subject: Do You Need To Refinance Your Home? [print this page] The mortgage industry is fraught with fees and charges that the average consumer can't quite tell whether they are real or not.
-- Loan Term: This is the time period during which you repay the mortgage. Standard length (for a very long time) was 30 years; lately 15 year mortgages have become common. Also available are forty-year and fifty-year mortgages. Generally, the longer the term is, the lower your payment is; but this also depends on the interest rate.
If the the mortgage broker, who you thought was really on your side all along, writes you a mortgage at the rate of 5.75%. The broker gets a commission of 1% of the loan amount for each 0.25% that he raises your interest rate when he writes your mortgage. On a loan of $300,000 that's a sudden commission of (in this case) $9,000. (Now imagine how many loans that broker writes in a typical month.)
Another trick they use to separate you from your money is not locking in your interest rate even though they may tell you they have done so. They do this in the hopes that rates will go down, and they can still charge you the originally quoted rate. This relates to the Yield Spread Premium again -- if the rate goes down from 5.5% to 5%, they will have made an extra 2% Premium.
-- Yield Spread Premium: This is a fee, but is listed here separately because you should try to avoid this fee whenever possible. It is essentially a commission that the mortgage broker makes simply for increasing the interest rate that the actual lender has approved your loan for. It is a shady practice and should not be tolerated.
