Mortgage Rates Information

Are you considering a new mortgage loan and are looking online for Mortgage Rates Information? There are several things you need to know about the mortgage rate quotes that you get from a mortgage broker or find on the Internet that can result in overpaying thousands of dollars for your home mortgage.

Here are several tips to help you avoid paying too much when refinancing your home mortgage loan.

Mortgage Rates Information

How do mortgage rates work anyhow? With the exception of bank originated mortgage loans, mortgage rates come from wholesale lenders. These lenders don’t deal with the public directly but offer loans through mortgage brokers and other companies that resell their mortgage loans for a commission. This commission can come from two sources, the first being you and the second being the lender.

Mortgage Origination Fees

When your mortgage company or broker charges you a fee for arranging your loan this is called a loan origination fee and should appear on your Good Faith Estimate and HUD-1 Statement. A reasonable amount to pay for this origination fee is one percent of your loan amount and will be due at closing. Many mortgage brokers overcharge this origination fee and it’s not uncommon to find Good Faith Estimates with 2.5% or more. (That doesn’t mean you should pay it though…)

The second commission you need to be aware of (and this one’s important) is a fee paid by the mortgage lender. Why should you be concerned about a fee paid by the mortgage lender? If the lender’s paying the fee it’s not coming out of your pocket right…or is it?

Why would the mortgage lender pay a fee to the broker for arranging your home loan? I mean, what’s in it for them, really? Mortgage lenders know that home loans with higher than market interest rates bring them a premium profit when the loans are sold on the secondary, or investor mortgage market. Your lender pays your mortgage broker a fee for locking and closing your home loan with a higher than necessary mortgage rate. This means your monthly payment is higher than it should be to give that broker a commission. (At your expense…)

Should the broker get a commission from the lender on top of what you’re already paying them for loan origination? Your broker probably thinks so; however, there are a number of upfront and honest mortgage brokers out there willing to refinance your home for a flat one percent origination fee without slipping in junk fees or marking up your mortgage rate. My Underground Mortgage Videos will show you exactly how to find this person.

What About Bank Mortgage Loans?

You might think that you can avoid mortgage broker markup and commission simply by refinancing with your bank. The problem is that your bank knows the same thing about making a profit from the secondary mortgage market by selling your home loan. There might not be a middleman marking up your mortgage rate to get a commission from the bank; however, the bank still marks up your mortgage rate to boost their profits when selling your loan. Another problem with your bank mortgage is thanks to the Banking Lobby in the United States, banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margins on your loan.

Bottom line if you are considering taking out a mortgage loan from your bank: you’ll never get anything close do a par mortgage rate…

Par Mortgage Rates Definiton: Any interest rate you qualify for without having to pay points up front and does not create an “extra” commission for the person arranging your loan.

How to Get the Best Deal When Refinancing

Getting the best deal on your next home mortgage loan boils down to finding the right person to arrange it for you. There are plenty of honest mortgage brokers willing to work for a one percent origination fee without marking up your mortgage rate or throwing in junk fees. Who is the best mortgage broker to refinance your home loan? It’s probably not the broker working for a large firm with expensive office spaces or a company hummer. These brokers are simply unable or unwilling to negotiate the kind of deal described here when refinancing.

Tell your prospective mortgage brokers that you are willing to pay a one percent origination fee for their services and will not accept any loan that includes Yield Spread Premium. Remember, Yield Spread Premium is the commission paid by your lender when the mortgage broker locks and closes your home loan with a higher than necessary mortgage rate. Avoiding this unnecessary markup of your mortgage rate can save you thousands of dollars every year that you keep the loan.

You can learn more about refinancing your home for a flat one percent origination fee without paying unnecessary markup of your mortgage rate or junk fees at closing by registering for my Underground Mortgage Videos. Register today and you’ll have instant online access to the mortgage videos and materials without downloading anything to your PC.

