If you’re considering refinancing your Florida mortgage loan and want the lowest possible rate there are several things you need to know about mortgage rate quotes. The quotes you find when comparison shopping all include commission based markup of the rate that raises your mortgage payment by hundreds of dollars. Here are the basics you need to know in order to avoid this unnecessary markup when refinancing your home.
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
In this example imagine you’re refinancing your Florida mortgage for $350,000 at a rate of six and a half percent. Your mortgage broker charges you a fee of one percent for their part in your loan which amounts to $3,500. What the mortgage broker doesn’t tell you is that the lender approved you for a 6% rate and they’ve marked it up to get a bonus from the lender. You’re stuck paying higher than market interest rates and the broker walks way with $7,000 from the lender as a bonus.
How Does This Change Your Mortgage Payment?
If you choose a fixed rate loan with a term length of 30 years at 6.5 percent your monthly payment will be $2,200. The same mortgage with a 6% rate would have a payment of only $2,090. Falling for this mortgage broker trick will cost you $1,320 every year you keep this loan; all because your broker lied to you!
When refinancing your mortgage it is possible to avoid this markup of your mortgage rate and get wholesale rates for your home loan. You can do this and pay only a fee of one percent to your mortgage broker. Spend a few hours researching mortgage loans and Yield Spread Premium and you’ll save thousands of dollars on your next home loan.
Add A Comment