Outsmart Your Broker Avoid Paying Yield Spread Minimum
Below is a MRR and PLR article in category Finance -> subcategory Wealth Building.
Outsmart Your Broker: Avoid Paying Unnecessary Fees
Summary:
In the competitive world of mortgages, success hinges on being sharp and informed. To secure the best deal, you need to outsmart your mortgage broker?"not an easy task given their expertise. One key area to be aware of is the Yield Spread Premium (YSP). Understanding and negotiating this can save you significant money.
What is the Yield Spread Premium?
Mortgage brokers act as intermediaries between you and wholesale lenders. When you qualify for a loan, the wholesale lender provides your broker with a guaranteed interest rate. The broker then marks up this rate before offering it to you. The difference, known as the Yield Spread Premium, is essentially the broker's commission.
Why Do Brokers Inflate Your Interest Rate?
Simply put, brokers inflate rates because it’s profitable. Wholesale lenders offer them bonuses for charging higher rates?"often increasing your interest rate by 0.25% earns the broker points. One point equals 1% of the loan amount, which can be a substantial incentive for brokers to maximize their earnings.
Can You Avoid Paying the Yield Spread Premium?
Absolutely! To sidestep this extra cost, request to see the original interest rate guarantee from your broker. Clearly state that you're willing to cover the origination fee and closing costs, but refuse to pay the Yield Spread Premium. Essentially, by paying both origination and YSP, you're being charged twice for your broker's commission.
Is the Origination Fee Sufficient Compensation?
Yes, it is. Brokers earn between 1 to 3 points?"as much as 1% of your loan amount?"when you secure a mortgage. This sizable compensation should be adequate, eliminating the need for additional charges through the YSP.
Conclusion
The Yield Spread Premium is a tactic some brokers use to boost their earnings, at your expense. Protect your finances by understanding these practices and standing firm in negotiations. In the intricate landscape of the mortgage industry, knowledge is your most powerful tool to outsmart your broker.
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