Robyn Seymour - Comparison Shopping will not save Your Money on Mortgage Forever

When refinancing your mortgage loans most people will tell you about comparison shopping. It will not necessarily prevent you from overpaying for your new mortgage; in most cases you are simply choosing the best of the worst mortgage rates. Learn how to recognize and avoid paying Yield Spread Premium with your mortgage and you’ll get the mortgage rate you deserve. Here are several tips to avoid overpaying for your next mortgage when refinancing.

Most homeowners have never heard of Yield Spread Premium and according to the Secretary of Housing and Urban Development it will be responsible for American homeowners overpaying nearly $16 billion dollars this year. If you’re not already familiar with Yield Spread Premium you’re overpaying your share of that amount.

How does Yield Spread Premium work?

When your application for mortgage refinancing is approved by a wholesale mortgage lender, you qualify for an interest rate based on your credit and the qualifying ratios of your application. This is considered a wholesale mortgage rate; however, when it gets to you the mortgage company or broker marks it up for a commission. The interest rate you receive is a “retail” mortgage rate and includes Yield Spread Premium to give the loan originator a commission. What’s so bad about that you ask? You’re already paying origination fees for the mortgage company or broker’s services; if you agree to pay Yield Spread Premium you are effectively paying double and in many cases triple for your loan.

In some States like California, the high cost of real estate magnifies the problem of Yield Spread Premium and results in overpaying thousands of dollars every year. Homeowners who learn to recognize this unnecessary markup can negotiate with mortgage companies and brokers to avoid paying it. With the help of a free mortgage tutorial you can get the adequate knowledge about how to avoid Yield Spread Premium and other costly mistakes.