5 Quick Mortgage Refinancing Tips

When it comes to refinancing there are good mortgage companies and there are bad ones. Choosing the wrong lender can lead to losing thousands of dollars from unnecessary fees and markup. Here are 5 quick mortgage refinancing tips for conventional refinancing and government refinance programs like HARP 2.0, FHA streamline refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL).

1. The Good Faith Estimate (GFE) is Just an Estimate

When it comes to the fees you’ll pay refinancing your mortgage the Good Faith Estimate is not the final word. Your actual closing costs are found on the HUD-1 Settlement Statement. Commonly overpaid items include the loan origination fee and discount points. If you don’t have the cash to pay your closing costs have the option of lender paid closing by accepting higher refinance rates.

2. Compare Refinance Rates AND Fees

One of the most common mortgage mistakes is focusing on getting the lowest refinance rates at the expense of lender fees. Paying unnecessary discount points or overpaying the loan origination fee makes it more difficult to break even recouping your closing costs. If you can’t break even on your out-of-pocket expenses you’ll be losing money no matter how low your refinance rates.

3. Choose The Right Mortgage Type and Term Length

Should you pick an Adjustable Rate Mortgage or go with the FHA or VA for your next home loan? Choosing the wrong type of loan could raise your payment amount. FHA home loans for instance require mortgage insurance which adds hundreds of dollars to your payment. The VA does not require mortgage insurance so if you’re eligible for a VA home loan make sure you’re taking advantage of the benefit you earned by serving.

Term length is the amount of time you have to repay your mortgage loan and along with the refinance rates determines your payment amount. Refinancing with a shorter term like 15 years can save you thousands of dollars in finance charges where lengthening your term will make it impossible to recoup your out-of-pocket expenses.

4. Shop Around For The Best Deal

Mortgage brokers can be an excellent resource for getting your mortgage refinance application approved but they will charge you an origination fee for their services. I’ve seen small credit unions charge as little as $400 for loan origination where most brokers charge one percent or more of your loan amount. Community based credit unions are an excellent starting point for refinance rate shopping even if you’re not a member. Always compare fees for loan origination and look at things like the cost of the appraisal before choosing a lender.

5. Question Everything

If you find something in your mortgage disclosure that you don’t understand or doesn’t look right don’t be afraid to ask questions. There are some fees that can be negotiated as well as junk fees you’ll want to avoid. Don’t let a pushy or unhelpful broker put you in a home loan that you’ll regret. If you find a loan officer or broker pushing back against your questions take your business somewhere else.

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You can learn more about getting the best deal on your next home loan while avoiding unnecessary fees by checking out my free Underground Mortgage Videos.

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Here’s a quick sample to get you started refinancing with today’s best mortgage lenders without paying junk fees…

How to Avoid Paying Your Loan Origination Fee

mortgage payment How to Avoid Paying Your Loan Origination FeeIf you’re considering mortgage refinancing you might wonder if you have to pay the origination fee. There’s more to getting a good deal than just focusing on a specific lender like USAA Mortgage Rates; the fees you pay including the origination fee can make or break the deal you’re getting. Here is everything you need to know about that origination fee to make sure you’re getting the best deal when mortgage refinancing.

Origination Fee Definition

The origination fee found on your Good Faith Estimate is paid to the person or company arranging your home loan. Sometimes you’ll get offers without it; this doesn’t mean the broker isn’t getting paid but that someone else, usually the lender is paying the origination fee for you.

There are no free lunches when it comes to your home loan so why would the lender agree to pay your broker origination fee? Settlement charges are paid by the lender in exchange for higher refinance mortgage rates. In addition to paying your broker fee the lender could also pay your closing costs; however, will raise your interest rate twice.

Should you agree to higher rates to get your origination fee paid? Refinance rates are now near a sixty-year low, something you’re unlikely to see again this lifetime. If you’re currently paying six-percent or more on your existing home loan then it could be well worth your while to accept a higher interest rate in exchange for the lender paying the origination fee.

You can figure out if refinancing in this way makes sense by approximating your break-even point. The break-even point is simply the amount of time it’s going to take you to recoup your out-of-pocket expenses from the lower payment amount.

How to Approximate Your Break-Even Point

Notice that I say “approximate” your break-even point. Some people in the business get all bent out of shape and start waving their arms around when you talk about breaking even recouping closing costs. The reason is that your break-even point doesn’t take into consideration changes in term length. The term length of your home loan is defined as the amount of time you have to pay the mortgage back. How does term length affect breaking even recouping your out-of-pocket expenses?

If you’re currently paying on a thirty-year home loan and refinance with a 15-year term length you’ll break even faster because you’re paying less interest after the first year than if you continue paying on a 30-year mortgage. Conversely, if you’re paying on a 15-year mortgage and refinance with a 30-year term it’s going to take you longer to break even then the approximation allows. You’re paying more in interest than you were before so breaking even takes longer. If you’re keeping the same term on your refi (15 year to 15 year or 30 year to 30 year) then this discussion is purely academic.

