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.