Mortgage brokers can be an excellent resource for refinancing your California mortgage loan; however, you have to watch your broker like a hawk to avoid overpaying for your new mortgage. In addition to giving you a mortgage rate that includes Yield Spread Premium, brokers often place homeowners in loans that serve their need for a commission instead of finding you a good deal.
If you’ve already watched the mortgage videos on this site, you’re familiar with Yield Spread Premium and know how mortgage brokers mark up your interest rate to boost their profits. The best way to avoid paying this unnecessary markup of your mortgage interest rate is to be upfront with your mortgage broker before entering into an agreement. Tell your mortgage broker that you’ll pay a reasonable origination fee for their services and all necessary closing costs but will not pay Yield Spread Premium with your interest rate.
Choosing the right type of mortgage for your situation before negotiating with a mortgage broker is also very important. Don’t let a mortgage broker fast talk you into a risky interest only or option Adjustable Rate Mortgage if you don’t fully understand what you’re getting into. The type of mortgage and the term length you choose depends on your financial situation, tolerance for risk, and your goals for the loan.
Most homeowners benefit from a fifteen year term length instead of a thirty year loan when refinancing their California mortgage loans. You will qualify for a lower mortgage rate and will pay significantly less in finance charges with a fifteen year mortgage. The interest rate you should choose depends largely on your tolerance for risk. When used correctly, Adjustable Rate Mortgages can save you a lot of money if you have the stomach for the risk involved. You can learn more about your California mortgage refinancing options, including costly mistakes to avoid with our free mortgage tutorial.