Mortgage Refinance Low Rate
Mortgage Broker Refinancing: Watch Your Mortgage Broker Like a Hawk to Avoid Overpaying
If you are considering mortgage refinancing with a mortgage broker, there are several things you need to know to avoid overpaying for your loan. Mortgage brokers routinely inflate the interest rates they sell their customers to boost their revenue. Here are several tips to help you save money when refinancing with a mortgage broker.
Mortgage Brokers can be an excellent tool for refinancing your mortgage loan. Brokers have contacts with dozens of lenders and can tailor loan packages to your individual financial situation. It is important to understand how mortgage brokers are compensated to avoid paying double for your new mortgage loan.
When you take out a new loan using a mortgage broker, that person receives the origination fees you pay. Origination fees typically run between 1-1.5% of your loan amount and that fee is more than ample compensation for the amount of work your mortgage broker did. So how does the mortgage broker overcharge you? By inflating the interest rate that the wholesale lender qualified you, the mortgage broker receives an additional 1% of your loan amount for each .25% they overcharge you from the lender.
Heres an example of how this scam works. Suppose your mortgage broker tells you that you qualify for an interest rate of 6.75% on a $250,000 mortgage loan. You agree to the terms and pay the broker 1.5% for the origination fee. Your fees for the mortgage brokers services are $3,750. These fees are in line with what you can reasonably expect to pay when refinancing. What your mortgage broker isnt telling you is that the wholesale lender qualified you for a mortgage interest rate of 6.25% and your mortgage broker is inflating your interest rate to boost their profits. By getting you to agree to pay 6.75% the mortgage broker receives an additional 2% of your loan amount. Your mortgage broker gets $5,000 from the wholesale lender for lying to you!
This retail markup of your mortgage interest rate by the mortgage broker is called Yield Spread Premium and results in paying thousands of dollars in unnecessary interest. How can you avoid paying retail markup of your interest rate? You can learn how to recognize Yield Spread Premium and how to avoid paying it by registering for a free mortgage guidebook.
