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Yield Spread Premium - The Hidden Fee

Just because you live in Eustis, Mount Dora, or Tavares, you are not immune to this mortgage financing fee that mortgage brokers and correspondent lenders almost always charge.

Yield Spread Premium (often referred to as YSP) is quite simply the opposite of buying down an interest rate. For example, if you want to buy down your interest, you can pay the bank/lender a point (1% of the loan amount) or more. Each point you pay is not a direct reduction of your rate by a percent. It is often 1 point buy down equals .25% reduction in interest rate. This differs from lender to lender. With YSP, you can increase your interest rate in exchange for the bank paying you points.

Why is this good? Read more here.

Posted by Jason Price on 07/22/2008 08:25 PM

Comments (5)

eustis, mount dora, tavares, yield spread premium, ysp, closing costs, good faith estimate, gfe, truth in lending, til

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5 Comments on Yield Spread Premium - The Hidden Fee

JUL

2008

Good post, you would be surprised how often I have to explain YSP at closing to people who don't see or know about it until they see the HUD.

This is how I explain this - I came up with this after 15+ years in the business and I think this makes it as simple as possible... keep in mind.. mortgage brokers buy wholesale and sell retail

The higher the rate - the lower the points

The lower the rate - the higher the points

you pay one way or another.........

"The higher the rate - the lower the points The lower the rate - the higher the points you pay one way or another........."

This is not necessarily true. I offer flat fee services. Yes, with a flat fee the lower the loan amount the higher the "points" may appear, and the higher the loan amount the lower the "points" appear. The loan amount in my case determines the perceived "points," not the rate. I offer my cleints par pricing. If they want to wrap my fee into the interest and not the loan, then I charge YSP. But it is their choice, not mine.

Jason, there are times that I am working with a Borrower that is a little short on funds to pay for Closing Costs and this is a good way to make up some of that difference.

JUL

2008

George,

Exactly!!! YSP should be used as a tool to help the borrower with closing costs. Not as a way for us to make more money without the borrower knowing how it will really impact them.

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