How To Refinance Your Mortgage & Save

When you refinance your mortgage you’re replacing it with a new home loan that ideally has a better interest rate and loan terms. Your potential savings will vary depending on the size of your home loan, loan-to-value ratio, and the refinance rates and fees you get. Mortgage rates are still near historic lows so if you’ve been procrastinating or are on the fence about paying for a new home loan there’s no better time than the present.

Should I Refinance My Mortgage?

Using a simple mortgage calculator like the one below makes it easy to calculate how much you’ll save and if refinancing is worthwhile. You can get started by entering your home loan balance, the interest rate you’re being quoted, your ideal term length and annual taxes and insurance (optionally).

Simple Mortgage Calculator

Loan Amount: Years: Mortgage Rate:

Annual Taxes: Annual Insurance:

Monthly Payment =

Generally speaking if you’re able to reduce your mortgage rate by one percent you’ll save around $1,000 annually for every $100,000 you owe. This doesn’t take into account changes in term length or the fees you’ll pay, all important considerations when deciding if you should refinance.

Shortening your term-length from 30 years to 15 years for instance will save you a boat-load of cash in finance charges alone and allow you to recoup your out-of-pocket expenses at a much faster rate.

How to Calculate Your Break Even Point

Calculating your break-even point will help you decide if paying for a new home loan is worthwhile. This calculation is only an approximation because it doesn’t factor in changes in term-length; however, it is still a useful determination.

Start with the new mortgage payment amount you got by using the simple mortgage calculator above. Your monthly savings is the difference between your old payment and the new one. Add up all of your out-of-pocket expenses that you’ll pay closing on the new mortgage and divide by your monthly savings. This will tell you approximately the number of months it will take to break even recouping your closing costs.

Are you satisfied with the amount of time it’s going to take you to break even? If so, paying for a new home loan probably makes sense. Keep in mind that the less you pay closing on your new home loan the more you’ll benefit from today’s low refinance rates.

Types of Mortgage Refinancing

The type of mortgage refinancing you choose influences the interest rates and fees you’ll receive. Getting the best terms for your new home loan depends partly on the type of refinancing you choose.

  • Rate & Term Refinancing

    This is the most common option for many homeowners. With rate & term refinancing the goal is to lower your interest rate and/or change the term length of your home loan. Cashing equity out of your home is usually not an option and the less you pay at closing the better off you’ll be in the long run.

  • Cash-out Mortgage Refinancing
  • Qualifying for cash-out refinancing is becoming increasingly difficult. You’ll need near stellar credit and a favorable loan-to-value ratio just to qualify. Refinance rates and lender fees are higher than what you see with rate & term refinancing.

  • Government Refinance Programs
  • If your home loan is with the FHA, VA or USDA you can save yourself a lot of hassle with government refinance programs. The FHA streamline refinance program allows you to lower your interest rate with minimal paperwork and fees. The VA offers an Interest Rate Reduction Refinance Loan (IRRRL) with the same type of streamline refinance. The USDA offers a similar streamline refinance program.

    If you’re underwater in your current home loan, meaning that you owe more than your home is worth, you might qualify for the Home Affordable Refinance Program (HARP) if your home loan is backed by Fannie Mae or Freddie Mac.

    The only catch with Government Refinance Programs is that you cannot have late payments and cash-out refinancing is not an option.

Beware Excessive Mortgage Fees

The downside of refinancing your home are the fees you’ll be required to pay at closing. The most common fees you’ll encounter are the loan origination fee and discount points. The origination fee is paid to the person or company arranging your home loan and discount points are paid to lower your interest rate.

You’ll find when shopping for refinance rates that most lenders quote interest rates that include discount points first. Should you pay discount points to get the lowest possible interest rate? Probably not. Paying unnecessary points only raises your out-of-pocket expenses and makes it that much more difficult to recoup your closing costs. Most homeowners do not benefit from paying discount points; however, if you’d like to see how paying the fee affects your payments there is a table on page three of your Good Faith Estimate.

What about that loan origination fee? Most loan officers will tell you that one percent is standard for the origination fee; however, I’ve reviewed small, community based credit unions that charge as little as $400 for their loan origination fee. This is one of the considerations you’ll need to factor in when shopping for the best mortgage deal.

When shopping for refinance rates you’re bound to encounter no out-of-pocket fees or no closing costs options that allow you to either roll your mortgage fees into the loan balance or take higher interest rates in exchange for the lender paying your fees.

If you don’t have the cash on hand to pay your closing costs these can be attractive options; however, you should weigh how this option affects your payments in the long run.

