If you are in the process of refinancing your home loan and want the best mortgage rates there are several things you need to know about Florida mortgage rate quotes. The quotes you find on the Internet and from your mortgage broker include markup that could raise your payment by hundreds of dollars. Here are several tips to help you get the best rate when refinancing without paying too much to the mortgage company or broker.
Pitfalls of Yield Spread Premium
The markup of your mortgage rate for a commission is known as Yield Spread Premium. It is simply a percent of your mortgage that is created when you lock and close your loan with above market rates. This percentage is paid to your mortgage company or broker as an incentive for overcharging you.
Yield Spread Premium in Action
Suppose you’re refinancing your home loan for $350,000 with a mortgage rate of 6.5%. The broker charges you a 1% fee for arranging you loan meaning you’ll have to pay this person $3500 at closing. What your broker isn’t telling you is that you actually qualified for a 6.0% mortgage rate and they’ve marked it up because the lender is paying them 2% or $7000 for overcharging you. You get stuck with a higher than market mortgage rate meaning you’ll pay thousands of dollars in finance charges unnecessarily.
How Does This Change Your Mortgage Payment?
Suppose you refinance your home with a fixed rate mortgage with a 30 year term length. The mortgage your broker told you that you qualified for at 6.5 percent would give you payment of $2,200 per month. If you got the mortgage you qualified for at 6.0% your payment would only be $2,090. That’s a savings of $1,320 per year all because your mortgage broker took advantage of your situation!
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.
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