California Mortgage Refinancing - Beware Markup of Your Mortgage Interest Rate

By Louie Latour

f you are in the process of refinancing your California mortgage and are not familiar with Yield Spread Premium, you risk overpaying thousands in unnecessary mortgage interest every year. Learning how mortgage companies and brokers make their money will help you avoid paying too much for your new California mortgage loan. Here is an introduction to Yield Spread Premium and several tips to help you avoid paying it when refinancing your mortgage.

Did you know that the HUD Secretary recently stated that American homeowners overpay $16 billion dollars of unnecessary mortgage interest every year? The reason this is happening is the little known markup of retail mortgage interest rates called Yield Spread Premium.

What is Yield Spread Premium? Simply put, it is the markup of your mortgage interest rate by your loan originator. Mortgage companies and brokers do this to line their pockets at your expense. When you refinance your California mortgage loan you’re already paying the mortgage company or broker an origination fee for their services; however, like used car salesman these people try and squeeze every penny they can out of you. I’m not here to throw stones at mortgage brokers, and I’m not saying every loan representative out there would swindle your mother out of her Social Security check, but most would.

Here’s how Yield Spread Premium on your California mortgage works. When your application for mortgage refinancing is approved by a wholesale lender, you qualify for a specific mortgage rate. Your Mortgage Company or broker receives a guarantee of that mortgage rate from the wholesale lender. What your loan representative isn’t telling you is that they receive a bonus from the wholesale mortgage lender for every .25% that they get you to overpay.

Suppose you qualify for a 6.5% mortgage on a $300,000 California mortgage loan. Your loan representative charges you 1.5% of the loan amount for the origination fee which you think is reasonable. This means you have to pay $4,500 to the Mortgage Company or broker at closing for their part in arranging your loan. What your loan representative didn’t tell you is that you really qualified for a 6.0 percent mortgage and they marked it up because the wholesale lender pays them 1% of your loan amount for each additional .25% you agreed to overpay.

Your loan originator walks away from the deal with the $4,500 you paid in origination fees plus a $6,000 bonus from the wholesale lender for lying to you. This markup of your California mortgage interest rate is called Yield Spread Premium and if you agree to it, you’ll pay thousands of dollars in unnecessary mortgage interest every year. How do you avoid paying Yield Spread Premium when refinancing your California mortgage loan? You can learn this and other costly mortgage mistakes to avoid with a free mortgage tutorial.

To get your FREE six-part Mortgage Refinancing Tutorial, visit RefiAdvisor.com using the link below. Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: "Mortgage Refinancing - What You Need to Know," which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit Refiadvisor.com. Claim your free mortgage refinancing tutorial today at: http://www.refiadvisor.com California Mortgage Refinancing Article Source: http://EzineArticles.com/?expert=Louie_Latour