During this time when the economy is struggling, refinancing your mortgage is a good way to save some money. Here are some tips that can help you side step some common mistakes that people make when refinancing that end up costing a bundle. There are some things that you can do to make sure refinancing your home mortgage saves you money not cost you money.

Caution: Yield Spread Premiums

If you are like most homeowners you have no idea what Yield Spread Premium is or that it even existed. Most homeowners are not aware of this or even that they have been paying it since they purchased their home. What the Yield Spread Premium is, is the broker or lenders commission on the loan you received. What the lender or broker does is add it on to the interest rate so they can be sure they are getting their commission.

The commission rate that most lenders and brokers charge is usually 3% of the houses total price, which they then add onto your monthly payments. These charges are usually buried under all of the paperwork that comes along with the loan and most if not all brokers and lenders will not inform the borrower about the charges that are added to the monthly payments. The lenders and banks receive payment from the wholesaler of the loan for charging the highest interest rate they possibly can.

Refinancing your home loan at the wholesale mortgage rate is possible.

Those homeowners who do some research are able to realize and avoid it when the lender or broker they are using is charging a very high interest rate. By negotiating with the mortgage brokers and lenders you can determine a much lower interest rate. The brokers and lenders already profit off of the closing cost and fees and there is really no need for the yield spread premium, this is just another way they try to make money off of you. Be aware and know what they are charging you and why.

Refinancing you home mortgage can be a great financial move to make. Doing your homework on the lenders or brokers you may potentially use as well as negotiating and having some patience can save you lots of your hard earned cash. If you refinance now you can see the results by next month.

-M Petrone

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