Looking for the right home loan
Thinking of refinancing your home loan? Looking for the best refinance rates available? If so, there are several things to know about rate quotes that you can find. Refinancing a home loan can quickly lower your monthly payment, saving you more money; however, there are numerous “junk fees” and margins that can cloud the large amount of money you have found. Here are some great tips to help you find a great mortgage rate without overpaying.
Best Home Mortgage Rates
Where are the best home mortgage rates? Many homeowners cannot know a good mortgage rate when they find one because they are unaware of the margin and hidden fees. What is a hidden markup? It’s one way that loan originators, banks, and lenders can earn extra money by refinancing your loan. Essentially, your interest rate is trading higher than the bottom line, which increases your interest rate and allows your loan originator to earn additional money with your dollar. How do you avoid this hidden expense? You must find someone who is willing and able to provide you with a mortgage without increasing your rate. In other words, you need access to wholesale mortgage rates. Refinancing (or even buying) with the right originator can save you thousands of dollars in the end. How do you find the right creator? Let’s first discuss how to find the WRONG!
Bank Mortgage Loans
Countless Americans think that refinancing through a bank is great business because they cut out the middle man, allowing you the lowest rate. However, there are several problems with bank-originated home loans.
Mortgage brokers and lenders are regulated by their state’s consumer protection and predatory lending laws, as well as the Real Estate Settlement Procedures Act, so they are required to disclose (almost every penny) all fees associated with your home loan. Banks, however, are regulated by the federal government and exempt from your state’s mortgage loan regulations. Although they must comply with federal truth-in-lending laws, there are many loopholes that banks can circumvent. In addition, the bank has lobbied the federal government to only have to provide an inaccurate good faith estimate and an annual percentage rate based on this estimate. Due to the loopholes mentioned above, banks are not required to disclose your markup or markup on your home loan.
In addition to the lack of regulation, banks are in business just to lend money. They make most of their profits by selling their home loans on the secondary market. Loans with a higher market rate yield more profit for a bank (known as a Service Release Premium), so you will never get a wholesale refinance rate from your bank.
How to Get Wholesale Refinance Mortgage Rates
Obtaining a home loan at a wholesale rate is not as difficult as it sounds. You don’t need to have special information or a secret agent, you just need to find the right mortgage broker! The fact of the matter is, if you want the lowest possible refinance rate, you will need to find a mortgage broker who is willing to make your loan for a fixed fee up front that does not increase your interest rate for a fee (called the yield margin).
Remember how banks profit from selling their home loans to investors for a fee known as Service Release Premium? Well, mortgage brokers can charge a similar fee known as a Yield Spread Premium. The yield margin premium is a fee that a mortgage lender pays to a mortgage broker for selling a higher interest rate to a borrower. Although it must be reported to you, it is often explained as a fee that the lender pays to the broker and has nothing to do with the borrower’s expenses. It would be great if that were true, but unfortunately it is 100% at the borrower’s expense, and that expense lasts the entire life of the loan! It is the increase in the interest rate that results in an increase in the mortgage payment that comes directly out of the borrower’s pocket. The most important thing to know about this fee is that although you may be saving out of pocket expenses during loan origination, in the long run it is best that you pay the mortgage broker an upfront fee to originate your loan and get the rate of lowest possible interest. An honest mortgage broker should be able to offer you both options and tell you the real difference in your mortgage payment with and without your yield margin premium. If that is disclosed and discussed in advance, then there is no hidden charge because your mortgage broker has disclosed it to you.
If you want wholesale mortgage rates for your next home loan, be sure to tell your prospective brokers that you understand the markup premium and are not interested in a loan that includes a markup. Offer to pay them a reasonable fee for loan origination and you’ll be on your way to saving money on your next home loan!