The Importance of the Yield Spread Premium

Yield spread premium is a term that many homeowners do not know about because it is a fee that many mortgage that brokers do not share with borrowers. Knowing what this means, and how it effects your wallet, will help you negotiate the best terms for your loan.

What is Yield Spread Premium?

Yield spread premium refers to the difference in fees paid to a broker for rates. For example, a 5.50% rate may offer a broker a payment of 1% of the loan amount for their services. A 6.00% rate, on the other hand, may offer 2% of the loan amount for broker services. The bank pays the broker directly, so you are never involved in payments.

YSP vs. Points

Discount points is the percentage you pay to lower your rate. YSP, or yield spread premium, is paid by the lender. Both fees are paid to the broker, but they are paid for very different reasons.

In order to properly determine the amount that you are charged, review your documents closely because all brokers are required to disclose all fees within three business days of your loan application.

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