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Refinancing Your Florida Mortgage

Mar 20, 2008
Are you refinancing your mortgage and want to get the lowest mortgage rates? There are several things you should know about the rate quotes you receive before refinancing to avoid paying too much. The quotes you get from your broker and on the Internet include commission based markup that drives up your payment by hundreds of dollars each month. Here is what you need to know about this unnecessary markup to avoid paying too much for your next mortgage.

Watch Out For Yield Spread Premium

The markup of your mortgage rate for a commission is known as Yield Spread Premium. It is simply a percent of your mortgage that is created when you lock and close your loan with above market rates. This percentage is paid to your mortgage company or broker as an incentive for overcharging you.

Yield Spread Premium in a Typical Mortgage Loan

Imagine you're refinancing your home and your existing mortgage is for $350,000. Your mortgage broker quotes you a rate of 6.5%. You agree to pay a one percent origination fee for the broker's services meaning you have to come up with $3500 at closing. What your mortgage broker hasn't told you is that you actually qualified for a 6% mortgage rate and they've marked it up for a commission. You get stuck paying too much for your mortgage loan and your broker walks away with an extra $7000 from your lender.

How Does This Cost You Money?

If you refinanced your home with a fixed rate mortgage for 30 years at six and a half percent your mortgage payment would be around $2200. The same loan at six percent interest has a payment of around $2090. That's a difference of $1320 per year that you're losing every year because the broker took advantage of you!

It is possible for homeowners who understand Yield Spread Premium to avoid this unnecessary markup and refinance with a wholesale mortgage rate. When you do this it is only necessary to pay a one percent origination fee to the broker. You can do this for yourself by investing a few hours doing your homework and can save yourself thousands of dollars in the process.
About the Author
Louie Latour specializes in teaching seniors how to get the best florida mortgage rates when refinancing. Before refinancing your mortgage loan, make sure you check RefiAdvisor's excellent free video guide to florida mortgage refinancing here.
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