Mortgage Refinance Guide

If you’re shopping for a new home mortgage loan, the interest rate you receive is important because it helps determine your monthly payment amount. There are a number of other factors to consider when choosing a home mortgage refinance loan; here are several tips to help ensure you get a good deal and a good mortgage rate.

Comparison shopping for a low mortgage rate will not guarantee you a good loan. At best you’ll end up with the best of the worst mortgage offers available. At worst you’ll overpay thousands of dollars every year you keep the loan. The reason for this is that nearly every mortgage quote you receive when comparison shopping includes the hidden markup known as Yield Spread Premium. If you’re not familiar with this term you’re paying too much for the mortgage you have now.

What is Yield Spread Premium? When you qualify for a home mortgage refinance loan the wholesale lender behind your mortgage approves you for a certain interest rate. You mortgage representative knows this interest rate; however, they mark it up because the lender pays them a commission for overcharging you. That’s right, for every .25% that you overpay your loan representative receives a bonus of 1.0% of your mortgage amount. This bonus is in addition to the fees you are already paying for their part in arranging your new home mortgage loan.

Homeowners who unknowingly accept a mortgage that includes this markup pay thousands of dollars every year unnecessarily. You can avoid Yield Spread Premium with your home mortgage refinance loan if you’re upfront with the loan representative while comparison shopping. Tell your mortgage representative that you will not tolerate Yield Spread Premium, that you’ll pay a reasonable origination fee and any necessary third party settlement fees. Once you find a mortgage company that agrees to these terms, and any honest company would, you are in a position to choose the best mortgage for your financial situation. You can learn more about shopping for the best home mortgage refinance loan while avoiding costly mistakes like Yield Spread Premium with our free mortgage video tutorial.

The Internet is an excellent resource for comparing mortgage rates. The only problem with online rate quotes is that unless you find mortgage companies and brokers that will not charge you Yield Spread Premium, the quotes you receive have been marked up unnecessarily. Here are several tips to help you compare mortgage rate quotes without overpaying for your next mortgage.

If you are a homeowner with good credit and are not borrowing more than $415,000 to refinance your mortgage ($415,000 is the 2007 conforming loan limit set by Fannie Mae and Freddie Mac), your primary consideration for the new loan should be the interest rate and fees you pay. This means you need to find rate quotes that do not include Yield Spread Premium.

If you’re not already familiar with Yield Spread Premium, this is your loan originator’s markup of your mortgage rate for a commission. Your loan representative marks up your interest rate to get a bonus from the wholesale lender in addition to the fees you are already paying for loan origination. If you accept a mortgage that includes Yield Spread Premium you are effectively paying double for the new loan; not to mention thousands of dollars in unnecessary mortgage interest.

When comparison shopping for a new mortgage, remember that rate quotes by themselves are basically worthless. You also need to consider fees and closing costs listed on the Good Faith Estimate before making a decision. The Good Faith Estimate is an itemized list of all fees associated with a mortgage that the lender is required to provide you within three days of receiving your application. This three day rule doesn’t help you when you’re comparison shopping; however, most mortgage companies will provide you a Good Faith Estimate before you submit an application if you ask for it.

Watch out for anything on the Good Faith Estimate that resembles an application fee, broker courier fee, or lock fee. These are mortgage garbage fees you should simply refuse to pay. Tell your loan representative that you understand how Yield Spread Premium works and will not accept any loan offer that includes this markup. You can learn more about refinancing your mortgage while avoiding expensive homeowner mistakes like Yield Spread Premium with our free mortgage video tutorial.

If you’re considering using the Internet to find a new mortgage loan, the best advice you can get is to read before you click. There are a number of situations where using an online lender will get the best deal; however, it is important to read the terms and conditions before providing your information.

Many of the so called “mortgage” sites you visit on the Internet receive a computerized loan origination fee for collecting your contact information and financial details. There’s nothing wrong with sites that generate mortgage leads; however, the problem comes with lenders that pass this fee to you on your Good Faith Estimate. Lending Tree is notorious for the Computerized Loan origination fees that come out of your pocket. Take a look at the Licenses and Disclosure statement found on their website and you’ll see that they can receive as much as $1,300 for selling your information. This fee then appears on your Good Faith Estimate and you are obligated to pay it.

