If you are like most homeowners seeking mortgage refinance information online you’re already familiar with discount points and how they affect your mortgage rates.
What you may not know is that the mortgage industry has a little known dirty secret called Yield Spread Premium.
Simply put, Yield Spread Premium is the opposite of a discount point. Someone… just not you… is getting cash from the lender for marking up your mortgage interest rate. Here are the basics you need to know to avoid paying too much when refinancing your home mortgage loan.
Mortgage Refinancing & Yield Spread Premium
It sounds like a scary term but Yield Spread Premium is a relatively simple concept to wrap your head around. The majority of homeowners today have never heard of Yield Spread Premium nor do they know that this markup of their mortgage rate was quietly slipped into their existing home loan. According to the government Yield Spread Premium is responsible for American homeowners overpaying nearly sixteen billion dollars this year alone.
How Yield Spread Premium Works
Here’s an example: suppose you are refinancing your mortgage for $250,000 and your mortgage broker tells you that you qualify for a mortgage rate of 6.5 percent. What you don’t know is that you actually qualify for a mortgage rate of 6.0%. The “spread” is the difference between what you got and what you could have had…in this example .5%.
The premium created in this example is a 2% commission for the mortgage broker for lying to you. In this example the mortgage broker walked away with a $5,000 payday from the mortgage lender for overcharging you. This is in addition to any fees you paid to the broker for loan origination. 99.99% of homeowners have mortgage loans with higher than necessary mortgage rates. Most likely you’re already paying thousands of dollars too much for your existing mortgage loan.
Yield Spread Premium Can Be Avoided
You can refinance your existing home loan without this unnecessary markup of your mortgage rate. Homeowners who learn to recognize and avoid Yield Spread Premium are able to take advantage of the wholesale nature of mortgage rates and save thousands of dollars every year pay a mortgage. The free online videos available on this website will show you an easy-to-follow method of refinancing your mortgage without this markup of your interest rate and how to avoid lender junk fees.
Check out my Underground Mortgage Videos and you’ll also receive a list of mortgage brokers in your area that don’t mark up mortgage rates to get you on the right track to refinancing without paying too much for your next mortgage loan.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
Great tips, thanks!