subject: Do You Need Tips To Save Your Home? [print this page] When shopping for a refinance mortgage lender to refinance your home, there are a number of things you should know beforehand in order to not get ripped off by a seemingly innocent-looking mortgage broker. Mortgage brokers always (almost always) mark up your interest rate in order to receive a bigger commission from the mortgage lender that they represent.
If you aren't aware of this markup you'll be paying much more in interest than you otherwise would have to pay if you were able to avoid this "fee." There are many Americans that just need more information on how to save their home and be education in various financial matters regarding foreclosure and loans.
1) Find a good rate. Do some checking around in your local area and find out what the going wholesale rate is for mortgage loans and mortgage refinancing. Most (if not all) local banks will be lending at rates higher than the local wholesale rate. If you come into the process knowing what that rate is, you may stand a chance of getting a much better rate on your mortgage.
Most standard mortgages have terms of 15 or 30 years; however, nowadays, there are terms available of forty or even fifty years. If you are extending the term of your loan, you will be paying a lower amount per month, but since you are paying that payment for many more months, your total overall paid amount could be substantially higher than before you refinanced.
Here's an example of how the Yield Spread Premium works: Say, for example, you're getting a loan for $200,000. The originating lender approves you at 5.5%. However, your broker marks that up to 6.75% without telling you. Now, of course, you're paying a few hundred more each month in interest; over the life of your loan you'll be out thousands of dollars. But it gets better. that 1.25% difference in what you go approved for and what you're going to be paying -- that's the Yield Spread Premium. And for each 0.25% that the broker increases your loan interest rate, the broker gets 1% (of the original loan amount) up front -- as a useless commission. In this example, he's getting $10,000 in addition to the $2,000 loan origination you've paid. Now that you know about the Yield Spread Premium, avoid it at all cost.
