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It is going to be very easy to overpay for a new mortgage if you are refinancing your California home loan. The mortgage rate you think you’re getting is not the interest rate you qualified for when your application was approved. Your mortgage rate includes hidden markup to boost your loan representative’s commission; here are steps you can take to avoid paying too much when refinancing your California mortgage loan.

The high cost of California real estate makes it difficult for many homeowners when refinancing. Because of the large amount you have to borrow to refinance your California home, any markup of your mortgage interest rate is greatly magnified and will cost you thousands of dollars every year. What is this hidden markup of your mortgage interest rate? When your application for a new California mortgage loan is approved you qualify for a specific mortgage rate. Your mortgage company marks this rate up because the lender pays them a bonus for overcharging you. The difference between the mortgage rate you qualified and the mortgage rate you close is Yield Spread Premium.

Here’s an example to illustrate Yield Spread Premium in action. Suppose you refinance your California mortgage with a broker who quotes you a mortgage rate of 6.75%. You agree to pay 1% of your $750,000 mortgage amount for origination fees. This is a reasonable fee for the broker’s services ($7,500). What your mortgage broker isn’t telling you is that you qualified for a 6% mortgage rate and the broker marked it up to 6.75% to receive a bonus from the wholesale lender. For every additional .25 percent you agree to overpay the broker receives another 1% of your loan amount.

In the previous example the broker pockets your origination fee of $7,500 plus an additional $22,500 from the wholesale lender for overcharging you! You get stuck paying thousands of dollars in unnecessary mortgage interest every year and the mortgage broker pockets $30,000 at your expense. How can you avoid this ridiculous but perfectly legal markup of your California mortgage interest rate? With the aid of a free tutorial you can study this and other costly mortgage mistakes that have to be avoided.