If done properly, mortgage refinancing can save a homeowner a lot of money. However, there a few common and costly mistakes homeowners make when refinancing their home loan. These mistakes can result in paying thousands of dollars more than you needed to. Here is some help with avoiding these expensive mistakes.

Always Compare Closing Costs when Refinancing a Mortgage
Their will always be some type of closing costs or fees involved with refinancing a mortgage. The amount of these fees will depend on the mortgage lender, but typically can be negotiated down. Their will also be loan origination fees, and maybe private mortgage insurance. These costs will be added to the total amount of the mortgage. Whenever you are looking to refinance your mortgage, it is very important to compare the different costs of each lender, and all the terms and conditions of each loan type, in addition to the interest rate.

Yield Spread Premium and Avoiding this Mortgage Refinancing Cost
All mortgage lenders and banks will charge you a slightly higher interest rate than they receive from their wholesale lender. This is done in order to pay commissions and bonuses to employees and brokers. For every .25% in interest the lender can overcharge you, they are given a cash bonus. The difference between the actual rate you are eligible for and the rate given to you is the Yield Spread Premium. This is not really necessary for the lender to charge as they will be making profit on the other costs and fees, like loan origination fees. By adding a yield spread premium, the lender or bank is basically getting a double commission. Homeowners who know what a yield spread premium is, can typically avoid it and save themselves a lot of money.

-M Petrone

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