Mortgage Refinance Guide

If you are considering refinancing your California home loan, there are a number of costly pitfalls you need to be aware of. The high cost of homes in California is bad enough without every Tom, Dick, and Harry with a mortgage license helping themselves to your money; however, that’s exactly how mortgage loans work. Yield Spread Premium is the retail markup of your California mortgage rate and will result in your paying thousands of dollars in unnecessary finance charges.

Your mortgage representative marks up the interest rate you qualified when refinancing your California mortgage because the wholesale lender pays them a bonus for overcharging you. That’s right, for every quarter point you unknowingly agree to overpay, the loan representative receives a bonus of one percent of your loan amount. Factor in the high cost of real estate and Yield Spread Premium is the single largest scandal facing the California homeowner; however, this unnecessary markup of your mortgage interest rate is perfectly legal.

How can you avoid paying Yield Spread Premium when refinancing your California home loan? It’s simpler than you think; once you understand how mortgage companies and brokers make their money you can negotiate to pay less. Start by telling your mortgage broker that you understand Yield Spread Premium and will not tolerate it with your California home loan. Tell them that you will pay a reasonable origination fee for their services and all necessary third party settlement charges, but will not tolerate any form of lender paid compensation for a higher mortgage rate.

You can learn more about refinancing your California home loan while avoiding costly mistakes such as computerized loan origination fees with our free mortgage tutorial.