Yield-Spread Premium.
In plain English
A yield-spread premium is money a lender pays a mortgage broker as a reward for signing you up at an interest rate above the lowest you could have gotten. The higher rate is worth more to the lender over time, and it shares part of that value with the broker. It creates a clear conflict of interest, because the broker earns more by giving you a worse rate. Rules after 2008 curbed the practice on consumer mortgages, but understanding it is a reason to compare offers and ask how your broker is paid.
01Why it matters
A yield-spread premium can quietly cost you a higher rate for years, so knowing it exists is a reason to compare loans and question how a broker is compensated.
02The math, step by step
You qualify for a 6 percent mortgage, but the broker signs you at 6.5 percent. The lender pays the broker a yield-spread premium for the higher rate, and you pay more every month for it.
03What this is NOT
A yield-spread premium is NOT a fee on your closing statement. The lender pays the broker for a higher rate, so the cost reaches you as a higher interest rate rather than an upfront charge.