If you are considering refinancing your home mortgage with your bank you might want to reconsider. While refinancing with your bank might be convenient, you will pay too much for the new loan. Here are several facts about bank originated mortgages you need to know before refinancing.

The first thing you need to know about bank mortgage loans is that your bank is exempt from the Real Estate Settlement Procedures act that protects homeowners by requiring lenders to disclose their markup and fees. The Banking Lobby spent millions of dollars to have the law changed excluding banks. Why would you ever consider doing business with a lender that doesn’t have to play by the rules?

Secondly, banks mark up their interest rates to boost their profits when your loan is sold on the secondary market. In fact, banks make the majority of their profit selling loans to investors. The higher your mortgage rate the more the bank profits. The difference between wholesale mortgage rates and the rate your banker quotes you is called “Service Release Premium.”

Most bankers swear will swear to you that their interest rates are not marked up and will even show you the Bank’s rate sheets. The problem is the rate sheet includes Service Release Premium and because of the loophole in the Real Estate Settlement Procedures Act the bank is not required to tell you that they’ve marked up the rate. If you’ve done your homework you can get an idea of what wholesale rates are by checking the weekly yield on Fannie Mae’s website. Compare this yield to your bank’s mortgage rate and you can easily spot the markup.

You can learn more about refinancing your mortgage while avoiding costly mistakes by registering for a free mortgage tutorial.