Mortgage Refinancing 101        

Learning the basics when refinancing your mortgage can save you thousands of dollars by helping you avoid common pitfalls. Understanding mortgage refinancing means learning loan terminology and how your loan originator makes their money. Here are several tips to help get you started on the right foot when refinancing your mortgage.

Loan Term Length: Your mortgage comes with a length of repayment; this is the time you have to repay the debt and along with your interest rate determines your payment amount. The most common choices are 15 or 30 years; however there are now 40 and 50 year term lengths available. The shorter the term length you choose the higher your payment will be; choosing a mortgage with a longer term length results in a lower mortgage payment.

Interest Rate: The mortgage rate you receive determines your cost of borrowing. There are two basic varieties of interest rates to choose from: loans with adjustable interest rates that fluctuate over time and fixed interest rates that remain constant for the duration of your loan.

Fees & Points: Your new mortgage comes with the many of the same fees you were required to pay when purchasing your home. Comparison shopping can save you money and help you avoid many of the junk fees lenders charge unsuspecting homeowners.

Yield Spread Premium: This is the markup your lender adds to your mortgage interest rate to get a commission from the lender. This commission is paid in addition to the origination fees you¡¯re already paying for you mortgage broker¡¯s services. Lenders pay this bonus because loans with above market interest rates bring them a premium profit on the secondary market.

You can learn more about refinancing your mortgage without paying too much with a free mortgage toolkit.