When refinancing a mortgage, there are a lot of things you should be aware of to ensure you get the best deal possible. Most homeowners have no idea how a refinancing works, and could easily end up paying thousands of dollars more than they need to. Here are some secrets of the mortgage industry which will help you avoid getting ripped of when getting a mortgage refinance.

Money Saving Secrets of the Mortgage Industry
A “Yield Spread Premium” is how some less desirable mortgage lender, brokers, and banks make an extra profit on your mortgage. Most homeowners do not know, or have never heard of, a yield spread premium, and therefore can not avoid it. A yield spread premium is an extra bonus commission paid to the lender or bank who helped you. This premium is added into your loans cost, and can cost you thousands of dollars, and even more in interest payments.

Besides a bank originated mortgage, all home loans are the same. Whether you used an internet company, a mega lender or small time broker, all mortgages are the same. Typically a “Loan Origination Fee” is tacked on to the total cost of a refinancing. This fee should generally cost around 1% of the total cost of your loan. However, many mortgage lender and banks charge much more than this, sometimes up to 5%.

Mortgage lenders, banks, and brokers will rarely reveal the true interest rate you qualified for. This is because they know that the rate they quoted you is more than that. This is because of loan origination fees, and the dreaded yield spread premium. Brokers get an extra commission for every .25% in interest rates you overpay. This quickly adds up to a large bonus for the lender, and they are very reluctant to give it up.

So is a minor yield spread premium a big deal? Yes! Homeowners can easily be paying hundreds of dollars per month more than they need to. However, homeowners who are aware of these junk fees can be prepared to look for them, and ask questions. This will be the best way to ensure you get the absolute best refinancing deal possible.

-M Petrone

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