Florida Mortgage Refinancing
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
This commission based markup of your interest rate is called Yield Spread Premium. It is the percentage of your loan amount created when you lock and close the mortgage with higher than market interest rates. This amount is paid to your mortgage broker as a bonus for inflating your mortgage rate.
Yield Spread Premium in Action
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.
What Does This Do To Your Payments?
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!
It is possible for homeowners who understand Yield Spread Premium to avoid this unnecessary markup and refinance with a wholesale mortgage rate. When you do this it is only necessary to pay a one percent origination fee to the broker. You can do this for yourself by investing a few hours doing your homework and can save yourself thousands of dollars in the process.
