No one wants to get ripped off when it comes to any purchase, and your mortgage loan is no exception. The problem is that very few homeowners understand how mortgage loans work and wind up overpaying thousands of dollars. Here are several "industry secrets" to help you avoid paying too much when refinancing your home mortgage loan.
The Mortgage Industry Has a Dirty Little Secret
When it comes to ripping people off you can't get dirtier than Yield Spread Premium. If you've never heard of Yield Spread Premium don't worry, 90% of homeowners have no idea it exists. So what is Yield Spread Premium? Simply put this is a commission paid to the person arranging your loan for overcharging you.
It doesn't matter if that person is the mortgage company down the street from you, a broker, or that mega giant Internet web site; with the exception of bank originated mortgages all loans work the same.
Most mortgage companies and brokers charge you an origination fee for their part in arranging your loan. This origination fee, often called "origination points" could set you back as much as three to four percent of your loan amount. One percent is a reasonable amount to pay for loan origination; however most people pay too much for this fee.
Yield Spread Premium Exposed
How does Yield Spread Premium work? Here's an example to illustrate how Yield Spread Premium can drive up your mortgage payment by thousands of dollars every year. Suppose you're refinancing your home loan for $325,000.
Your mortgage broker quotes you an interest rate of 6.75% and charges you an origination fee of 2.5%. You'll be required to pay $8,125 to the mortgage broker for their part in arranging you loan. At this mortgage rate your monthly payment amount will be $2,110.
What Your Mortgage Broker Doesn't Want You To Know
The mortgage broker quoted you an interest rate of 6.75%. What your broker isn't telling you is that you actually qualified for a mortgage rate of 6.0% and they've marked it up to get a commission from the lender.
The lender pays your mortgage broker a bonus of 1.0% of your mortgage amount for every 0.25% you agree to overpay. In this example the broker receives an additional 3.0%, or $9,750 on top of the $8,125 that you're already paying them for loan origination. That's a whopping $17,875 for a few hours work!
So what if the lender pays your mortgage broker all that money, it's not coming out of your pocket right? Wrong! If you had gotten the mortgage rate that you qualified your monthly payment would only be $1,940 per month.
That's $2,040 you're paying every year unnecessarily. The good news for you is that Yield Spread Premium and other junk fees can be avoided. Invest a few hours doing your homework and you can save yourself thousands of dollars every year on your mortgage loan.
By: Louie Latour
Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this Mortgage Refinancing Toolkit, which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com. Get your free mortgage refinancing tutorial today at: refiadvisor.com
Sunday, January 16, 2011
Thursday, December 30, 2010
The Danger of Property Refinancing
Refinancing is a good way to ensure that you retain your property when in cash crunch. However, not all refinancing deals are good. Especially for new investors, it can put you in a vicious circle that will be hard to get out of. In this article, I will take you through the dangers of property refinancing. Read on!
Property refinancing has many dark sides. The first one is the source of the e money for the refinancing deal. There is nothing wrong with using interest free mortgages to refinance your properties. Especially when these are some sense in the transaction, it is worth going for it.
However, some other financing options are there to make a kill. Some financiers might take advantage of your situation and make you pay for this highly. This will not be very good for you. Especially when you use refinancing brokers, you will tend to pay more than twice the cost making it the most expensive experience you can go through.
Refinancing your property to the point when there is no cash inflow in the property is dangerous. If you overspend on renovations, it may not be very good since the expenditure will reduce your profit margins. Over financing have caused the fall of many experienced investors.
Many new investors have too suffered in this lone. However, these can be avoided. So instead of refinancing, it is better to sell your assets that perform below your expectations. Use the surplus to meet your urgent refinancing needs and avoid going for external funding. Try to have some money in a reserve account to enable you face such unforeseen circumstances. Through this, the cost will be kept down.
When looking for refinancing, you will have to sacrifice many things in your life. You will need to stop the extra spending on non essential items. You will not be able to get out for your routine leisure and other entertaining places.
This becomes a lot tricky. When it reaches a point when you have to take a part time job to refinance your property, you will feel hard pressed. Your free time will be gone and you will not be at a position to enjoy any more.
Mental anguish is one major setback when refinancing. You will lose sleep as a result of this. And if the worst happens that you don't find a good refinancing option, you will lose your property which will be a major setback for you and your loved ones. The experience you will go through will not be a good one.
In summary- The dangers of property refinancing are many and of varied nature. The process is expensive. It will snatch you of your freedom if you have to work extra hours to meet the additional financial obligation.
Even when you strike a deal with your mortgage lender, it will remain a temporary relief which will haunt you at later times. So instead of refinancing, you can opt for other friendly methods that can enable you achieve your dream.
By: Tridipta K Ghosh
Hi, this is Tridipta K Ghosh, a Professional Freelance Writer over 3 years. He's ready to take your order.
Mail him: thebigt.king@gmail.com
Property refinancing has many dark sides. The first one is the source of the e money for the refinancing deal. There is nothing wrong with using interest free mortgages to refinance your properties. Especially when these are some sense in the transaction, it is worth going for it.
However, some other financing options are there to make a kill. Some financiers might take advantage of your situation and make you pay for this highly. This will not be very good for you. Especially when you use refinancing brokers, you will tend to pay more than twice the cost making it the most expensive experience you can go through.
Refinancing your property to the point when there is no cash inflow in the property is dangerous. If you overspend on renovations, it may not be very good since the expenditure will reduce your profit margins. Over financing have caused the fall of many experienced investors.
Many new investors have too suffered in this lone. However, these can be avoided. So instead of refinancing, it is better to sell your assets that perform below your expectations. Use the surplus to meet your urgent refinancing needs and avoid going for external funding. Try to have some money in a reserve account to enable you face such unforeseen circumstances. Through this, the cost will be kept down.
When looking for refinancing, you will have to sacrifice many things in your life. You will need to stop the extra spending on non essential items. You will not be able to get out for your routine leisure and other entertaining places.
This becomes a lot tricky. When it reaches a point when you have to take a part time job to refinance your property, you will feel hard pressed. Your free time will be gone and you will not be at a position to enjoy any more.
Mental anguish is one major setback when refinancing. You will lose sleep as a result of this. And if the worst happens that you don't find a good refinancing option, you will lose your property which will be a major setback for you and your loved ones. The experience you will go through will not be a good one.
In summary- The dangers of property refinancing are many and of varied nature. The process is expensive. It will snatch you of your freedom if you have to work extra hours to meet the additional financial obligation.
Even when you strike a deal with your mortgage lender, it will remain a temporary relief which will haunt you at later times. So instead of refinancing, you can opt for other friendly methods that can enable you achieve your dream.
By: Tridipta K Ghosh
Hi, this is Tridipta K Ghosh, a Professional Freelance Writer over 3 years. He's ready to take your order.
Mail him: thebigt.king@gmail.com
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