Florida Home Loan Refinancing
Are you refinancing your mortgage and want to get the lowest mortgage rates? There are several things you should know about the rate quotes you receive before refinancing to avoid paying too much. The quotes you get from your broker and on the Internet include commission based markup that drives up your payment by hundreds of dollars each month. Here is what you need to know about this unnecessary markup to avoid paying too much for your next mortgage.
Pitfalls of Yield Spread Premium
When your mortgage broker locks and closes your home loan with higher than market interest rates the spread created is called Yield Spread Premium. The broker inflates your mortgage rate to get this commission from the lender at your expense.
Yield Spread Premium in a Typical Mortgage Loan
Suppose you’re refinancing your home loan for $350,000 with a mortgage rate of 6.5%. The broker charges you a 1% fee for arranging you loan meaning you’ll have to pay this person $3500 at closing. What your broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate and they’ve marked it up because the lender is paying them 2% or $7000 for overcharging you. You get stuck with a higher than market mortgage rate meaning you’ll pay thousands of dollars in finance charges unnecessarily.
How Does This Cost You Money?
If you refinanced your home with a fixed rate mortgage for 30 years at six and a half percent your mortgage payment would be around $2200. The same loan at six percent interest has a payment of around $2090. That’s a difference of $1320 per year that you’re losing every year because the broker took advantage of you!
It is possible for homeowners who understand Yield Spread Premium to avoid this unnecessary markup and refinance with a wholesale mortgage rate. When you do this it is only necessary to pay a one percent origination fee to the broker. You can do this for yourself by investing a few hours doing your homework and can save yourself thousands of dollars in the process.