Mortgage Loan Origination Fees

Mortgage loan origination fees are a fee charged by the person arranging your loan and are a common way to overpay for your mortgage loan.

The origination fees you pay are just one of the ways mortgage brokers receive compensation for their work; there are other forms of compensation that raise your monthly payment and cost you thousands of dollars.

Here are several tips regarding Mortgage Loan Origination Fees to help you avoid paying too much for your next mortgage loans.

Mortgage Loan Origination Fees

Origination fees are also called origination points and are a fee charged by the person arranging your home loan at closing. Remember that one “point” is one percent of your loan amount. A reasonable amount to pay for mortgage loan origination fees is one point, or one percent of your loan amount; however, many brokers pad their fees and try and charge you much more. If you’re upfront with the broker when shopping around it is possible to find honest mortgage brokers willing to work for one percent.

Other Mortgage Broker Compensation

Mortgage brokers are basically salespeople reselling mortgage loans from wholesale lenders for a commission. Much like a salesman on a used car lot they’re looking to boost their commission in any way possible, even at your expense. This is the mortgage industry’s dirty little secret…lenders reward brokers that lock and close home loans with above market interest rates with a hefty commission. This commission often doubles, even triples the broker’s compensation from your loan…driving your monthly payment up unnecessarily.

Beware Yield Spread Premium

How does this unnecessary markup of your mortgage rate work? Did you know that for every .25 percent that your mortgage broker overcharges you the lender pays them one percent of your loan amount? That quarter point may not seem like much; however, many brokers don’t stop there and mark their loans up by as much as .75 percent or more. This markup adds hundreds of dollars to your monthly payment which is thousands of dollars you’re throwing away just to give the mortgage broker a bonus.

Mortgage brokers don’t talk about Yield Spread Premium because it is such a significant part of their bottom line. Many brokers become angry and defensive when questioned about Yield Spread Premium and have clever ways of hiding it in your loan documents. Were you charged a fee for locking in your mortgage rate and did the rate lock confirmation come on the broker’s letterhead? This is the first sign of a dishonest mortgage broker. Mortgage lenders DO NOT charge fees for locking in a mortgage rate… this “rate lock fee” is pure garbage. The fact that your rate lock confirmation did not come from the lender means the broker is hiding their markup of your mortgage rate because the lenders rate lock confirmation clearly shows any Yield Spread Premium associated with your mortgage rate.

How to Avoid Yield Spread Premium

Just like your origination fee, Yield Spread Premium on your mortgage loan can be negotiated. Look for mortgage brokers that are self employed working out of home or small office spaces. These brokers don’t have the overhead of large firms and are much more likely to negotiate with you on their fees. Tell the mortgage broker upfront that you will not accept any home loan that includes Yield Spread Premium and are willing to pay a one percent origination fee for their services. If the mortgage broker agrees to these terms when you lock in your rate make sure the rate lock confirmation comes from the lender and there is no Yield Spread Premium present on the lock.

What About Bank Mortgage Loans

Can’t you just avoid this entire mortgage broker hubbub by taking out your mortgage from a bank or credit union? While it is true banks are convenient when it comes to mortgage loans you’ll never get anything close to the deal you could get from a mortgage broker. Banks don’t charge Yield Spread Premium on their loans because they fund mortgage loans with the bank’s money; however, banks have their own markup, known as Service Release Premium. Your bank is not required to disclose anything about this markup to you due to a little known loophole in the Real Estate Settlement Procedures Act, meaning you’ll never know the rate you could have gotten from a mortgage broker.

Banks don’t offer their customer par mortgage rates, nor do most mortgage brokers. A par mortgage rate is one that doesn’t cost you discount points to get and does not create a commission for the broker from Yield Spread Premium. Getting a par mortgage rate for yourself is not as hard as you think; you don’t have to be a financial guru to negotiate a deal like the one I’ve described here… you just need to find the right mortgage broker for the job.

