If you are in the process of refinancing your home mortgage loan, finding the best lender and the lowest refinancing mortgage rate can be an intimidating process. Did you know that the rate quotes you receive when shopping for a new loan all include commission based markup? Homeowners who learn to recognize this unnecessary markup of their mortgage rate can save thousands of dollars on their mortgage every year. Here are several tips to help you get the best refinancing mortgage rate for your next home loan.
How is Your Mortgage Rate Marked Up?
When you refinance your home loan you’ll pay an origination fee to the person arranging your loan. In addition to this fee the lender pays a commission to the broker for locking in and closing with a higher than market mortgage rate. This fee the lender pays is called Yield Spread Premium. When you learn how to avoid this markup of your mortgage rate you’ll be able to take advantage of wholesale rates and save thousands of dollars each and every year you have a mortgage loan.
Yield Spread Premium And Your Mortgage
To illustrate the commission based markup known as Yield Spread Premium here is one example. You need to borrow $250,000 to refinance your existing home loan and the broker agrees to charge you a one percent fee. You close with a 6.75% mortgage rate and pay $2,500 to the broker for loan origination. What you don’t know is that the lender actually approved you at 6.0% and the broker marked it up for the commission. In this example the lender pays your broker a $7500 bonus for overcharging you on top of the $2,500 you’ll pay at closing.
How Does Yield Spread Premium Raise Your Payments?
You might say .75 percent isn’t that much, what’s the big deal? In the previous example if you refinance with the 6.0 percent rate that you deserve your monthly payment on a 30 year mortgage would be $1,498 per month. If you agree to a 6.75 percent mortgage rate your monthly payment balloons to $1,621 per month! That’s $1,476 you’ll pay unnecessarily every year because your mortgage broker lied to you.
Refinancing Your Home Without Yield Spread Premium
Learn to recognize Yield Spread Premium and you can take advantage of wholesale mortgage rates and save thousands of dollars every year. You can refinance and pay the broker a one percent origination fee without Yield Spread Premium if you know how to go about it. You can lean more about wholesale rates and recognizing and avoiding lender junk fees.
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