Before you enter market to find a mortgage for yourself, you must be aware of few facts. Whenever you are being quoted, there is always a hidden amount which is added to the quote. This hidden amount is the commission added by the person arranging the mortgage. So each month the amount which you would be paying as your mortgage, some of it will be the commission for the person who arranged it. This is a fact which you need to be aware of while looking up for best refi rates.

Finding Best Refi Rates

In order to understand the concept of commission, you need to be aware of what per mortgage rate is. This is the rate prevailing in the market and would be on a similar level. If you feel that the quote which you have received is higher then it might have commission added to it. Par value is the base value of the mortgage which any person would offer you and would not have commission attached with it.

Discount Points

Markup is the amount which the person arranging the mortgage adds to the refi rate and then the final figure is quoted to the consumer. Apart from markup, another factor which you need to keep in mind is of discount point. These are the points which you have to pay in order to bring down your mortgage rate.

The function of discount points is very similar to that of markup as you would have to pay this fee to the lender in order to reduce your refi rate. The amount reduced would be by 25% and one discount point is equivalent to one percent of the mortgage being paid. However, discount points are under severe scrutiny in the market today as they are seen as a waste of money and most homeowners are aware of this fact. However, those who aren’t aware, have to pay higher mortgage payments each month.

Yield Spread Premium

Furthermore, for best refi rates you need to be aware of the yield spread premium. This is the fee which is to be generated from the lender and is often added to the hidden markup in your quote. Lenders sure this premium to lock and close your mortgage rate at a higher rate. Therefore, often it’s difficult for consumers to evaluate whether the quote given to you is over charging you or not or is in parity with the market prevailing rates.

While assessing your quote, if you wish to check whether the premium is added or not, you would have to look in your HUD – 1 statement if you are getting the refinancing done through a broker. However, if you are getting it done by the bank, then they wouldn’t mention this as they are not required to disclose such information.

Therefore, when you receive a quote, make sure you are aware of the rate prevailing in the market. This would help you realize the par value within the market and then you could decide as to which is the best refi rate.

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