Mortgage refinancing can save a homeowners lots of money is they are able to get better interest rates, terms, or conditions, on their home loan. While mortgage refinancing can be a pretty easy process, many homeowners make costly mistakes that can be easily avoided. Here are some of the most common mistakes homeowners make when refinancing their mortgage:

Be on the Lookout for a Yield Spread Premium
A lot of homeowners have no idea that they have been paying a yield spread premium for years. Even homeowners who caught a glimpse of their yield spread premium are not sure what it is. A yield spread premium is simply an extra bonus or commission on your home loan. Every little percentage a lender ot broker can up your interest, the more they make as a bonus. The loan wholesaler gives bonuses to all lenders and banks for tacking on a higher than needed interest rates.

Typically, the yield spread premium adds up to 3% of a homes total selling price, and is added to the home loan amount total. Generally, lenders, banks, or brokers, do not tell homeowners about this fee, and bury it in fine print. While this is not ethical, it is not illegal, and more often than not it happens.

This rate of pay usually equals 3% of the homes total price which will be added on to your monthly mortgage payments. Your mortgage broker or lender will typically never inform you of these charges and the actual amounts are buried in the loan documentation.

Well how do I avoid a Yield Spread Premium?
Homeowners can generally avoid paying a yield spread premium. The best way for this to happen is to first point it out to the lender, and get their view, and then negotiate. The mortgage lender, bank, or broker, is already making money off of closing fees and a yield spread premium is just money you would be spending for no good reason.

Homeowners need to be certain they have gone over every detail of their proposed mortgage refinancing prior to signing anything. Always remember you are the customer, and there are a lot of mortgage lenders who are happy to have you as their client.

-M Petrone

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