Your Bank vs. Mortgage Brokers

They type of lender that you choose affects the fees you’ll pay. Most lenders are fairly competitive when it comes to refinance rates; however, the real differences come from the fees they charge.

Banks offer convenience generally at the expense of fees. Mortgage brokers have access to home loan offers you might not find on your own but typically charge higher origination fees. Community based credit unions seem to have the best deals that I’ve found, if you qualify for membership.

Shopping smartly from a variety of banks, credit unions, and mortgage brokers will help you find the best deal.

How to Shop Smartly For Your Next Home Loan

  1. Understand Your Existing Home Loan
  2. The first step in getting the best deal is to find out as much as you can about your current home loan. Is it backed by Fannie Mae or Freddie Mac? What is the term length? How much is your home worth? How much do you owe and at what interest rate? Is there a prepayment penalty? The answers to these questions will help you replace your current mortgage loan with a better deal.

  3. Check Your Credit Reports First
  4. Make sure that your credit reports are accurate by visiting before requesting mortgage refinance quotes. Avoid applying for new credit card accounts, especially those store charge cards while you’re applying for refinancing. The quickest way to boost your credit score is to pay down the balances on your credit cards below 30% of your limit.

  5. Choose a Mortgage Program & Stick With It
  6. This is one of the most important things you’ll do before refinancing. Do you want an FHA streamline refinance? Do you need a 30-year fixed mortgage rate? Is your goal to refinance with a 15-year term to build equity and payoff the loan balance faster? The point here is pick a mortgage program and don’t let a fast talking loan officer confuse you by quoting mortgage rates and fees across different programs.

    Comparing mortgage quotes from the identical programs is the only way to make a true apples-to-apples comparison of interest rates and fees.

  7. Shop From a Variety of Lenders & Brokers
  8. Shop around for the best refinance rates AND fees from a variety of today’s best mortgage lenders. Make sure you’re getting accurate quotes by providing your Social Security number but limit all of your quotes to a two week (14 days) period. When you limit mortgage lenders to running your credit in a two week period your credit score will only get dinged for one lender inquiry.

  9. Use The Good Faith Estimate Correctly
  10. The new Good Faith Estimate is a mortgage refinance rate shopper’s best friend. Remember to request zero discount point quotes and use the table on page three to see if you’ll benefit from paying this fee. Page two shows you the loan origination fee, any Yield Spread Premium and garbage fees like processing or administrative fees. Use page two as leverage when negotiating with loan officers. Remember that brokers and lenders are a dime a dozen. If one doesn’t want to play ball with you move on to the next.

    Keep your loan officer honest by reconciling the Good Faith Estimate with the HUD-1 Settlement Statement provided prior to closing. The HUD-1 is the final word on your refinance rate and fees.

The most common mortgage mistake is not doing your homework prior to paying for a new home loan. Shopping smartly for the best refinance rates and fees will ensure you break-even quickly and get the most benefit from your lower interest rate.

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Mortgage Refinance Options

If you are considering a new home loan there are a number of mortgage refinance options available today that allow you to lower your monthly payment, even consolidate your higher interest debt, keeping more cash in your monthly budget. The only problem with today’s mortgage refinance options is the number of people trying to make a quick buck at your expense. Here are several tips to help you evaluate your options while avoiding unnecessary markup and junk fees.

Mortgage Refinance Options

Most homeowners refinance their mortgage loans to get a lower mortgage rate and a lower monthly payment. While this is one of the most common refinance options available there are a number of other reasons to refinance even if you can’t get a lower mortgage rate. Consolidating high interest credit card debt is another popular mortgage refinance option that can save you a lot of money considering how much the ridiculous credit card companies have jacked up their interest rates during the recession. Refinancing your mortgage and taking cash back from your home equity to pay off and hopefully cut up your credit cards could result in a slightly higher mortgage rate; however, it would still be much lower than the criminally excessive 20% or more charged by many credit card companies today.

If debt consolidation using mortgage equity isn’t one of your goals you might wonder if mortgage refinancing is the right decision. Ever hear of the two percent rule of mortgage refinancing? The two percent rule of mortgage refinancing states that you should not considering refinancing unless the new mortgage rate is at least two full percent lower than what you’re currently paying. This is one of the bits of most commonly quoted bad advice that you’ll encounter as a homeowner. Instead of basing your decision to refinance on an old wives’ tale, it makes more sense to base financial decisions regarding your home on a cost vs. savings basis.