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Mortgage Refinance Information

piggybank Mortgage Refinance InformationIf you’ve been considering a mortgage refinance for your existing home loan, now is an excellent time to take advantage of historically low interest rates. As a homeowner in today’s pinched economy you might be concerned about overpaying for the new mortgage.

While mortgage refinancing is not for everyone it makes sense if you are looking to lower your monthly payment or convert your Adjustable Rate Mortgage to a fixed rate loan. Here are several tips to help you decide if mortgage refinancing is right for you and to avoid overpaying for your next home loan.

Everyone’s finances are different and mortgage refinancing won’t make sense in every situation. You might be familiar with the “two percent rule” of mortgage refinancing; however, this “rule” is simply bad advice and it makes more sense to determine how long it will take to recoup your expenses from refinancing than to use a blanket “two percent rule.”

Is Mortgage Refinancing Right For You?

To make an informed decision about refinancing your mortgage you’ll determine how much it will cost you to take out the new loan. This includes all closing costs and expenses associated with the new mortgage loan. Suppose for instance it will cost you $3500 to refinance your home and the new monthly payment is going to be $100 lower than your existing mortgage payment. In this example you would divide the cost of refinancing by the savings to determine the number of months it will take to recoup your expenses. ($3500/$100 = 35 months, just shy of three years)

If you can live with the amount of time it takes to recoup your refinancing expenses with the lower payment then mortgage refinancing makes sense in your situation.

Refinance Your ARM to a Fixed Rate Mortgage

Another common reason for refinancing is to convert a risky Adjustable Rate Mortgage to a more secure fixed rate loan. Many homeowners are finding themselves in financial hot water when their lenders adjust their payment amounts. Many Adjustable Rate Mortgages come with teaser rates that expire after a period of time which can lead to payment shock when the lender adjusts the payment amount to include the new, higher mortgage rate. If you find yourself in this situation and are unable to refinance because you owe more than your home is worth you risk losing your home to foreclosure.

Lower Your Mortgage Payments

Another excellent reason for refinancing your home mortgage is to get a lower payment. There are a couple of ways you can do this: qualify for a lower mortgage rate or extend the term length of your mortgage loan. Term length is the amount of time you have to repay your mortgage and a general rule of thumb is the longer your term length the lower your payment will be. You can learn more about your mortgage refinancing options, including costly lender junk fees to avoid by registering for the free mortgage videos available on this website.

Refinancing Banks

You might be considering refinancing your home mortgage loan with your bank or credit union to take advantage of today’s low interest rates. After all, what could be more convenient than simply transferring your mortgage payment out of your checking account?

Are bank originated mortgage loans really the best deal for your home mortgage? Here are several tips to help you avoid making an expensive mistake refinancing your home loan.

Refinancing Banks & Your Mortgage Loan

Banks and credit unions love to brag about their mortgage loans. Bank of America for example loves to flaunt its “no fee” mortgage loans… but are they really a good deal? I’d say be sure and read the fine print before taking out a loan from your bank or credit union; however, thanks to the banking lobby there is no fine print for you to read. What do mean by this? Allow me to explain…

The Real Estate Settlement Procedures Act

Also abbreviated RESPA, this is the legislation that required mortgage lenders to disclose their fees and markup. Note that I said “required” as the Banking Lobby spent millions of dollars lobbying congress to change this disclosure legislation to exclude banks…successfully. That’s right, your bank and credit union is exempt from RESPA laws that require fair and honest lending practices in the United States. Banks are simply not required to disclose their markup or profit margins on your mortgage loan.

Service Release Premium

Big deal you might be thinking, bank mortgage rates have to be good to compete with other lenders right? Nope…your bank doesn’t care about being competitive, and most homeowners don’t know the first thing about mortgage rates to understand how banks are making their money.

So how exactly do banks make money from mortgage loans? They just sit back and collect interest from my mortgage payments right? Wrong!

