Do You Want To Refinance Your Home?

If you’re looking to refinance your mortgage you will find you are inundated with offers from virtually every source. One of the more popular offerings these days is the “no cost” mortgage. As the saying goes, there is no such thing as a free lunch; therefore, be very careful when considering one of these no-cost mortgages.

Another reason not to refinance with a bank: Banks make the bulk of their profits in selling loans to a secondary market. The higher your mortgage rate is, the more profit the bank makes when they sell it to an investor.

Mortgage brokers normally add between 05.% and 0.75% to your interest rate for their commission; however, on these no-cost loans, you may have an additional 0.5% or more added on to offset the costs you didn’t pay. They often disguise this as Yield Spread Premium, which, under normal circumstances, is really just another line item meaning ‘commission’ — but in this case, it’s even more nefarious because you’re just paying more than you have to otherwise..

If your mortgage rate being inflated even more than normal, this means you’ll be paying even more over the life of your loan — more than double, in some cases, than what you would’ve paid if you had just paid the costs up front as in a normal mortgage. And that is not good for you (or your wallet).

The sad part of the entire thing is, this deceptive practice is perfectly legal, even if it is deceptive and costly to the consumer. It is so very widespread due to the fact that, from a marketing perspective, anything “free” or “no-cost” is easier to market to unsuspecting consumers.

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