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How to Get the Best Mortgage Rate When Refinancing

Are you thinking about refinancing your home loan but aren't sure how to get the best mortgage rate? Choosing a lender to refinance can be a confusing process and if you pick the wrong person to arrange your loan you could pay thousands of dollars too much every year. The reason this happens is that your mortgage company or broker adds commission based markup to your mortgage rate. Homeowners who learn to recognize this markup can save themselves thousands of dollars every year. Here are several tips you can use to get the best mortgage rate when refinancing your mortgage.

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.

How Yield Spread Premium Works

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 Yield Spread Premium Affects Your Mortgage Payment

Is .75% of your mortgage rate worth worrying about? In the previous example if you refinanced with the rate you qualified at six percent your payment would $1,498 per month. Had you agreed to the mortgage rate that includes Yield Spread Premium your mortgage payment would be $1,621 per month at 6.75%. This adds up to $1,476 per year that you'll pay to give your mortgage broker a bonus.

You Can Avoid Yield Spread Premium

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.

Article Source: http://www.uberarticles.com/articles

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. Click here to get your own unique version of this article.

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