Banks make the majority of their profits selling loans to investors on the secondary mortgage market. The higher the interest rate on your loan the more profit the banks make when your loan is sold. This is why the bank will try and close your loan with the highest mortgage rate possible. Banks know what mortgage rate you could get in the open market from a mortgage broker; however, they mark this rate up create a profit when your loan is sold. This markup of your mortgage rate by the bank is known as Service Release Premium.

Does Service Release Premium Really Matter?

How much could your bank really markup up your mortgage rate and does it really make a difference? Well, suppose you refinance your home for $300,000 with a 30 year fixed rate loan at 5.5%. What you didn’t know is that you could have had a 5.0% mortgage rate from a wholesale lender. What does this markup by the refinancing bank mean for your mortgage payment?

At 5.5% on a $300,000 mortgage your monthly payment will be $1700 per month. If you had the mortgage rate you deserve at 5.0% your monthly payment would only be $1610 per month. That’s $1080 per year you’re flushing down the toilet just to boost your bank’s profits.

How to Get a Wholesale Mortgage Rate

You don’t have to be a financial guru to refinance your mortgage with a wholesale mortgage rate. First of all you should avoid refinancing banks and credit unions no matter how convincing the salesperson or your neighbor Bob. Secondly, you need to find the right person to arrange your new mortgage. This person needs to be a mortgage broker, but not just any broker. Mortgage brokers, like banks, mark up mortgage rates for a commission so you’ll need to find the right broker for the job.

It is possible to refinance your home loan with a wholesale mortgage rate and pay only a 1.0% origination fee to the mortgage broker for arranging the loan. You can learn how to do this for yourself while avoiding costly lender junk fees by checking out my free mortgage videos on this website.

Check out my Underground Mortgage Refinancing Videos today and you’ll get immediate access to videos that save the average homeowner $1,000 per year… Guaranteed!

Wishing you success with your next home mortgage,

Robert Regehr

Par Mortgage Rates Definition

mortgage bubble Par Mortgage Rates DefinitionIf you are considering refinancing your existing home mortgage loan a par mortgage rate could save you thousands of dollars every year that you have the mortgage. The problem is that all of the mortgage rate quotes you see online and from your local mortgage companies include some markup to create a commission for the loan originator.

Here are the basics you need to know about par mortgage rates to help you get the lowest rate and monthly payment when refinancing your mortgage loan.

A “Par” mortgage rate is one that does not cost money to get or creates cash for the mortgage broker as a commission.

Mortgage rate sheets used by your Mortgage Company or broker are listed on a scale. Going from one side of the rate sheet to the other, the lower the mortgage rate the more you’ll need to pay in “discount points” to get that lower rate. As you move further along the scale there is a point where no points are required. This point on the rate sheet is a “par mortgage rate.” Move further along the rate sheet and you’ll see that mortgage rates higher than “par” creates cash commission in the form of Yield Spread Premium.

Here’s an example to illustrate how mortgage rate sheets quote an interest rate:

5.75% (.5 point required) 5.875% (.25 point required)
6.0% (zero points) Par Mortgage Rate
6.125% (.25% commission created) 6.25% (.5% commission created)

As you can see, 6% is the par mortgage rate of the day. Mortgage rates above 6% create cash for the Mortgage Company or broker while rates below 6% cost you money in the form of discount points. If you want the lowest possible mortgage rate when refinancing you’ll need to get as close to par as possible without creating Yield Spread Premium for the mortgage broker.

How do you get a par mortgage rate? You can get a par mortgage rate by paying a flat 1% origination fee to the person arranging your mortgage loan. Doing this is easier than you think; you just need to find the right mortgage broker for the job.

The free mortgage refinancing videos on this website show you how to get a par mortgage rate while avoiding lender junk fees in the process. Register today and you’ll be on your way to saving thousands of dollars every year on your next mortgage loan.