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Beware of Yield Spread Premium on California mortgage rates

By Apil Gupta Subscribe to RSS | June 24th 2012 | Views:
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If you are going to refinance your mortgage because the California mortgage rates on your current program have gone significantly high, and are not aware of Yield Spread Premium, there are 9 out of 10 chances that you might be overpaying thousands of dollars due to high California mortgage interest rates every year. In order to prevent this, you need to understand how California mortgage rate companies and brokers earn their revenues. Following is a brief introduction of Yield Spread Premium, and some tips to help you prevent paying the same while refinancing your mortgage.

The HUD Secretary has recently revealed that American homeowners overpay as much as $16 billion of unnecessary mortgage on an annual basis, the reason being a mark-up of retail mortgage interest rates California known as Yield Spread Premium. This mark-up is basically related to the mortgage interest rate California and is put up by the loan originator. This practice is followed by mortgage companies and brokers to increase their profit margins at the cost of the borrower's hard earned money. When you refinance your mortgages California, you are already paying the orientation fee to the mortgage company or broker for their services. This is not the case with every party, but a majority of them would try to make as much money off you as they possibly can.

Yield Spread Premium on California mortgage works in the following manner: When your mortgage refinancing application is approved by the wholesale lender, you are qualified for a mortgage rate California. The mortgage company or broker receives a guarantee of this particular mortgage rate from the wholesale lender. The fine print, or hidden fact, so to speak, at this point in time is that the loan representative does not tell you that they receive a bonus from the wholesale lender for every 0.25% that they manage to get you to overpay. For instance, if you qualify for a 6.5% mortgage on a $400,000 California mortgage loan, the loan representative would charge 1.5% of the loan amount as the origination fee, which comes out to $6,000. Pretty decent, youmay think. But the real story is that you had qualified for a loan with a 6% mortgage interest rate California, and the loan rep marked it up since the wholesale lender pays him 1% of the loan amount for every 0.25% that is successfully marked up.

This basically means that the loan originator walked away with $6,000 that you paid him as his legitimate origination fee, plus $8,000 from the wholesale lender as bonus for duping you convincingly. This fake mark-up is known as Yield Spread Premium, and if you are not aware of this kind of an arrangement between the lender and the loan representative, you will certainly end up paying tens of thousands of dollars in the years to come. In order to avoid paying this additional charge on your California mortgage loan, you need to make sure that the representative as well as the lending company you are working with are reliable, and do not have a record of conning the ir clients.

Apil Gupta - About Author:
Author is providing Low Mortgage rates, Finance, Refinance , Loans in California, USA.

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