Mortgage Refinancing: How to Negotiate With Your Loan Representative for the Best Terms and Rates

Proper negotiation with your loan representative will save you thousands of dollars and many headaches when mortgage refinancing. Asking your loan representative the right questions will help you avoid paying Yield Spread Premium on your mortgage rate and many other costly mistakes homeowners make. Here are several tips to help you negotiate with your loan representative for the perfect loan when mortgage refinancing.

Your first priority when mortgage refinancing needs to be avoiding Yield Spread Premium. Your ability to avoid Yield Spread Premium will make or break the deal you get when mortgage refinancing. What is Yield Spread Premium? This is the markup your loan representative adds to your mortgage interest rate in order to receive a bonus from the wholesale lender.

Your mortgage company already receives the origination fee you pay for arranging your loan; however, for every .25% you agree to overpay on your mortgage rate, that company receives 1% of your loan amount as an incentive for overcharging you. That's right; your loan representative receives a bonus for overcharging you. How does negotiation help you avoid paying this markup? Tell your loan representative you will not pay any markup of your mortgage interest rate by their company. Tell that person you will pay a reasonable origination fee for their part mortgage refinancing.

A reasonable origination fee is no more than 1-1.5% of your loan amount. Next, tell your mortgage representative you will pay no more than $400 for the loan processing fee and any necessary closing costs. Check your good faith estimate for anything that resembles an application fee, lock fee, or courier fee. These are mortgage company junk fees you should tell your loan representative that you will not pay.

As you can see, mortgage "negotiation" is more like delivering your terms for mortgage refinancing. If the loan representative refuses to accept your terms, simply find another company that will. There are hundreds if not thousands of mortgage companies competing for your business, and that competition is fierce. State your terms, stand your ground, and you can avoid overpaying when mortgage refinancing.

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Mortgage Refinancing - Lower Interest Rates Mean Bigger Savings

You probably already know qualifying for a lower rate when mortgage refinancing will save you money; however, do you know how much you'll save? Even if you only qualify for a quarter point lower interest rate you can still save a boatload of cash over the lifetime of your mortgage. Here are several tips to help you qualify for a better interest rate and illustrate the potential savings from mortgage refinancing.

One factor that affects your interest rate when mortgage refinancing is the term length you choose. Mortgage refinancing with a shorter term length will get you a lower rate than a traditional 30 year mortgage. Loans with 15 year terms are a popular choice when mortgage refinancing. You can improve the mortgage rate your lender qualifies you by cleaning up your credit and paying down your debts. Here is an example to illustrate the potential savings by qualifying for a lower mortgage rate.

Suppose you qualify for a 6.5% interest rate when mortgage refinancing $100,000. Your monthly payment at this rate will be $871 on a 15 year mortgage and $632 on a 30 year mortgage. The total amount of finance charges you will pay for these loans are $56,798 at 15 years and $127,520 at 30 years. You can see how much you save in finance charges when mortgage refinancing with a 15 year loan, but what if you qualify for a lower mortgage rate?

Suppose you qualify for a 6.0% mortgage rate on the same loan for $100,000. Your monthly payment amount at this reduced rate would be $844 with a 15 year loan and $600 with a 30 year mortgage. The total finance charges in this case are $51,844 for 15 years and $115,820 for 30 years. This lower .5% on your mortgage rate results in a savings of $11,700 on a 30 year mortgage!

You can now see how choosing a 15 year mortgage and qualifying for the lowest possible mortgage rate will save you thousands of dollars and is well worth your time and effort. To learn more about your mortgage refinancing options, including costly mistakes to avoid, register for a free mortgage tutorial.

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