My Way Lending

Mortgage loans can be very confusing and there is an abundance of bad advice available on the Internet. Much of the mortgage information you find online is sales motivated and if you’re not careful you could wind up paying thousands of dollars unnecessarily. This is why doing your homework and carefully researching mortgage offers is important before applying for a new loan.

Doing your homework means more than simply comparing loan offers and choosing the loan with the lowest mortgage rate. You’ll need to negotiate with the mortgage companies you request quotes from to avoid paying Yield Spread Premium. This markup will cost you thousands of dollars in unnecessary mortgage interest each year if you accept a loan that includes this markup.

What is Yield Spread Premium? This is the markup your loan representative adds to your interest rate to boost their commission, often without telling you. Here is an example of how Yield Spread Premium works: suppose you are refinancing with a $300,000 loan using a mortgage broker. Your broker tells you that you qualify for a 6.5% mortgage rate and charges you 1.0% for the loan origination fees. What your mortgage broker isn’t telling you is that the lender approved you for 6.0% mortgage rate and they marked it up to receive a 2.0% bonus from that lender. The difference between the 6.0% mortgage rate you qualified and the 6.5% rate that you closed is Yield Spread Premium.

Once you understand how Yield Spread Premium works you can negotiate to avoid paying it. Tell your potential mortgage brokers that you will not accept this markup with your loan. Tell them you will pay a reasonable origination fee and all necessary closing costs; however, will not pay any amount of Yield Spread Premium. You can learn more about refinancing your mortgage without paying too much with our free mortgage video tutorial.

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Refinancing your home mortgage gives you the opportunity to get cash and lower your monthly payment. For many people their homes are the single largest asset they own; this also makes the mortgage payment the largest expense for their budgets. There are several ways to lower your monthly payment and put cash in your pocket even if you cannot qualify for a lower interest rate.

Cash back refinancing allows you to take advantage of the equity you have built in your home. For many homeowners refinancing with cash back is a more affordable option than a second mortgage or home equity line of credit. Refinancing with cash back allows you to qualify for a lower mortgage rate because your home is secured by only one loan.

If your financial situation has changed since purchasing your home you may qualify for a better mortgage rate. Many homeowners find being promoted, taking a new job, getting married or divorced changes their qualifying ratios and improves the mortgage rate they receive. Even if your credit prevents you from qualifying for a lower mortgage rate you can still lower your payment amount by extending the term length of your loan. Term length is the amount of time you have to repay the mortgage; the most common term lengths are 15 or 30 years. There are now 40 and 50 year terms to allow the greatest amount of flexibility when refinancing with cash back.

The cash you receive from refinancing can be used for any reason; many homeowners use this money to consolidate higher interest debt. The advantage of using the money for this reason is that you gain a tax deduction for consolidating your bills. Other common uses include home repairs and renovations and education expenses. You can learn more about refinancing your mortgage while avoiding costly mistakes with our free mortgage tutorial.

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If you’re shopping for a new home mortgage loan, the interest rate you receive is important because it helps determine your monthly payment amount. There are a number of other factors to consider when choosing a home mortgage refinance loan; here are several tips to help ensure you get a good deal and a good mortgage rate.

Comparison shopping for a low mortgage rate will not guarantee you a good loan. At best you’ll end up with the best of the worst mortgage offers available. At worst you’ll overpay thousands of dollars every year you keep the loan. The reason for this is that nearly every mortgage quote you receive when comparison shopping includes the hidden markup known as Yield Spread Premium. If you’re not familiar with this term you’re paying too much for the mortgage you have now.

What is Yield Spread Premium? When you qualify for a home mortgage refinance loan the wholesale lender behind your mortgage approves you for a certain interest rate. You mortgage representative knows this interest rate; however, they mark it up because the lender pays them a commission for overcharging you. That’s right, for every .25% that you overpay your loan representative receives a bonus of 1.0% of your mortgage amount. This bonus is in addition to the fees you are already paying for their part in arranging your new home mortgage loan.

Homeowners who unknowingly accept a mortgage that includes this markup pay thousands of dollars every year unnecessarily. You can avoid Yield Spread Premium with your home mortgage refinance loan if you’re upfront with the loan representative while comparison shopping. Tell your mortgage representative that you will not tolerate Yield Spread Premium, that you’ll pay a reasonable origination fee and any necessary third party settlement fees. Once you find a mortgage company that agrees to these terms, and any honest company would, you are in a position to choose the best mortgage for your financial situation. You can learn more about shopping for the best home mortgage refinance loan while avoiding costly mistakes like Yield Spread Premium with our free mortgage video tutorial.

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