Yield Spread Premium sounds scary, but it’s just a fancy name for what your loan originator overcharges you to collect a bonus from the wholesale lender. Yield Spread Premium or YSP, is easy to spot when you know what to look for. Here are the basics to help you recognize YSP and avoid lining your loan representative’s pockets at your expense.

The first step to avoid overpaying for your new mortgage interest rate is to check out the going rates across the market. For every .25% the loan originator overcharges you, that person’s bonus or YSP is 1% of your loan amount. If your actual interest rate is 5.5% at the time your guarantee is written but the person you are dealing with tells you they can guarantee 6%, you know they are overcharging you .5% in Yield Spread Premium.

How can you tell what the going rates are across the mortgage market? Every Friday Fannie Mae publishes the yield for their mortgage backed securities on their website. This information can be found under “Fannie Mae Weekly Yield” and you can use this gauge the going rate across the market. Knowing this information is much like knowing the bluebook value of a car you are purchasing. It is much more difficult for the dealer to overcharge you when you know the wholesale value of the car.

You can learn more about refinancing your mortgage without paying too much by registering for a free mortgage guidebook.