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What is a Yield Spread Premium?

Yield spread premium (YSP) is lender-paid compensation a mortgage broker earns when delivering a loan with an interest rate above the lender's par rate, representing the difference between par rate and actual loan rate serving as bonus for broker.

How It Works

  • Par rate is base rate at zero points
  • Loans above par generate yield spread premium
  • YSP typically calculated as percentage of loan amount
  • Larger loan exceeding par rate increases YSP

Purpose and Use

  • Compensates mortgage brokers for services
  • Can cover costs associated with loan
  • Reduces upfront costs for borrowers
  • Broker earns lender-paid fees

Yield spread premiums are lender-paid compensation brokers earn delivering loans above par rate, representing interest rate difference serving as bonus while reducing upfront borrower costs.

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