How to Refinance with the Lowest Mortgage Rate
By Louie Latour
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.
Why Are Mortgage Rates 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
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.
Yield Spread Premium Raises Your Monthly Payments
You might wonder if arguing over .75% of your mortgage rate
is worth the trouble. In the example above you qualified
for a six percent mortgage rate; however the broker marked
it up to 6.75%. On a conventional 30 year mortgage your
monthly payment at 6.0% would be $1,498. If you agree to the
higher mortgage rate that includes commission based markup
your payment would go up to $1,621 per month. This is
$1,476 per year that you'll pay extra; almost an entire
mortgage payment extra because your broker took advantage of
Yield Spread Premium Can Be Avoided
Homeowners who learn to recognize this commission based
markup of their mortgage rates can refinance with a
wholesale mortgage rate and save thousands of dollars in
finance charges. It is possible to refinance your home with
a wholesale rate and only pay one percent to the broker.
You can learn more about doing this yourself without paying
lender junk fees.
RefiAdvisor specializes in showing homeowners how to get the
best mortgage rate when refinancing. Before you refinance
your home, make sure you check Louie Latour's excellent free
video guide to getting the best
refinancing mortgage rate here.
Copyright 2008 Mirroreyes Internet Services Corporation.