Now that I’ve satisfied the naysayers (if you’re one and aren’t satisfied too bad) here’s how to approximate your break-even point. First, figure out how much your payment will go down each month based on the new mortgage rate. (be sure and compare your payment with and without the origination fee markup)

Second, look at the total closing costs on your Good Faith Estimate and divide this figure by the amount you’re saving each month. This will give you the number of months (approximately) it will take you to break even recouping your out-of-pocket expenses. If this timeframe is acceptable and you don’t plan on selling or getting another mortgage then it probably makes sense to avoid paying your loan origination fee.

How Much Refinance Rate Markup?

How much higher can you expect your refinance rates to be if the lender pays the origination fee and/or closing costs? That depends on how much the broker is charging you. A reasonable amount to pay for loan origination is one percent of your mortgage amount; however, many brokers will try to charge your more.

Don’t be afraid to negotiate the amount of your mortgage origination fee as a condition of doing business. As for your refinance rates, the lender will typically pay one percent of your mortgage amount for every .25 percent you accept in higher interest rates. Whether or not it makes sense to take higher mortgage rates in exchange for the lender paying your settlement costs depends on your personal situation.

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You can learn more about getting the best refinance rates without paying lender junk fees or markup by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample showing you how to avoid paying the lender junk fees that cost your neighbors thousands of dollars…

How do I Refinance My Mortgage?

If you’ve been contemplating the question should I refinance my mortgage there are several things you should know before jumping in. The refinance mortgage rates you get and the fees you pay all boil down to the answers you get for the question How Do I Refinance My Mortgage. Here are several tips before you refi with sound answers to the question How do I Refinance My Mortgage loan.

Should I Refinance My Mortgage?

Most people’s goal for mortgage refinancing is to lower their monthly payment. You can do this by taking advantage of today’s low refinance mortgage rates. Keep in mind that mortgage refinancing is going to cost you out-of-pocket at closing so the answer to the question Should I Refinance My Mortgage comes down to how long it’s going to take you to break even recouping your closing costs.

You can quickly figure this out once you know what your new payment will be by dividing your total expenses including the loan origination fee by the amount your mortgage payment is going down each month. This tells you the number of months it’s going to take to break even recouping your fees. The average homeowner refinances every four to five years; if you refinance before breaking even you’re losing money no matter how low your interest rate.

How do I Refinance My Mortgage Without Overpaying?

There are two important steps to getting the best deal when refinancing your mortgage. First, make sure your credit score isn’t preventing you from getting today’s lowest refinance mortgage rates. The interest rates you see advertised by lenders like Amerisave are based on having a lofty credit score of 820 or better. If your credit isn’t up to snuff your refinance rates could be much higher depending on the state of your credit reports. Invest a little time spring cleaning your credit and make sure the information is accurate. Also, try and pay down the balances on your credit cards as much as possible before applying for your mortgage refi.

Second, to get the best deal when mortgage refinancing make sure you’re not overpaying the loan origination fee or paying unnecessary discount points. The mortgage origination fee is paid to the company or broker arranging your refi and should not be more than one percent of your home loan amount. As for discount points, this is a sneaky tick used by even the best mortgage lenders to make their offers seem more attractive.

Refinance mortgage rates for a 30-year, fixed-rate home loan have been hovering just over four percent for almost seven weeks now; however, several lenders like Wells Fargo Refinance are advertising in the 3 percent range. How are they doing this? The fine print reveals the fees required to get their advertised rates. Assuming you have the necessary credit score to qualify all these mortgage refinancing offers require discount points.

A discount point is defined as the fee paid to lower your mortgage refinance rate by .25 percent and is equal to one percent of your home loan amount.

Should you pay discount points when mortgage refinancing? Probably not… Remember that getting a good deal on your home loan depends on more than just getting the lowest refinance rates. You want to break even on your out-of-pocket expenses as quickly as possible. Paying discount points at closing is just more cash out of your pocket for very little benefit.

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You can get more money-saving tips that answer the question How Do I Refinance My Mortgage without losing money by checking out my free Underground Mortgage Videos.

httpv://www.youtube.com/watch?v=be9md0A0_2c
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Here’s a quick sample to get you started refinancing your home without losing money at closing…

Home Mortgage Refinance Calculator Tips

Are you looking for the lowest interest rate, fees, and payment when refinancing your home mortgage loan? A home mortgage refinance calculator makes it easy to figure out how much your new payment will be; however, it won’t show you hidden markup that results in overpaying thousands of dollars. If you want the lowest payment a home mortgage refinance calculator is a useful tool only if you can avoid this hidden markup and junk fees. Here are several tips to help you get the lowest payment for next home mortgage loan.

