.

It is possible to recoup your out-of-pocket expenses, including the expenses you’re paying up front to qualify from the lower payment amount. While recouping the money you paid to qualify is actually repaying yourself it’s nice to know you’ll get that money back, including lender fees and any mortgage broker fees.

How to Recoup Your Closing Costs

The goal for cash-in mortgage refinancing is simple, lower your payment as much as possible allowing you to recoup your out-of-pocket expenses as quickly as possible. The way to do this is qualify for the lowest possible refinance rates while avoiding junk fees. The most commonly overpaid fees are the mortgage loan origination fee paid to the broker and discount points paid to the lender. There’s no sense paying discount points if the benefit you’re getting from buying down your mortgage rate doesn’t allow you to recoup the fee.

Remember to Calculate Your Break Even Point

You can figure out how long it’s going to take to get your cash back by adding up your total costs, including the cash-in and dividing by how much your payment will go down each month. This will tell you the number of months it’s going to take to break even. If you refinance or sell your home before the break-even point you’re actually losing money, no matter how low your new interest rate.

Bonus Tip: Some unnecessary fees you’ll want to avoid when refinancing your home include rate lock fees, application fees, loan processing and courier fees. These fees are pure junk and make it more difficult, even impossible to break even recouping your closing costs. Don’t be afraid to call out your lender on junk fees or threaten to take your business elsewhere. Mortgage brokers and lenders are a dime a dozen and in this economy you can find honest professionals willing to work for your business.

Click Here For More Details…

You can learn more about your cash-in mortgage refinancing options, including strategies for avoiding unnecessary lender 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 saving that $3,000 a year on your mortgage loan just like your neighbors did…

Who Are The Best Mortgage Companies For Your Next Home Loan?

Are you searching for the best mortgage companies offering today’s lowest refinance rates but want to avoid paying unnecessary fees? Did you know that closing costs are up 35% from a year ago primarily due to lender junk fees? One of the most common mortgage mistakes is overpaying the loan origination fee when refinancing which can amount to losing thousands of dollars. Here are several tips before you refi to help you find the best mortgage companies without paying lender junk fees at closing, saving you thousands of dollars at closing.

Who Are The Best Mortgage Companies Online

How do you find the best mortgage companies when refinancing? Should you go with one of the Internet giants like Amerisave, USAA Mortgage Rates, Wells Fargo Refinance, or can a local mortgage broker help find you the best deal? Most of your neighbors approach mortgage refinancing with the recommendation of a friend or by collecting Good Faith Estimates (GFE) trying to compare fees.

The problem with the Good Faith Estimate approach is that the law offers no standards for lenders to follow when preparing loan documents; quoting fees on the GFE is little more than a marketing tool used by lenders to make their offers seem more attractive. Because of this lack of standards fee shopping using the GFE does not give you an apples-to-apples comparison making it nearly impossible to find the best deal.

How to Get The Lowest Refinance Mortgage Rates

Mortgage brokers can be a valuable resource for finding the lowest refinance rates while avoiding unnecessary fees, if you find the right person to arrange your refi. Many of your neighbors try and cut out the middleman by signing with a company like Amerisave Mortgage; however, this doesn’t give you the benefit of the broker’s experience for comparison shopping rates or fees. Mortgage refinancing with a good broker allows you to compare loan offers using this person’s experience. Finding an honest mortgage broker is also the easiest way to avoid paying unnecessary lender fees at closing.

How to Find an Honest Mortgage Broker

Hiring a mortgage broker is like hiring any other professional to work on your home. The recommendations of friends can be helpful but there are other factors you’ll want to consider. One of the most important considerations to make when mortgage refinancing are the closing costs you’ll pay. Whether or not you’re getting a good deal on your refi depends not just on getting the lowest refinance rates but how much you’re paying to get them. If you’re not able to break even recouping your out-of-pocket expenses from closing you’re losing money no matter how low your interest rate.

Getting back to finding an honest broker the easiest way to choose the right person is by their experience level and the fees they charge. Try to find a broker with at least ten years’ experience and make sure they have the appropriate licenses to originate home loans in your State.

You can verify your broker’s license by visiting the Nationwide Mortgage Licensing System and Registry at:

http://www.nmlsconsumeraccess.org/

Once you’ve verified that your broker is licensed and checked for complaints you’ll want to look at the mortgage loan origination fee. A reasonable amount to pay for loan origination is one percent of your home loan; many brokers try and inflate this fee by charging double, even more. Keep an eye out for unnecessary broker fees including third-party processing and broker courier fees. A sure sign that you’re dealing with a dishonest broker is quoting you a rate lock fee. Lenders don’t charge fees to lock your mortgage rate so any broker that quotes you one is padding their commission at your expense.

I’ve also created a list of Mortgage Licensing Regulators by State.

Despite a few bad apples overcharging their clients I truly believe that finding an honest broker to arrange your next refi is the best approach to refinancing with today’s best mortgage companies without paying unnecessary fees or markup.

Click Here For More Details…

You can learn more about refinancing with today’s best mortgage companies without paying junk 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 best mortgage companies without overpaying…