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"What You Don't Know About Mortgage Could Cost You Tens Of Thousands Of Dollars"
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Article: "What You Don't Know About Mortgage Could Cost You Tens Of
Thousands Of Dollars"
By Andre Plessis
"What Mortgage Companies Don't Want You To Know"
Lenders often reward mortgage companies who arrange high-interest mortgages. Many Americans don’t know they qualify for a lower rate, but the truth is that most could get a lower rate. The bonus typically worth thousands of dollars is included in most loans written by mortgage companies.
Bonus to brokers are known in the industry as "
YIELD SPREAD PREMIUMS" (YSP). Say you qualify for a $400,000 loan at a 6.5% rate with an upfront fee of 1 percentage point paid to the broker, or $4,000. The broker can also sell you higher rate such as 7%. The lender might reward the broker with a bonus of 1 percentage point, or $4,000. The $4,000 is the yield spread premium. The broker just made $4,000 loan origination fee, plus $4,000 "YIELD SPREAD PREMIUM" so $8,000 commission on your loan. The "spread" reflects the difference between the lower interest rate that you could qualify for and the higher interest rate that he or she actually paid. The "premium" is the reward paid to the broker. You can find out if you paid a "YIELD SPREAD PREMIUM" by calling your Title Company and simply ask them to fax you the "Final HUD".Here is the worst that happens to YOU once you have been sold a higher interest rate. Higher rate will cost you TENS OF THOUSANDS OF DOLLARS OVER THE LIFE OF YOUR LOAN. This is an example of what may have happened to you or could happen to you. Those figures are for example purpose.
|
No Yield Spread Premium |
With Yield Spread Premium |
|
|
Loan Amount |
$400,000 |
$400,000 |
|
Interest Rate |
6.5% |
7% |
|
Interests Paid Over 30 Years |
$510,177.95 |
$558,035.59 |
|
YOUR INTEREST SAVINGS |
$47,857.64 Savings Over 30-Year |
NONE |
"Here is How You Can SAVE BIG On Your Next Home Loan"
|
Loan Size |
Mortgage Guru Fee |
85 - 90% of Brokers Fees |
YOUR SAVINGS |
|
$100,000 |
1 Point ONLY |
1 Point + YSP = $2,000 |
Save Up to $1,000 |
|
$200,000 |
3/4 Point ONLY |
1 Point + YSP = $4,000 |
Up to $2,500 |
|
$300,000 |
1/2 Point ONLY |
1 Point + YSP = $6,000 |
Up to $4,500 |
|
$400,000 |
1/2 Point ONLY |
1 Point + YSP = $8,000 |
Up to $6,000 |
|
$500,000 |
1/2 Point ONLY |
1 Point + YSP = $10,000 |
Up to $7,500 |
|
$600,000 |
1/2 Point ONLY |
1 Point + YSP = $12,000 |
Up to $9,000 |
|
$700,000 |
0.4 Point ONLY |
1 Point + YSP = $14,000 |
Up to $10,850 |
|
$800,000 |
0.4 Point ONLY |
1 Point + YSP = $16,000 |
Up to $12,800 |
|
$900,000 |
0.4 Point ONLY |
1 Point + YSP = $18,000 |
Up to $13,500 |
|
$1,000,000 |
0.4 Point ONLY |
1 Point + YSP = $20,000 |
Up to $16,500 |
The National Association of Mortgage Brokers does not keep exact statistics on the prevalence of such bonuses. But a Harvard study concluded that they were paid in 85% to 90% of broker-arranged loans and averaged over $1,800 in the late 1990s. With the escalation in housing prices and the size of mortgages, those average bonuses to brokers are probably much higher today. Brokers are supposed to disclose such payments on a "Good Faith Estimate" form, which borrowers get after they apply for a loan, as well as on the settlement statement at the time of the loan’s closing.
But the premium is not explained on the forms and often is not even labeled. It may appear as an abbreviation or be included in a category such as broker compensation that occupies one line among a pile of loan papers. It’s confusing to most consumers and can cost you TENS OF THOUSANDS OF DOLLARS if you don’t know what you’re getting into.
To find out if you have paid a "YIELD SPREAD PREMIUM" call your title agency and asked them to fax you the Final HUD.
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Andre Plessis
Andre Plessis
"The Mortgage Guru"
"A Mortgage Professional
whose primary goal is to provide the expertise, guidance and skills necessary to
obtain the best mortgage to meet your personal needs".
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P.S. If you are at all intimidated or unsure about the mortgage process if you don’t understand how to evaluate your options in getting a mortgage loan our 15 key questions will help you feel comfortable that you are making the best decisions. Also if you are in the process of refinancing your home with anyone, CALL ME and I will let you know if you are being offered the best loan option based on market conditions and your financial situation.
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