Yield Spread Premium - Why Everyone Gets Cheated on Their Mortgage

by Louie Latour - Date: 2006-11-30 - Word Count: 383 Share This!

Yield Spread Premium is the retail markup mortgage companies and brokers charge without telling you. Mortgage loans are commodity products just like cars and if you adopt a car buying mentality when refinancing your mortgage, you will save a lot of money. Here is what you need to know about Yield Spread Premium and how you can avoid overpaying for your next mortgage loan.

Mortgage companies and brokers are simply retail outlets for wholesale mortgage lenders. Just like car dealerships, mortgage companies mark up the interest rate on their mortgage loans to make a profit. When your car dealer sells automobiles they purchase the vehicles wholesale and mark them up for their showrooms. If you know the blue book value of the vehicle you want to purchase, you have an advantage when negotiating over price because you know what the dealer charged. The same is true with mortgage loans. If you know the interest rate the wholesale lender qualified you, it is possible to avoid paying the retail mortgage companies markup.

Yield Spread Premium is the term for the retail markup of your mortgage interest rate. When you apply for a mortgage loan the wholesale lender that your mortgage company or broker deals with qualifies you for a specific mortgage interest rate. The wholesale lender provides a written guarantee of the interest rate to your mortgage company or broker. Your mortgage company marks up the interest rate and provides you a separate written guarantee of a higher interest rate. Mortgage companies charge Yield Spread Premium because they make one point for every .25% they mark up your interest rate. One point is equal to one percent of your loan amount; this is a lot of money the mortgage company receives for lying to you.

How can you avoid paying Yield Spread Premium when refinancing your mortgage loan? If you know the blue book value of the vehicle you are purchasing you can avoid excessive markup by the dealership. Knowing the wholesale interest rate you qualify for when mortgage refinancing gives you an advantage and can help you avoid paying retail markup. So how do you find out what interest rate the wholesale lender qualified you for? You can learn this and more, including costly mortgage refinancing mistakes to avoid by registering for a free mortgage tutorial.

Related Tags: mortgage refinance information, refi home loan, mortgage refinancing

To get your free mortgage guidebook visit RefiAdvisor.com using the link below.

Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. For a free copy of "Mortgage Refinancing - What You Need to Know," which teaches strategies to find the best mortgage and save thousands of dollars in the process, visit Refiadvisor.com.

Claim your free mortgage refinance information guide today at: http://www.refiadvisor.com

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