how a yield spread premium worked
mortgage brokers are compensated directly by borrowers when the borrower pays an origination fee when the lender pays the broker a yield spread premium or a combination of these if there is no origination fee the borrower is most likely agreeing to pay an interest rate above the market rate paying an interest rate above market rates to compensate a mortgage broker lender is not necessarily a bad thing for the borrower as it can reduce the mortgage s upfront costs there is no such thing as a 100 no cost mortgage for the borrower if a borrower does not pay closing costs or commissions they will end up paying those fees spread out over the life of the loan in the form of slightly higher monthly payments note that if a borrower expects to hold the mortgage for a short time paying a relatively high interest rate can be more economical than paying high fees upfront a thorough cost benefit analysis should be performed before any contracts are signed par rates and mortgage brokersthe par rate is the standard interest rate offered by a mortgage lender based on the terms of the loan and the creditworthiness of the borrower this rate is free of any adjustments such as closing points discount mortgage points fees or commissions 