How to Decide if Mortgage Refinancing is a Good Decision

It’s going to cost you money to refinance your home…this can’t be avoided. Application fees, rate lock and origination fees and closing costs await you should you decide to refinance your home loan. Some of these fees are blatant mortgage junk fees that savvy homeowners can easily avoid. Don’t worry if “financially savvy” aren’t two words you’d use to describe yourself, the free mortgage videos on this website will show you how to cut $1200 worth of fat from your mortgage loan every year.

Getting back to your decision to refinance, there is an easy way to decide if mortgage refinancing makes sense for you, assuming your goal is to save money with a lower payment. Simply add up all of the costs associated with refinancing your home loan found on your Good Faith Estimate and divide by how much lower your monthly payment will be on the new mortgage. Here’s an example to illustrate. Suppose your current mortgage payment is $1,400 and refinancing will get you a lower payment of $1,100. The estimated fees and closing costs for the new mortgage total $6,500. The difference in your mortgage payment will be $300 and with that savings it will take you just over 21 months to recoup your closing costs before you realize any benefit from the new mortgage. If you can live with this timeframe then mortgage refinancing makes sense. Keep in mind that getting a lower payment isn’t the only mortgage refinance option available and there are situations where refinancing with a higher monthly payment makes just as good financial sense.

What About Mortgage Junk Fees & Unnecessary Markup?

Like anything else you purchase there are people trying to take advantage of your mortgage to make a buck. As we’ve all learned banks are greedy shameless institutions that exist solely to take your money. The same is true to a lesser degree of nearly every financial advisor and mortgage broker you’ll encounter when exploring your mortgage refinance options. What you need is a clear roadmap for avoiding unnecessary mortgage rate markup and junk fees used by banks and mortgage brokers to boost their profits at your expense.

Did you know that most mortgage brokers mark up the mortgage rates they quote to collect a hidden, second commission from your mortgage lender on top of the origination fee you’re already paying for arranging your home loan? Banks have the same hidden profit margin built into their mortgage rates and your Good Faith Estimate is full of junk fees that serve no purpose other than lining your loan originator’s pockets at your expense. How can you avoid unnecessary mortgage markup and junk fees when refinancing your home loan? Check out my free Underground Mortgage Videos and I’ll show you how to save as much as $1200 per year by cutting the fat from your mortgage loan.

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The Secret to Getting the Lowest Mortgage Rates

Getting the lowest mortgage rates can be tricky, especially if you choose the wrong person to arrange your next home loan. Pick the wrong person and you’ll not only get too high a mortgage rate but you’ll pay mortgage junk fees in the process. Here are several tips to help you find the right person to arrange your next home loan while avoiding unnecessary markup and mortgage junk fees.

Mortgage Rate Secrets

When it comes to mortgage loans what you don’t know will hurt you. Did you know the average homeowner in the United States overpays $100 or more per month for their home loan? This because the person arranging the loan pulled a fast one with the mortgage rate… In fact, the Secretary of Housing and Urban Development stated this mortgage trick will cost homeowners in the United Sates sixteen billion dollars this year alone. Don’t want to be a victim of this statistic you say? You don’t have to be…and I’ve got the tools for you to ensure that you’re not.

Where to Get a Mortgage Loan

Before we get into where to find the perfect mortgage loan I should talk about where not to get a home loan.

1. Stay away from your bank. Banks are exempt from the Real Estate Settlement Procedures Act and are not required to disclose any of their markup or profit margins to you. If you take out a home loan from your bank you’ll never know how much you’ve overpaid because the bank is simply not required to tell you. Ignorance is bliss right? Only if you like throwing your money away…
2. Stay away from faceless Internet Mortgage lenders. We’ve all seen the commercials on TV; however, spend a few minutes reading the fine print from the Lending Trees of the world and you’ll quickly discover just how bad their junk fees are.
3. Avoid mortgage brokers that charge Yield Spread Premium and other junk fees. I’ll get into Yield Spread Premium in a moment as this is the hidden junk that causes most people to overpay.

So where is the best place to get a mortgage loan? The best home loan around isn’t going to be from a place, it’s from a person. That’s right, getting the best deal for your mortgage isn’t about shopping around for the best loan offer… it’s all about shopping for the right person to arrange your home loan.

Who Is the Right Person to Arrange Your Mortgage?

The right person isn’t a mortgage banker or the hotshot broker in the yellow pages with a company hummer. These people will be unwilling or unable to negotiate the type of mortgage deal that will get you the lowest possible mortgage rate. What you’ll need to find is a small-time, self-employed mortgage broker willing to work for a flat fee without marking up your mortgage rate for an “extra” commission. What is this extra commission that drives up most people’s mortgage payments unnecessarily wasting thousands of dollars? In the mortgage business the fee created when your mortgage rate is called “Yield Spread Premium.”

