Refinancing your mortgage with the right broker can mean the difference between getting a great mortgage and making a costly mistake. Like used car salesman, your mortgage broker works for a commission; the loan that gives your broker the best commission is not the mortgage you want for your home. Here are several tips to help you locate the right broker when refinancing your home mortgage loan.
Mortgage brokers have earned a reputation as being sleazy and untrustworthy; however, the do have access to wholesale interest rates. This is something you’ll never get on your own unless you find an honest mortgage broker; banks and Internet lenders do not give their customers access to wholesale rates. The bad thing about working with a mortgage broker is that most try and boost their commission at your expense.
Before refinancing your mortgage using a broker you need to understand how mortgage brokers are paid. You’ll pay the broker an origination fee for their services when refinancing and the broker can receive compensation from the wholesale lender behind your loan. A reasonable fee to pay for loan origination should not be more than one percent of your mortgage amount. On top of this origination fee many brokers mark up your mortgage interest rate to get a commission from the wholesale lender.
This markup of your mortgage interest rate for a commission is a kickback from the wholesale lender for overcharging you. Mortgage brokers receive an additional point form the lender for every quarter percent you overpay. The difference between the wholesale mortgage rate you qualified and the one your mortgage broker quotes you is called Yield Spread Premium. This markup of your mortgage interest rate is completely unnecessary and only serves to give your mortgage broker a commission.
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