How to Use a Home Mortgage Refinance Calculator

Using a home mortgage refinance calculator to evaluate mortgage quotes is simple. Plug in the amount you are refinancing, your mortgage interest rate, and the duration of your home loan and you’ll have your new payment at the click of your mouse. What you should know about this payment amount is that includes markup for a fee known as Yield Spread Premium. This fee is paid by lenders to any loan originator who locks and closes your home loan with a higher than necessary interest rate. This is the markup that no calculator will help you avoid.

Avoiding Hidden Markup of Your Interest Rate

If you want the lowest payment for your next loan before using that home mortgage refinance calculator you need to find quotes that haven’t been marked up for someone’s commission. First of all, don’t get me wrong, home loan originators deserve to be paid for their work like everyone else… and that is what your loan origination fee is for. A reasonable fee to pay for loan origination is one percent of your loan amount assuming the person arranging your fee has not marked up your interest rate for Yield Spread Premium.

How does this hidden markup interest rate for a commission work? For every quarter point that your loan originator marks up your interest rate the lender pays them one percent of your loan amount as this extra commission known as Yield Spread Premium. Your loan originator doubles, even triples their commission with Yield Spread Premium and you get stuck with a monthly payment that is a hundred dollars or more than it should be.

How to Get Wholesale Home Loan Interest Rates

How can you avoid this unnecessary markup of your home loan interest rate? Instead of relying on that home mortgage refinance calculator to tell you if your quote is a good deal you can save yourself thousands of dollars simply by finding the right person to arrange your next home loan. Start by telling potential originators that you’ll pay them a reasonable fee for loan origination but will not accept any mortgage quote includes markup for Yield Spread Premium. Once you’ve got mortgage quotes that haven’t been marked up for Yield Spread Premium you can run them through your home mortgage refinance calculator to determine how much you’ll be saving with a wholesale mortgage rate.

You can learn more about using a home mortgage refinance calculator to score yourself a wholesale home loan interest rate by checking out my free Underground Mortgage Refinancing Videos.

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Here’s a quick sample to get you started on the path to a wholesale rate today.

Mortgage Processing Fee Definition

The mortgage processing fee is not typically a junk fee found on your Good Faith Estimate (GFE) or HUD-1 Settlement Statement.

This is a fee paid to the mortgage company or loan processor for services related to preparing your loan application. Just because loan processing fees can be legitimate doesn’t mean that some mortgage brokers won’t abuse this fee.

Here is what you’ll need to know to avoid paying too much for your mortgage processing fees while avoiding other junk fees on your next mortgage loan.

Mortgage Processing Fee Defined

The mortgage processing fee should cost you no more than $500; however, $300 is more reasonable amount to pay. This fee should be clearly disclosed on your GFE and HUD-1 Statement. If you see that the fee is being paid to a third party on your loan documents this simply means that your mortgage company outsources preparing their loan documents.

What is the mortgage processing fee for? “Mortgage Processing” covers preparing all of the information for your application, verifying information, creating documents to the lender’s specification and facilitating closing between the loan under writer and title when necessary. Should you pay this fee? There is a lot of work that goes on behind the scenes in preparing your loan application and mortgage processors deserve to be paid for the work they do in putting your loan together. Some people call the processing fee a mortgage junk fee; however, there is some merit to this fee and the ability to close your new mortgage without a hitch.

If your mortgage broker is quoting you $900 or more for mortgage processing fees it’s probably not worth your time to try and talk this fee down; you’ll be better off finding another mortgage broker.

Mortgage Junk Fees

What are other mortgage junk fees and how do you avoid them? Mortgage junk fees are any fee you encounter that serves no purpose but to increase the profit margin of the person arranging your home loan. Mortgage brokers get paid for their services in two ways: fees paid by you and fees paid by your mortgage lender. Brokers get paid a fee by the mortgage lender for increasing your mortgage rate, often without telling you and from the origination fees disclosed on your Good Faith Estimate and HUD-1 Statement.

A reasonable amount to pay for the loan origination fee is one percent of your mortgage amount, provided the person arranging your loan is not marking up your mortgage rate on top of the origination fee. Other junk fees that serve no purpose whatsoever include broker courier fees and mortgage rate lock fees. There simply isn’t a single mortgage lender out there that charges a fee for locking in a mortgage rate. If your mortgage company or broker is charging you a mortgage rate lock fee you can be certain that you’re dealing with a dishonest person or company and should find someone else to arrange your next home loan.

You can learn more about which mortgage fees and closing costs are legitimate and how to spot which ones are junk by checking out my free Underground Mortgage Videos. Spend an hour with my mortgage refinancing videos and you’ll know more about home loans than the so called mortgage “experts.”

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Here’s a quick sample of what you’ll learn today when you sign up.