Real Estate Innovation

Refinancing Your Florida Mortgage

Are you refinancing your mortgage and want to get the lowest mortgage rates? There are several things you should know about the rate quotes you receive before refinancing to avoid paying too much. The quotes you get from your broker and on the Internet include commission based markup that drives up your payment by hundreds of dollars each month. Here is what you need to know about this unnecessary markup to avoid paying too much for your next mortgage.

Watch Out For 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 a Typical Mortgage Loan

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.

How Does This Cost You Money?

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.