California Mortgage Refinance – Finding a New Loan Without Overpaying

If you are refinancing your California mortgage loan it can be difficult to know which loan is best for you. There are dozens of loans to choose from and not every mortgage will be right for your situation. Doing your homework and learning how mortgage companies make their money will help you avoid paying too much. Here are several tips to help you find the perfect mortgage when refinancing your California mortgage.

Many homeowners elect to refinance their California mortgage loans with their banks due to their convenience; however, before you do this it is important to explore your options and qualify for the lowest mortgage rate. Avoiding the hidden markup of Yield Spread Premium will allow you to qualify for the lowest mortgage interest rate based on your credit and qualifying ratios.

What is this Yield Spread Premium? If you've never heard of Yield Spread Premium before, it is simply the retail markup of your mortgage interest rate to boost your loan originator's commission. The wholesale lender that approved your California mortgage qualified you for a specific interest rate; however, your mortgage company marks this rate up because the lender pays them a bonus for overcharging you. For every quarter percent you overpay, the mortgage company receives a commission of one percent of you loan amount.

You might ask, shouldn't I just refinance with my bank since they don't use wholesale mortgage lenders? Banks are just as guilty of inflating their mortgage rates for different reasons. Banks sell their mortgage loans to investors on the secondary market. The higher your mortgage rate, the more money your Bank makes from the sale. When a Bank marks up your mortgage interest rate to make a profit from the sale it is called Service Release Premium.

How can you avoid paying this unnecessary markup of your California mortgage rate? Simply learn how to recognize the markup and you can negotiate with lenders not to pay it. You can learn more about refinancing your California mortgage without overpaying with a free mortgage tutorial.