Comparison Shopping When Mortgage Refinancing Will Not Help You
Louie Latour asked:
People love to tell you “You have to comparison shop till you drop” when mortgage refinancing to get a good deal. Most homeowners that do this simply end up with the best of the worst mortgage offers available. The reason for this is that no amount of comparison shopping will keep you from a retail mortgage rate. The only way to get a wholesale mortgage rate is to negotiate with prospective mortgage companies to avoid paying Yield Spread Premium. Here’s what you really need to know about refinancing your mortgage if you want to save money.
Never heard of Yield Spread Premium? You’re not alone, according to the HUD Secretary this insidious markup will cost homeowners in the United States sixteen billion dollars this year alone. Simply put, Yield Spread Premium is the “retail” markup of your mortgage interest rate by the loan originator to get a bonus. Some mortgage brokers defend Yield Spread Premium like it’s some kind of noble endeavor on their part to get homeowners that don’t have a down payment qualified.
This is complete bollocks and only serves to justify their taking advantage of people. Here’s an example of Yield Spread Premium in action:
Suppose you refinance your home for $250,000 and according to the broker you qualify for a 6.75% interest rate. You agree to pay 1.0% for the origination fee which is a reasonable amount to pay for the broker’s services; however, what the broker isn’t telling you is that you qualified for a 6.0% mortgage rate. The broker marked up your rate because the wholesale lender pays them a bonus of 1% of your loan amount for every .25% you agree to overpay.
In the previous example you paid $2,500 to the broker for the origination fee and the lender paid them $7,500 for overcharging you. This is a total of $10,000 the broker receives for originating your loan and overcharging you. Why do lenders pay so much for loans with above market interest rates? They do this because mortgage lenders make the majority of their profits from selling their loans to investors on the secondary market. Your loan with its “retail” above market interest rate will bring a premium profit for the lender; you get stuck paying thousands of dollars unnecessarily.
The good news is that you can avoid paying this unnecessary markup and qualify for a wholesale mortgage rate. Homeowners who learn to recognize retail markup can negotiate with their loan originators to avoid paying it. You can learn more about refinancing your mortgage with a wholesale interest rate by registering for a free mortgage tutorial.
Ethel
People love to tell you “You have to comparison shop till you drop” when mortgage refinancing to get a good deal. Most homeowners that do this simply end up with the best of the worst mortgage offers available. The reason for this is that no amount of comparison shopping will keep you from a retail mortgage rate. The only way to get a wholesale mortgage rate is to negotiate with prospective mortgage companies to avoid paying Yield Spread Premium. Here’s what you really need to know about refinancing your mortgage if you want to save money.
Never heard of Yield Spread Premium? You’re not alone, according to the HUD Secretary this insidious markup will cost homeowners in the United States sixteen billion dollars this year alone. Simply put, Yield Spread Premium is the “retail” markup of your mortgage interest rate by the loan originator to get a bonus. Some mortgage brokers defend Yield Spread Premium like it’s some kind of noble endeavor on their part to get homeowners that don’t have a down payment qualified.
This is complete bollocks and only serves to justify their taking advantage of people. Here’s an example of Yield Spread Premium in action:
Suppose you refinance your home for $250,000 and according to the broker you qualify for a 6.75% interest rate. You agree to pay 1.0% for the origination fee which is a reasonable amount to pay for the broker’s services; however, what the broker isn’t telling you is that you qualified for a 6.0% mortgage rate. The broker marked up your rate because the wholesale lender pays them a bonus of 1% of your loan amount for every .25% you agree to overpay.
In the previous example you paid $2,500 to the broker for the origination fee and the lender paid them $7,500 for overcharging you. This is a total of $10,000 the broker receives for originating your loan and overcharging you. Why do lenders pay so much for loans with above market interest rates? They do this because mortgage lenders make the majority of their profits from selling their loans to investors on the secondary market. Your loan with its “retail” above market interest rate will bring a premium profit for the lender; you get stuck paying thousands of dollars unnecessarily.
The good news is that you can avoid paying this unnecessary markup and qualify for a wholesale mortgage rate. Homeowners who learn to recognize retail markup can negotiate with their loan originators to avoid paying it. You can learn more about refinancing your mortgage with a wholesale interest rate by registering for a free mortgage tutorial.
Ethel




