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.
If you want the lowest refinance rates and mortgage broker fee for your next home loan there are several things you need to know to avoid overpaying. Did you know most of your neighbors overpaid their mortgage broker fee and didn’t get the lowest refinance rates because the broker marked up their interest rate? The good news is that you can get the lowest refinance rates without overpaying your mortgage broker fee. Here are several of my best tips for getting the lowest refinance rates without overpaying the mortgage broker fee for your next home loan.
Your Mortgage Broker Fee
The broker fee you pay when refinancing your home loan is for loan origination, meaning compensation for the broker’s work arranging your home loan. What is a reasonable fee to pay for loan origination? Many brokers charge two percent or higher; however, a reasonable mortgage broker fee is one percent of your loan amount assuming the broker has not marked up your lowest refinance rates.
The origination fee is easy to find and understand in your loan documents, but what about the hidden markup of the lowest refinance rates? The reason nearly all of your neighbors overpay when refinancing is because of a little known fee called Yield Spread Premium. What’s confusing about Yield Spread Premium is that the fee doesn’t come out of your pocket, it’s paid by your lender.
Getting The Lowest Refinance Rates
Why should you care about a fee paid by your mortgage lender? What should concern you is not the fact that your lender is paying Yield Spread Premium but why this fee is being paid. Mortgage lenders reward brokers that lock and close home loans with higher than necessary mortgage rates with the fee known as Yield Spread Premium. Did you know that the person arranging your home loan receives one percent of your home loan amount for every .25 percent they jack up your interest rate?
This unwanted junk fee is paid by the lender in addition to the origination fee coming out of your pocket. What does this unnecessary markup of your mortgage rate do to your monthly payment? Suppose your refinancing your home for $250,000 at 6.5% paying a mortgage broker fee of 1.5 percent. This origination fee amounts to $3750 that you’ll be required to pay at closing. Your payment on a thirty year fixed rate mortgage will be $1,600 per month. What the person arranging your home loan didn’t tell you is that you actually qualified for a 6.0 percent rate and they marked up your interest rate to 6.5 percent and over charged your mortgage broker fee.
If you had the mortgage rate you deserve at six percent your payment would only be $1498 per month. That’s $1,224 a year you’re throwing away because your broker took advantage of you… The good news is that you can get a new home loan paying a flat loan origination fee of one percent without this unnecessary markup of your mortgage rates.
You can learn more about getting the lowest refinance rates without overpaying the mortgage broker fee by checking out my free Underground Mortgage Videos.
Here’s a sample to get you started with a dirty secret your mortgage lender hopes you won’t find out about.
When the Federal Reserve lowers short term interest rates mortgage refinancing becomes a hot topic for many homeowners. If you are considering refinancing your mortgage but are concerned about paying too much there are several things you need to know about shopping for a new home loan. Here are several tips to help you refinance your home loan without paying garbage fees or unnecessary markup of your mortgage rate.
Banks vs. Mortgage Brokers
The first thing you need to know is that you should never take out a mortgage from a bank or broker bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose their profit margins or markup of your mortgage rate. If you refinance your home loan with a bank you’ll never get a wholesale mortgage rate or anything close to it. The same is true of broker banks.
What’s a broker bank? This is basically a mortgage company or broker operating as a bank. Many mortgage companies and brokers changed their businesses when the law changed in order to take advantage of the same loopholes as banks. The only way to recognize if your mortgage company or broker is acting as a broker bank is to ask if they close on the mortgage in the name of the company or the wholesale lender. If the answer you get is that they close in their own company’s name you are dealing broker bank and cannot refinance with wholesale rates.
Mortgage Broker Secrets
The biggest secret your mortgage broker is keeping from you is called Yield Spread Premium. This is the industry term for the commission your mortgage broker receives for marking up your mortgage interest rate. Brokers do this because lenders pay one percent of you loan amount for every .25 percent they overcharge you…something they do without telling you. There are ways to recognize this markup of your mortgage rate, and it is possible to avoid paying it when refinancing.
How to Recognize Yield Spread Premium
Your first opportunity to spot Yield Spread premium is on the Good Faith Estimate; however, many brokers intentionally omit it from this document. If you can get your hands on the rate lock confirmation from the lender, Yield Spread Premium is clearly disclosed; however, many brokers falsify rate lock confirmation to omit this markup. The last chance you’ll have to spot this markup is on the HUD-1 statement. If Yield Spread Premium is included with your loan it will be listed on lines 810 or 811 of this document. You may see it called a “broker rebate” or YSP paid to broker but this dollar amount is the kickback your broker receives for overcharging you.
Yield Spread Premium Can Be Avoided
Homeowners who learn to recognize Yield Spread Premium can negotiate with potential mortgage brokers to avoid paying it. You can learn more about refinancing your home loan without paying too much by registering for our free mortgage tutorial.