Many homeowners choose to refinance their mortgages with a bank as a matter of convenience. While it?s true that banks are convenient, they?re not going to give you the best deal. Here are several reasons why you should steer clear of your bank when refinancing your mortgage.
The first problem with refinancing with your bank, and it?s a big one, is that banks are exempt from the Real Estate Settlement Procedures Act that requires mortgage lenders to disclose their fees and profit margins. The banking lobby spent millions of dollars to have the law changed and banks routinely take advantage of homeowners using this loophole.
The second problem with refinancing with your bank comes from the way banks mark up their mortgage rates. Banks sell their loans to investors on the secondary market for a profit. Mortgage loans with higher than market interest rates bring premium profits for the bank. Your bank knows the wholesale mortgage rate you would qualify for; however, they mark your rate up to boost their profits. This markup by the bank is called Service Release Premium and if you accept a mortgage that includes it you?ll overpay thousands of dollars for new mortgage.
Service Release Premium is like Yield Spread Premium except for one important difference. Regular mortgage companies are required to disclose their markup, known as Yield Spread Premium by the Real Estate Settlement Procedures Act. Banks as you already know are exempt from this law and are not required to disclose Service Release Premium or their profit margins on your loan. The only one who knows how much they are overcharging you is the bank. Why would even consider refinancing with someone who doesn?t have to play by the rules?
You can learn more about refinancing while avoiding costly mistakes with a free mortgage video tutorial.
By Louie Latour
Source: http://articlesstudio.com/articlesstudio.c
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