By: Louie Latour

If you are considering mortgage refinancing and want the lowest possible interest rate, a wholesale lender could save you thousands of dollars. Not many homeowners understand how the markets work and most end up paying retail mortgage rates for their homes. By learning how wholesale rates work you can refinance without paying retail markup and save yourself thousands of dollars in unnecessary mortgage interest. Here are several tips to help you qualify for wholesale mortgage interest rate when refinancing your loan.

Wholesale Mortgage Lenders

Wholesale mortgage lenders do not deal with members of the public. In order to qualify for a wholesale mortgage rate you’ll have to use a mortgage broker. The problem with mortgage brokers is a significant part of their compensation comes from marking up your mortgage interest rate…which is precisely what you want to avoid.

This markup of your mortgage interest rate is called Yield Spread Premium and is the difference between the wholesale rate your lender approved you and the one offered by your mortgage broker. This markup of your mortgage interest rate is what makes the loan retail and is done because the lender pays your broker a bonus for closing mortgages with above market interest rates. For every .25% you agree to overpay beyond the rate you were approved by the wholesale lender the mortgage broker receives a commission of one percent of your mortgage amount.

You Can Avoid Yield Spread Premium

Homeowners who learn to recognize this interest rate markup can negotiate to avoid paying it. Start by telling potential mortgage brokers that you understand how Yield Spread Premium works and will not tolerate this markup with your loan. It is usually easier to negotiate with mortgage brokers that run their own business because a broker working for a large firm may not have the authority to give you the deal you need.

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