Low Interest Rate Loans

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?

You may be required to pay an origination fee to the company or mortgage broker that arranges your new home loan. The lender that approves your loan also pays a fee to this company or broker for closing your mortgage with higher than market interest rates. This fee paid to the broker for overcharging you is called Yield Spread Premium; homeowners who learn how to avoid Yield Spread Premium can save thousands of dollars every year by taking advantage of wholesale rates.

How Yield Spread Premium Works

Here’s an example of Yield Spread Premium in a typical transaction. You’ve decided to refinance your home and need a new mortgage for $250,000. The mortgage broker locks and closes your new loan with a 6.75% interest rate and charges you an origination fee of one percent. This means you’ll have to pay $2,500 at closing for the mortgage broker’s work. What your mortgage broker isn’t telling you is that the lender actually approved you for a 6.0% rate and they’ve marked it up for a commission. The lender pays your broker 3% or $7,500 for overcharging you in addition to the $2,500 you’re paying.

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.

Yield Spread Premium Can Be Avoided

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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