If you are in the process of mortgage refinancing, understanding interest rate locks can save you a lot of money. Locking in your mortgage interest rate protects you from the loan originator raising your interest rate; however, you should know the mortgage rate on the guarantee you receive is almost never the one you qualified. Here are several tips to help you lock in the mortgage interest rate you were qualified and avoid overpaying for your new mortgage loan.
Mortgage interest rates change on a daily basis. To get your hands on the ideal mortgage rate you should ask your loan representative for a rate lock. The interest rate lock you receive also needs to allow enough time for you to complete all of the necessary documentation and close on the mortgage. If you are unable to close before the rate lock expires, rest assured your loan originator will raise your mortgage interest rate.
Is the interest rate your loan representative gives you the one you were actually qualified? Probably not; mortgage companies and brokers routinely markup wholesale mortgage interest rates to receive a kickback from the lender. This markup is called Yield Spread Premium and could cost you thousands of dollars in unnecessary mortgage interest each year. You can avoid paying Yield Spread Premium by learning how to recognize the markup and negotiating with your loan representative to have this markup removed.
If your loan representative agrees not to include Yield Spread Premium with your mortgage interest rate, ask to see the rate lock from the wholesale lender. Comparing this rate lock with the interest rate guarantee you receive from your Mortgage Company or broker will confirm that your loan representative is not charging you Yield Spread Premium.
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Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: "Mortgage Refinancing - What You Need to Know," which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com.
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