Ditech : Mortgage Broker Refinancing – The Best Interest Rate Should Not Be Your Only Loan Consideration

Every wonder why if mortgage brokers have access to so many programs and “great deals,” why doesn’t everyone use a broker when mortgage refinancing? Brokers can help you locate mortgage offers that you might not find on your own; however, if you’re not careful you could wind up overpaying thousands of dollars when mortgage refinancing. Here are several tips to help you find the perfect mortgage for your financial situation when working with a mortgage broker.

The problem with refinancing your mortgage with a broker is that they frequently mark up your mortgage interest rate without telling you to make a profit. Mortgage brokers are legally required to disclose this markup of your mortgage interest rate; however it is frequently buried in the fine print of your loan contract. This markup of your mortgage interest rate is called Yield Spread Premium and is an incentive from the wholesale lender for overcharging you. For every .25% you agree to overpay for your mortgage rate, the broker is paid a bonus of 1% of your loan amount.

Your number one priority when refinancing your mortgage is to find a mortgage that does not include Yield Spread Premium. Tell your mortgage broker that you will pay a reasonable origination free for their services, all necessary third party fees, but will not pay any markup of your mortgage interest rate by their company. This unnecessary markup of your mortgage interest rate by the broker has gotten so bad that the Secretary of Housing and Urban Development was recently quoted that homeowners in the United States overpay $16 billion in unnecessary mortgage interest rates and closing costs every year.