Loan Articles

The very fact that you are shopping around for home refinancing options means that the mortgage plan that you have picked up no longer suits you or that you could have been more selective when choosing your mortgage lender. Either way, this guide seeks to prevent you from stumbling against the same stone twice by giving you some good refinancing tips that will help you choose the best rates available on the market.

To begin with, you have to keep in mind that choosing a good refinancing package is not nearly as easy as picking up a new large-screen LCD TV for your living room, although both items are retail products. Second, when shopping around for refinance deals, you have to pick a package with the lowest possible rate and minimum extra fees. One of the most unnecessary fees included in a refinance plan is the so-called origination fee. This is a fee that most real estate lenders charge so as to process your application for refinancing. The ordination fee is typically in the range of 0.5 percent and 2 percent of the borrowed amount, depending on the source of the loan (prime or sub-prime market). As a result, your refinance rate is very likely to double because of the fat commission of some brazen-faced broker.

You may as well try to circumvent brokers and other middlemen of the same batch by applying for refinancing with your good old bank because, as you may be thinking, banks are direct lenders and they are less likely to inflate their rates with commission fees. What you may not know, however, is that banks seldom, if ever, offer wholesale refinance rates to their customers. As a result, you have no way to figure out what your bank’s profit on your home refinance rate will be. One of the reasons why banks offer higher than wholesale rates to their customers is that they want to secure a fair profit when your loan is eventually sold to a secondary market investor.

The good news is that you can still lay your hands on whole sale refinance rates or at least on rates that are close to wholesale by finding the right refinancing advisor. Naturally, your personal circumstances will guide the decision you make. Your financial advisor could be a mortgage broker, who will agree to work for a flat origination fee and who will not mark up your refinance rate to double over the next few years. It is beyond doubt that such a fellow is not easy to find, but you can at least try to find one that will agree to a reasonable origination fee of about one percent of the deal and who will offer you refinance rates close to the current wholesale rates. Alternatively, you can try to arrange refinancing with a wholesale mortgage lender. Wholesale lenders grant and service loans, selling them on the sub-prime market. The lender funds the loan and sells it in one or two months. In general, wholesale lenders offer lower rates compared to retail lenders because brokers are manipulating the rates based on the yield spread premium.