Yield Spread Premium Definition

Yield Spread Premium is an amount of money created when the person arranging your loan gets you to pay an unnecessarily high mortgage rate. The lender and your mortgage broker both know the interest rate you qualify; however, the broker overcharges you to collect this fee. Many mortgage brokers today are motivated solely by greed and line their pockets at their customer’s expense. The good news is that you can avoid this unnecessary markup of your interest rate and mortgage broker tricks saving thousands of dollars. It doesn’t matter if you’re refinancing your existing mortgage or taking out a purchase loan…these mortgage tactics work for both.

How does this mortgage rate markup work? Mortgage lenders reward brokers for loans that close with higher than necessary mortgage rates with a commission of 1% for every .25% they overcharge you. This is on top of the origination fee that they’re already charging you, double dipping their fee if you will. What you’ll need to avoid this is find the right mortgage broker instead of shopping for a loan offer. When you’re shopping for a mortgage broker tell them that you understand how Yield Spread Premium works and will not accept any mortgage that includes this markup. Offer to pay this person a flat, one percent mortgage origination fee for a home loan without Yield Spread Premium attached. There are honest mortgage brokers willing to work for one percent, you just have to find one.

What About Mortgage Junk Fees?

Just because you find a mortgage broker willing to work for a one percent origination fee doesn’t mean you shouldn’t be concerned about junk fees. There are a number of junk fees that mortgage brokers slip into their loans just to boost their fees. You should carefully review your HUD-1 statement for junk fees prior to closing. Don’t rely on the Good Faith Estimate you receive as this document is little more than marketing propaganda used to lure homeowners into overpriced mortgage loans. When it comes to fees your HUD-1 Settlement Statement is the final word.

If you find anything on your HUD-1 that resembles a mortgage broker courier fee or rate lock fee you should question consider taking your home loan somewhere else. These fees, especially rate lock fees are pure junk used by dishonest mortgage brokers to boost their profit at your expense. If you are working with a broker that charges a rate lock fee you can be certain you’re dealing with a dishonest mortgage broker that cannot be trusted…period.

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Typical Loan Origination Fee

when refinancing makes sense Typical Loan Origination FeeIf you’re in the process of taking out a new home mortgage loan you might have questions pertaining to loan origination fees. What is a typical loan origination fee and what about mortgage brokers that claim the lender is paying this fee for you? There are no free lunches when it comes to mortgages and loans with “no origination fees” always come with a catch. Here is what you need to know about the typical loan origination fee in order to avoid paying too much for your next home mortgage loan.

Your Typical Loan Origination Fee

What’s a fair amount to pay for mortgage loan origination? First of all, you should understand what the loan origination fees are for. Your mortgage broker or loan company charges you a fee for their part in arranging your home loan known as a loan origination fee. Typical loan origination fees vary by broker and mortgage company; however, a one percent origination fee is a reasonable amount to pay for arranging your home loan. Many mortgage companies and brokers overcharge loan origination fees so you’ll want to comparison shop until you find someone willing to work for a flat one percent.

What About Hidden Origination Fees?

There is a hidden fee you need to know about before taking out a mortgage loan. Many mortgage companies charge you an origination fee, (often overcharging you) and then take a hidden fee paid by the lender on top of it. This hidden fee drives up your mortgage payment unnecessarily and often doubles even triples the compensation your broker receives for their work. You get stuck paying as much as a hundred dollars or more per month more than you need to and the broker doubles their take at your expense.

What is this hidden fee the Secretary of Housing and Urban Development blames for overcharging homeowners in the United States to the tune of sixteen billion dollars this year alone? I am of course talking about Yield Spread Premium. Don’t worry if you’ve never heard of Yield Spread Premium (YSP) as most homeowners have not.

The simplest definition of Yield Spread Premium is a fee paid by mortgage lenders for home loans that are locked and closed with higher than necessary mortgage rates. Your mortgage lender approves you for a specific mortgage rate based on your credit and financial details; however, the mortgage company or broker almost always quotes you a much higher rate to get this extra commission from the lender. As a result your mortgage payment is much higher than it need be and the reason most people overpay for their mortgage loans.

If you want the lowest possible mortgage rate for your home you’ll need to avoid this unnecessary markup for a hidden origination fee. You don’t have to be a financial guru to find someone willing to work for a one percent loan origination fee without including Yield Spread Premium on your mortgage; you simply need to find the right person for the job.

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Best Refinance Mortgage Loan

Are you considering refinancing your home loan and are searching the Internet for the best refinance mortgage?

