Origination Fee or Yield Spread Premium - What Are They?

When you're in the process of buying a property, you will come into contact with a lender who'll want a yield spread premium or an origination fee. What's that?! The person helping you with the loan is going to get paid. You get to decide how you want to pay them. With the lending rules of yesteryear, mortgage brokers either get paid directly from the borrower (you) or from the lender (still from you, but you pay it in a different way). If you want to have a lower interest rate, you'll pay an origination fee. It's the fee you have to come up with on top of the down payment and other fees you're paying for. For low-no fees, you'll choose the yield spread premium, which essentially spreads the origination fee over the course of the loan. The broker gets paid by the lender at closing and you pay the lender over the course of the loan. So if you know you're only going to hold the loan short term, you will likely want to have a YSP instead of an origination fee. If you'll hold it long term, you'll save more by paying the origination fee up front and enjoy the long term lower payment. Any questions? Ask in the comments. I usually reply! Our discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events.