Adjustable Rate Mortgage Refinancing – Don't Ignore the Lender's Margin

If you’re considering refinancing your home with an Adjustable Rate Mortgage there are a number of factors to consider before choosing a loan. Comparing Adjustable Rate Mortgage offers based on mortgage rate, Yield Spread premium, and lender’s margin will keep you from spending more than you need to for the new mortgage. Here are tips to help you find the perfect Adjustable Rate Mortgage.

When you have an Adjustable Rate Mortgage loan, your payment is based on the index the mortgage rate is tied to, plus the lender’s margin. The margin builds profit into the loan for your lender. Margin varies from one mortgage lender to the next; however, the average margin ranges from 2.25-2.75 percent. It is possible to find mortgage offers with margins as low as 2.1 percent if you’re willing to do your homework and shop around for the best deal.

When comparison shopping for an Adjustable Rate Mortgage from various lenders make sure you ask about the margin. Another important factor to consider with any mortgage is Yield Spread Premium. Yield Spread Premium is the markup of your mortgage rate by the loan originator to boost their profits on your mortgage loan. You’re already paying origination fees for their services and if you unknowingly agree to pay this markup you will overpay thousands of dollars for your new mortgage.

Mortgage lenders frequently use teaser rates to distract you from their margins. An Adjustable Rate mortgage with a 4.5% teaser rate for six might seem like a good deal until you realize the loan has a margin of 3%. This is a type of bait-n-switch that mortgage lenders frequently engage in at the expense of unsuspecting homeowners. You can learn more about your Adjustable Rate Mortgage options, including expensive mistakes to avoid with a free mortgage tutorial.