Would you be happy paying a mortgage site $1,300 just for filling out contact forms requesting information? This is why you must read before you click. No one likes to read the user agreements and disclosure statements found on these websites; however, if you read before clicking you can save yourself a lot of money and frustration. You can learn more about refinancing your mortgage while avoiding costly mistakes with our free video tutorial.

If you are in the process of refinancing your home loan, your mortgage company has a dirty secret they don’t want you to know. This secret is how mortgage companies overcharge homeowners for the interest rates they receive. If you learn how to recognize this markup of your mortgage interest rate you will save thousands of dollars when refinancing. Here is what your mortgage company doesn’t want you to know when refinancing your mortgage.

How do mortgage companies mark up your interest rate? This markup is called Yield Spread Premium and happens when your loan representative marks up your mortgage rate for a commission from the wholesale lender. Mortgage companies do this without telling you and rarely does this markup appear on your Good Faith Estimate.

Your mortgage company marks up the interest rate you were approved because the wholesale lender pays them a bonus of one percent of your mortgage amount for every quarter percent that they overcharge you. The difference between the mortgage interest rate you qualified and the rate you close is the Yield Spread Premium. Here’s an example of a mortgage refinancing transaction with Yield Spread Premium.

Suppose you are refinancing your California mortgage loan for $500,000. Your mortgage representative tells you that you qualify for a 7.5% interest rate and will pay 1.5% for the origination fees. What your mortgage company isn’t telling you is that you qualified for a 7% mortgage rate before Yield Spread Premium. You’re already paying the mortgage company $5,000 in origination fees; however, they are helping themselves to an additional $10,000 of your money by marking up your interest rate. The mortgage company walks away with $15,000 and you’re stuck paying an unnecessary .5% on a $500,000 mortgage loan. The high cost of California Real estate greatly magnifies the problem of Yield Spread Premium.

How can you avoid paying this ridiculous markup of your mortgage interest rate? Homeowners who learn to recognize Yield Spread Premium can negotiate to avoid paying the markup. You can learn how to avoid Yield Spread Premium and other costly mistakes with our free mortgage video tutorial.

If you are considering a new mortgage to refinance you California home, comparison shopping can save you a lot of money if you do it correctly. Before evaluating loan offers you need to have a discussion with potential mortgage companies and brokers regarding Yield Spread Premium. The high cost of California real estate severely magnifies the problem of Yield Spread Premium and could result in overpaying thousands of dollars each year.

If you’re not already familiar with Yield Spread Premium when it comes to California mortgage loans, here’s a quick introduction. Yield Spread Premium is the markup of your mortgage interest rate by your broker for a commission. When your application to refinance your California mortgage is approved, you qualify for a specific mortgage rate from the wholesale lender that approved your loan. Your mortgage broker knows the rate you qualified; however, this person marks it up without telling you because the wholesale lender pays them a bonus for overcharging your.

That’s right, for every .25% you overpay for the loan your mortgage broker receives 1% of the loan balance in addition to the origination fees you’re already paying. Factor in the high cost of homes in California and a quarter percent becomes a lot of money. This is money you have to pay month in and month out for as long as you keep the loan.

How do you avoid Yield Spread Premium when refinancing your California mortgage? The first discussion you have with a potential mortgage broker needs to be about Yield Spread Premium. Tell your mortgage broker that you understand how it works and will not tolerate the markup with your new mortgage. Tell your mortgage broker that you will pay a reasonable fee for the origination of your California mortgage and all necessary third party settlement costs but will not accept lender paid compensation. Any honest mortgage broker would agree to these terms. Once you’ve found an honest California mortgage broker you are ready to begin comparison loan offers to find the perfect mortgage for your situation. You can learn more about refinancing your California mortgage loan by registering for our free mortgage tutorial.