Reverse Home Loan Book

A well known author named Theodore Sturgeon once said “Ninety Percent of Everything is crap.” This became known as Sturgeon’s law and is even quoted in the Oxford dictionary. Sturgeon’s law is alive and well when it comes to the Internet and the mortgage advice you find online is no exception. Here are several tips to help you separate the wheat from the chaff when it comes to online mortgage advice.

I recently read an article online offering suggestions on how one could save money when refinancing. The article suggested that you should concentrate your efforts on finding a mortgage broker that worked on a non-commission basis. The author stated that non-commission loan representatives are less likely to overcharge you and have your best interest at heart when refinancing. While this sounds like good advice, it’s actually complete rubbish. If a mortgage company or broker tells you they work on a non-commission basis, you are guaranteed to pay too much refinancing with that company. Calling someone a “Non-commission loan representative” is just a slick marketing trick to gain your misplaced trust.

Here’s what that author doesn’t understand about the mortgage industry. Mortgage loans are simply retail products, just like televisions. Just as an electronic store marks up the price of your TV, the mortgage company or broker marks up your interest rate without telling you. This is in fact, how mortgage companies and brokers make the majority of their profits. It’s not commission; they make money from retail markup. You’re already paying origination points to this company for the new loan, so why should you pay double?

Here’s a summary of how it works. You qualify for an interest rate based on your credit and the details of your application. That interest rate is not set by the mortgage company; it comes from the wholesale lender. The mortgage company receives a written guarantee of your rate from that wholesale lender. Your mortgage company turns around and provides you a separate written guarantee for a higher interest rate. This markup by the mortgage company is called Yield Spread Premium. Homeowners that learn to recognize Yield Spread Premium when refinancing their mortgage loans can avoid paying it.

Can you see how the advice this author gave in their article could result in overpaying for a new mortgage loan? To learn more about mortgage refinancing while avoiding bad advice, costly mistakes, and Sturgeon’s law, register for a free mortgage guidebook.

By: Louie Latour

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Refinancing a home mortgage can save you a lot of money if you are able to get a acquire deal on a new loan. However, there are a few things you can do to help avoid costly mistakes in the refinancing process. I have included several tips which will help you avoid the common costly mistakes that can occur in a refinance.

Caution: Be Aware of Yield Spread Premiums

The majority of homeowners are completely unaware of a Yield Spread Premium, what it is, or that they have been paying it since buying their house. Basically, the yield spread premium is your mortgage lenders or brokers commission on your loan. They broker or lender will add to your interest rate to pay their commission.

This rate of pay usually equals 3% of the homes total price which will be added on to your monthly mortgage payments. Your mortgage broker or lender will typically never inform you of these charges and the actual amounts are buried in the loan documentation. The wholesaler of the loan will give a bonus to mortgage lenders and banks who charge as high of an interest rate that they can.

It is Possible to Refinance your Home at a Wholesale Mortgage Rate

The smart homeowner who realizes and knows how to recognize a yield spread premium can usually avoid paying unnecessarily high markups on their interest rate. The best way for you to do this is by negotiating with mortgage lenders and brokers to get the lowest rate possible. There is already closing costs and fees the broker or lender will profit on and the yield spread premium is not needed and taking money away from you for no reason.

Refinancing a home mortgage can be a very financially wise move to make. However, basic research on potential lenders and brokers, along with patience and simple negotiating can easily save you hundreds of dollars every single month. Refinance now and see the benefits next month.

By: Michael Petrone

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