If you are in the process of refinancing your home mortgage, you may encounter the term “Yield Spread Premium.” This is a controversial subject being debated in Congress and pertains to the way mortgage loans are sold in the United States. That’s right, just like a kitchen appliance, what you pay for a mortgage depends on where go and who you know. You might think the mortgage you “qualify” for depends on your credit rating; while your credit score plays a role in the mortgage rate you receive, Yield Spread Premium is a significant factor.
What is Yield Spread Premium? Simply put, Yield Spread Premium is the retail markup of your mortgage interest rate by the loan originator. It doesn’t matter if your mortgage originator is a local mortgage company, a mortgage broker, an Internet lender or even a bank, every loan has the potential for Yield Spread Premium. (When this markup is charged by a Bank it’s called Service Release Premium)
Why do retail mortgage loans include this markup? Mortgage originators are paid by commission. The more expensive your mortgage loan, the larger the commission they receive. In fact, the wholesale lenders encourage mortgage retailers to overcharge homeowners by paying a bonus of one percent of the mortgage amount for every .25 percent they overcharge you. Do you think your mortgage broker is going to tell you they’re marking up your mortgage interest rate? Absolutely not, this markup will be buried deep in the disclosure statements accompanying your loan contract.
How can you avoid paying this unnecessary markup of your mortgage interest rate? Homeowners who make shopping for a mortgage without Yield Spread Premium a priority when comparing mortgage offers can qualify for wholesale mortgage rates. All it takes is a little time to learn how to talk like a mortgage insider and know the right questions to ask when applying.
You can learn more about avoiding Yield Spread Premium and other junk fees when refinancing your home loan by checking out my free Underground Mortgage Videos. These videos walk you through every aspect of refinancing your home including how to recognize and avoid junk fees like Yield Spread Premium in easy-to-understand terms without jargon.
Here’s a taste of what you’ll get when you sign up, this video is about your mortgage originator’s (the person arranging your loan) dirty little secret…
Register today before this offer is gone and you’ll get immediate access to these Underground Mortgage Videos without downloading anything to your personal computer.
What a great article about the retail markup of mortgages. The video is an added bonus! We have included it in our "Mortgage Refinance" section at Newbuyer.com and on our new blog.
Thanks for the high-quality resource.
Thank you so much for your generosity of reaching out to everyday people. I wish I'd had this information before my mortgage broker tacked on 3 points to my loan … causing a $539 per month increase in my mortgage payment.
Bravo to you, and please keep up the excellence in information.
Michael, sorry, but what is “tacked on 3 points to my loan”? You mean you had to pay 3 extra points? Thank you!