If you are considering mortgage refinancing, there is more to shopping for a new mortgage than simply comparing loan offers. The most competitive offer you find has an interest rate that has been marked up by your loan originator; if you agree to this markup you'll pay thousands of dollars in unnecessary mortgage interest. Here are several tips to help you comparison shop for the best mortgage offer that does not include unnecessary markup of the interest rate when refinancing your mortgage.
Your mortgage "originator" works as loan representative or broker and is paid by commission. The more expensive your mortgage, the higher this person's commission will be. In addition to selling you a mortgage product that pays them the highest commission, your loan representative marks up your mortgage interest rate. This markup of your interest rate is called Yield Spread Premium.
Yield Spread Premium is the difference between the mortgage rate you were approved by the wholesale lender and the mortgage rate you received in your written "guarantee." This interest rate is higher because the wholesale lender pays a bonus to your loan originator of one percent of your loan amount for every additional .25% you pay. This is on top of the origination fee you're paying for this person's role in securing your loan.
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How can you avoid overpaying for your new mortgage when refinancing$%: When shopping for mortgage offers, tell your loan representative you will pay all necessary third party settlement fees and a reasonable origination fee to their company, but will not pay any markup of your mortgage interest rate. Ask to see the rate sheet from the wholesale lender that approved your loan and compare it to the interest rate you've been offered. If the mortgage rates are different you'll know it's been marked up to boost the loan representative's commission. You can learn more about mortgage refinancing without paying too much by registering for a free mortgage tutorial.
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