Saturday, June 30, 2007

How to Refinance Your Mortgage with Wholesale Interest Rates

If you’re a homeowner in the market for mortgage refinancing, a new loan with a lowest interest rate will save you money. Did you know mortgage loans are retail products just like home appliances? Most homeowners collect rate quotes from several different mortgage companies and pick the offer with the lowest interest rate. The problem with this approach is that all of these rate quotes include retail markup so they are simply choosing the best of the worst loan offers available to them. Here are several tips to help you find a wholesale mortgage rate when refinancing your home.

When you and I set out to find a mortgage we’re dealing exclusively with retail mortgage outlets. Even if you go to a wholesaler thinking you’ll get a wholesale rate, you’re actually dealing with a retail branch of that lender. It’s not possible for consumers to access wholesale lenders directly. This doesn’t mean you can’t get a wholesale mortgage rate; if you know how to go about refinancing with the right mortgage broker you can refinance with wholesale interest rates quite easily.

The first thing you’ll need to understand on your quest for the lowest mortgage rate is Yield Spread Premium. This markup is what makes mortgage loans “retail.” When you qualify for a mortgage loan the wholesale lender that approved your application qualifies you for a specific “wholesale interest rate.” Your mortgage company or broker knows this interest rate; however, this person marks the rate up to get commission from the lender. For every .25% you agree to overpay beyond what you were approved, your loan originator gets a bonus of 1% of your loan amount. You might ask “Is this a bad thing?” Mortgage brokers have to eat too, right?

It’s actually a very bad thing because you’re already paying a more than adequate origination fee for the broker's work. Any Yield Spread Premium the broker or mortgage company adds to your loan will effectively double, even triple their compensation unnecessarily. You’ll get stuck with above market interest rates and your broker walks away with three times their pay. Here’s an example of Yield Spread Premium when refinancing.

Suppose you qualify to refinance your $315,000 mortgage for 30 years at 7% interest. Your mortgage broker charges 1.0% for the origination fee, which is a perfectly reasonable amount to pay. This sounds like a good deal so far. What the mortgage broker isn’t telling you is that the wholesale lender approved you for a 6.5% mortgage rate and your broker marked it up to 7.0% without telling you. Mortgage brokers are required to disclose this markup; however, they have clever ways of disguising Yield Spread Premium with the disclosure buried in your HUD-1 statement. You agree to the terms and accept a higher than market mortgage rate while the broker walks away from the deal with $9,450.

Still think this is a good deal? Fortunately for you, there are ways to avoid paying Yield Spread Premium and keep the wholesale mortgage rate you were approved. You can learn more about refinancing your mortgage with a wholesale interest rate with a free mortgage tutorial.

To get your FREE Mortgage Refinancing Video Toolkit, visit using the link below.

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

Get your free mortgage refinancing tutorial today at:

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