If so, there are several things you should know about the mortgage rate quotes you find online, even those from your local mortgage broker.

Here are several tips to help you find the Best Refinance Mortgage while avoiding paying too much in interest rate markup and mortgage junk fees.

Finding the Best Refinance Mortgage Online

Did you know that 99% of the mortgage quotes you get today have been marked up to give someone a commission? This is a commission you’ll pay in addition to the loan origination fee. Does it make sense to pay double for your mortgage loan? The problem accepting a mortgage rate quote that includes markup for a commission is that you’ll keep paying the mortgage broker’s fee over and over again every year for as long as you keep the loan. Doesn’t it make more sense to pay a flat mortgage origination fee of one percent and get the broker out of your life for good?

Mortgage Broker Markup

So what is this nefarious markup of your mortgage interest rate that costs the average homeowner $1,200 per year? Simply put, mortgage brokers get a kickback from lenders for locking and closing your home loan with higher than market rates. What are market mortgage rates? Also known as “par” mortgage rates, this is one that does not cost you discount points to get and does not create a kickback for your broker. Here’s how it works. Your mortgage broker quotes you an interest rate based on how much they think you’ll agree to overpay. The broker knows what mortgage rate you were approved for; however, for every .25% they overcharge you the lender pays the broker one percent of your loan amount in addition to the origination fee you’re probably overpaying for the broker’s services.

How to Avoid Yield Spread Premium

This kickback paid the lender for the mortgage broker overcharging you is called Yield Spread Premium. Most homeowners have never heard of Yield Spread Premium and the abuse is so rampant that the Secretary of Housing and Urban Development recently stated American homeowners will overpay sixteen billion dollars this year alone because of it.

Fortunately Yield Spread Premium can be avoided. There are a handful of honest mortgage brokers out there willing to help you find the best refinance mortgage available without overcharging you in the process. A reasonable fee to pay for your loan origination is a flat one percent; you just need to find the right person to arrange your loan.

Banks Will Not Give You Par Mortgage Rates

Many homeowners think they can avoid markup and mortgage junk fees by refinancing with their bank or credit union. The problem is while its true banks don’t have the same markup as your mortgage broker on their loans they still markup interest rates to make a premium profit when your loan is sold. Also, due to a loophole in the Real Estate Settlement Procedures Act your bank isn’t required to tell you that they’ve marked up your rate or disclose their profit margin on your loan. Banks simply don’t offer their customers par mortgage rates…if you want best mortgage refinance possible you’ll have to use a mortgage broker to arrange your loan.

How to get the Best Refinance Mortgage

You can refinance your home loan by paying a flat one percent origination fee without junk fees or a mortgage that includes Yield Spread Premium; you just need to find the right mortgage broker for the job. Don’t get me wrong, not all mortgage brokers are dirty and rip off their customers; however, they have earned the reputation they deserve which is why you need to take steps to keep your broker honest when mortgage refinancing.

How to Keep Your Mortgage Broker Honest

You can keep your mortgage broker honest by reviewing key pieces of documentation before signing your loan contract. Don’t worry about making a mistake during the process; your three day recission rights allow you to back out of the deal up to three business days after signing before your mortgage loan is funded. Here are the documents you need to focus your attention on to get the best refinance mortgage possible.

First, make sure your loan does not create Yield Spread Premium for the mortgage broker. Tell your broker that you will pay a reasonable amount for the origination fee but will not accept a mortgage that creates Yield Spread Premium. Once you find a mortgage broker willing to arrange your loan with these terms you will need to pay close attention to the following two loan documents. First, once you lock in your mortgage rate you will need written confirmation of your lock from the lender. The lender’s written rate lock confirmation will clearly disclose any Yield Spread Premium being paid to your mortgage broker.

Make sure the written rate lock confirmation provided by your mortgage broker comes from the lender and is not something your mortgage broker typed up for you. Many brokers do this to conceal the Yield Spread Premium they are taking on your mortgage. Also, never accept verbal confirmation of your mortgage rate lock. If you don’t have your lock in writing from the lender then you haven’t locked. Period.

The second document you need to focus your attention on to get the best refinance mortgage is the HUD-1 settlement statement. This document will disclose all fees, including mortgage junk fees and Yield Spread Premium. Outlining all of the fees and markup you need to look out for is beyond the scope of this article and is covered in detail in my Underground Mortgage Videos.

You can learn more about finding the best refinance mortgage without paying junk fees or markup of your interest rate by checking out my Underground Mortgage Videos. Here’s a sample of what you’ll get when you sign up today. This module is called “Your Mortgage Lender’s Dirty Little Secret…”


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