Getting a better deal on your home loan through refinancing or modification can save you a lot of money every month. However, there are a few things to be on the lookout for in order to avoid paying too much when you decide to refinance or modify your home loan. So, here I have a few easy tips to help you get the best refinance deal possible.

The majority of homeowners have never heard of the term “Yield Spread Premium” (YSP) before. Some have even been paying it and are unaware that it is included in their monthly payments. This YSP is the markup percentage that the mortgage lender adds onto your interest rate in order to receive commission from their lender. Commissions as high as 4% of your loans total amount are sometimes occurring and the result is a much higher interest rate than you should have gotten that lasts for the entire length of your home loan.

So why would a mortgage lender add a Yield Spread Premium into your home loan? The mortgage lender basically receives a bonus for every .25% of interest they are able to tack on to your home loan. The information regarding this is buried in the fine print on one of the hundreds of pages of documents and can be very hard to find.

A homeowner who is informed as to what a Yield Spread Premium is can usually avoid having to pay the ridiculous markup by negotiating the fact with any potential mortgage lender prior to refinancing a home mortgage. There is already fees and closing costs associated with refinancing a home loan, so the YSP is not really necessary in order for the mortgage lender to turn a profit. This can actually be taken as a predatory loan practice as the lender is taking advantage of you for their own additional commissions, without informing you.

-M Petrone

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